Big 5 Sporting Goods Corporation (NASDAQ: BGFV) (the “Company”), a
leading sporting goods retailer, today reported financial results
for the fiscal 2019 second quarter ended June 30, 2019.
Net sales for the fiscal 2019 second quarter
were $241.0 million compared to net sales of $240.0 million for the
second quarter of fiscal 2018. Same store sales increased
0.7% for the second quarter of fiscal 2019. Net and same
store sales comparisons year-over-year reflect a small negative
impact as a result of the calendar shift of the Easter holiday,
when the Company’s stores are closed, into the second quarter of
fiscal 2019 from the first quarter of fiscal 2018.
Gross profit for the fiscal 2019 second quarter
was $73.1 million compared to $75.3 million in the second quarter
of the prior year. The Company’s gross profit margin was
30.3% in the fiscal 2019 second quarter versus 31.4% in the second
quarter of the prior year. The reduction in gross profit
margin reflected lower merchandise margins, which contracted 80
basis points primarily due to a shift in sales mix, as well as
lower distribution costs capitalized into inventory.
Selling and administrative expense as a
percentage of net sales was 30.0% in the fiscal 2019 second quarter
versus 31.1% in the second quarter of the prior year. Overall
selling and administrative expense for the quarter decreased by
$2.5 million from the prior year mainly due to a favorable
settlement related to the termination of a software contract and
lower print advertising expense and employee benefit-related costs,
partially offset by higher employee labor expense.
Net income for the second quarter of fiscal 2019
was $28,000, or $0.00 per diluted share, including a $0.03 per
diluted share net benefit primarily related to the favorable
settlement of a software contract termination. This compared
to net loss for the second quarter of fiscal 2018 of $0.2 million,
or $0.01 per share.
For the 26-week period ended June 30, 2019, net
sales were $486.3 million compared to net sales of $474.1 million
in the first 26 weeks of last year. Same store sales
increased 2.7% in the first half of fiscal 2019 versus the
comparable period last year. Net income for the first 26
weeks of fiscal 2019 was $1.7 million, or $0.08 per diluted share,
including the $0.03 per diluted share benefit for the software
contract termination and a $0.02 per diluted share charge for the
write-off of deferred tax assets, compared to a net loss for the
first 26 weeks of fiscal 2018 of $1.6 million, or $0.07 per share,
including a $0.01 per share charge for the write-off of deferred
tax assets.
The Company’s revolving credit borrowings were
$62.4 million as of the end of the fiscal 2019 second quarter,
which reflects a reduction in borrowings of $28.2 million, or 31%,
versus the same period in the prior year. The Company’s
merchandise inventories declined 7.5% on a per-store basis as of
the end of the second quarter compared to the prior year
period. The resulting working capital improvements in
inventory and accounts payable, as well as higher net income,
combined to provide $5.6 million in operating cash flow in the
fiscal 2019 year-to-date period, versus a $21.9 million use of cash
in the comparable prior year period.
“We are pleased to achieve our third consecutive
quarter of same store sales growth and deliver earnings exceeding
the top range of our guidance,” said Steven G. Miller, the
Company’s Chairman, President and Chief Executive Officer.
“We had a strong finish to the quarter, benefitting from increased
traffic in California in June in advance of new ammunition
legislation that took effect in July. This allowed us to
overcome the negative impact of the Easter holiday shift and a
significantly cooler than normal start to summer, which impacted
sales of summer products. With our sales performance and
continued focus on prudently managing our inventory levels and
expense structure, we delivered positive cash flow for the quarter,
allowing us to further reduce our borrowings on a year-over-year
basis and strengthen our balance sheet.”
Mr. Miller continued, “For the third quarter to
date, our sales are running down in the low single-digit range
versus the prior year, as the start to the quarter has been
impacted by continued softness in summer-related product sales,
given the slow start to summer weather, particularly in the Pacific
Northwest. We have been comping against relatively strong
sales that were driven by favorable weather during the same period
last year, but we are encouraged by the trending of a number of
core product categories. Looking forward, our sales
comparisons will ease over the balance of the quarter and we
believe that our merchandise assortment is well positioned to drive
upside over the period.”
Quarterly Cash Dividend The
Company's Board of Directors has declared a quarterly cash dividend
of $0.05 per share of outstanding common stock, which will be paid
on September 13, 2019 to stockholders of record as of August 30,
2019.
GuidanceFor the fiscal 2019 third quarter, the
Company expects same store sales to be in the flat to positive low
single-digit range and earnings per diluted share to be in the
range of $0.15 to $0.23, compared to a same store sales decrease of
2.0% and earnings per diluted share of $0.15 in the third quarter
of fiscal 2018. The Company’s fiscal 2019 third quarter
earnings guidance reflects an anticipated increase in merchandise
margins over the prior year period.
Store OpeningsDuring the second
quarter of fiscal 2019, the Company opened one store and for the
fiscal 2019 full year the Company currently anticipates opening
approximately four new stores and closing approximately five
stores.
Conference Call InformationThe
Company will host a conference call and audio webcast today, July
30, 2019, at 2:00 p.m. Pacific (5:00 p.m. ET), to discuss financial
results for the second quarter of fiscal 2019. To access the
conference call, participants in North America should dial (877)
407-9039, and international participants should dial (201)
689-8470. Participants are encouraged to dial in to the
conference call ten minutes prior to the scheduled start
time. The call will also be broadcast live over the Internet
and accessible through the Investor Relations section of the
Company’s website at www.big5sportinggoods.com. Visitors to
the website should select the “Investor Relations” link to access
the webcast. The webcast will be archived and accessible on
the same website for 30 days following the call. A telephone
replay will be available through August 6, 2019 by calling (844)
512-2921 to access the playback; passcode is 13692866.
About Big 5 Sporting Goods CorporationBig 5 is
a leading sporting goods retailer in the western United States,
operating 434 stores under the “Big 5 Sporting Goods” name as of
the fiscal quarter ended June 30, 2019. Big 5 provides a
full-line product offering in a traditional sporting goods store
format that averages 11,000 square feet. Big 5’s product mix
includes athletic shoes, apparel and accessories, as well as a
broad selection of outdoor and athletic equipment for team sports,
fitness, camping, hunting, fishing, tennis, golf, winter and summer
recreation and roller sports.
Except for historical information contained
herein, the statements in this release are forward-looking and made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements involve
known and unknown risks and uncertainties and other factors that
may cause Big 5’s actual results in current or future periods to
differ materially from forecasted results. These risks and
uncertainties include, among other things, changes in the consumer
spending environment, fluctuations in consumer holiday spending
patterns, increased competition from e-commerce retailers, breach
of data security or other unauthorized disclosure of sensitive
personal or confidential information, the competitive environment
in the sporting goods industry in general and in Big 5’s specific
market areas, inflation, product availability and growth
opportunities, changes in the current market for (or regulation of)
firearm-related products, disruption in product flow, seasonal
fluctuations, weather conditions, changes in cost of goods,
operating expense fluctuations, increases in labor and
benefit-related expense, changes in laws or regulations, including
those related to tariffs and duties, lower than expected
profitability of Big 5’s e-commerce platform or cannibalization of
sales from Big 5’s existing store base which could occur as a
result of operating the e-commerce platform, litigation risks,
stockholder campaigns and proxy contests, risks related to Big 5’s
leveraged financial condition, changes in interest rates, credit
availability, higher expense associated with sources of credit
resulting from uncertainty in financial markets and economic
conditions in general. Those and other risks and uncertainties are
more fully described in Big 5’s filings with the Securities and
Exchange Commission, including its Annual Reports on Form 10-K and
Quarterly Reports on Form 10-Q. Big 5 conducts its business in a
highly competitive and rapidly changing environment. Accordingly,
new risk factors may arise. It is not possible for management to
predict all such risk factors, nor to assess the impact of all such
risk factors on Big 5’s business or the extent to which any
individual risk factor, or combination of factors, may cause
results to differ materially from those contained in any
forward-looking statement. Big 5 undertakes no obligation to revise
or update any forward-looking statement that may be made from time
to time by it or on its behalf.
FINANCIAL TABLES FOLLOW
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BIG 5 SPORTING GOODS CORPORATION |
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CONDENSED CONSOLIDATED BALANCE SHEETS |
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(Unaudited) |
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(In thousands, except share amounts) |
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June 30, 2019 |
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December 30, 2018 |
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ASSETS |
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Current assets: |
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Cash |
$ |
6,594 |
|
$ |
6,765 |
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|
Accounts receivable,
net of allowances of $41 and $28, respectively |
|
13,728 |
|
|
14,184 |
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|
Merchandise
inventories, net |
|
318,604 |
|
|
294,900 |
|
|
|
Prepaid expenses |
|
9,746 |
|
|
9,224 |
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Total current assets |
|
348,672 |
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|
325,073 |
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Operating lease right-of-use assets, net |
|
262,288 |
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— |
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Property and equipment, net |
|
71,617 |
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|
76,488 |
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Deferred income taxes |
|
13,841 |
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|
14,543 |
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Other assets, net of
accumulated amortization of $1,902 and $1,772, respectively |
|
3,446 |
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|
3,457 |
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Total assets |
$ |
699,864 |
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$ |
419,561 |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities: |
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Accounts payable |
$ |
114,964 |
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$ |
80,613 |
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Accrued expenses |
|
58,053 |
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|
67,659 |
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Current portion of
operating lease liabilities |
|
61,352 |
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|
— |
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Current portion of
finance lease liabilities |
|
2,151 |
|
|
2,322 |
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Total current liabilities |
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236,520 |
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150,594 |
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Operating lease liabilities,
less current portion |
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213,180 |
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— |
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Finance lease liabilities,
less current portion |
|
4,375 |
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|
4,823 |
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Long-term debt |
|
62,437 |
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65,000 |
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Deferred rent, less current
portion |
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— |
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|
14,615 |
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Other long-term
liabilities |
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8,485 |
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9,668 |
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Total liabilities |
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524,997 |
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244,700 |
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Commitments and
contingencies |
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Stockholders' equity: |
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Common stock, $0.01 par
value, authorized 50,000,000 shares; issued 25,334,814 and |
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25,074,307 shares, respectively; outstanding 21,684,601 and
21,424,094 shares, respectively |
253 |
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250 |
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Additional paid-in
capital |
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119,145 |
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|
118,351 |
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Retained earnings
(1) |
|
97,996 |
|
|
98,787 |
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Less: Treasury stock,
at cost; 3,650,213 shares |
|
(42,527 |
) |
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(42,527 |
) |
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Total stockholders' equity |
|
174,867 |
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|
174,861 |
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Total liabilities and stockholders' equity |
$ |
699,864 |
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$ |
419,561 |
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(1) In the first quarter of fiscal 2019, the Company recorded
an after-tax decrease to beginning retained earnings of $0.3
million for a change in accounting principle related to
leases. |
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BIG 5 SPORTING GOODS CORPORATION |
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CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
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(Unaudited) |
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(In thousands, except per share data) |
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13 Weeks Ended |
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26 Weeks Ended |
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June 30, 2019 |
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July 1, 2018 |
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June 30, 2019 |
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July 1, 2018 |
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Net sales |
$ |
240,965 |
$ |
239,951 |
|
$ |
486,251 |
$ |
474,129 |
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Cost of sales |
|
167,848 |
|
164,680 |
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|
337,258 |
|
326,132 |
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Gross profit |
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73,117 |
|
75,271 |
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|
148,993 |
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147,997 |
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Selling and administrative expense (1) |
|
72,179 |
|
74,656 |
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|
144,790 |
|
148,144 |
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Operating income (loss) |
|
938 |
|
615 |
|
|
4,203 |
|
(147 |
) |
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Interest expense |
|
738 |
|
793 |
|
|
1,514 |
|
1,449 |
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Income (loss) before income taxes |
|
200 |
|
(178 |
) |
|
2,689 |
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(1,596 |
) |
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Income tax expense (benefit)
(2) |
|
172 |
|
70 |
|
|
997 |
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(39 |
) |
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Net income (loss) |
$ |
28 |
$ |
(248 |
) |
$ |
1,692 |
$ |
(1,557 |
) |
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Earnings (loss) per share
(1)(2): |
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Basic |
$ |
0.00 |
$ |
(0.01 |
) |
$ |
0.08 |
$ |
(0.07 |
) |
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Diluted |
$ |
0.00 |
$ |
(0.01 |
) |
$ |
0.08 |
$ |
(0.07 |
) |
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Weighted-average shares of
common stock outstanding: |
|
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Basic |
|
21,118 |
|
20,985 |
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|
21,074 |
|
20,964 |
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Diluted |
|
21,143 |
|
20,985 |
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|
21,100 |
|
20,964 |
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(1) In the second quarter of fiscal 2019, the Company recorded
a favorable settlement of $1.1 million, or $0.03 per diluted share,
related to the termination of a software contract. |
(2) In the first half of fiscal 2019 and 2018, the Company
recorded charges of $0.4 million, or $0.02 per diluted share, and
$0.2 million, or $0.01 per share, respectively, to write-off
deferred tax assets related to share-based compensation. |
Contact:
Big 5 Sporting Goods
Corporation
Barry EmersonSr. Vice President and Chief Financial Officer(310)
536-0611
ICR, Inc.John MillsManaging Partner(646) 277-1254
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