Big 5 Sporting Goods Corporation (Nasdaq: BGFV) (the “Company”), a
leading sporting goods retailer, today reported financial results
for the fiscal 2020 first quarter ended March 29, 2020, and
provided an update on fiscal 2020 second quarter results to date.
Steven G. Miller, the Company’s Chairman,
President and Chief Executive Officer, said, “Despite the
extraordinary impact of the COVID-19 pandemic, which forced the
temporary closure of approximately one-half of our stores for the
last ten days of the first quarter, our earnings performance for
the quarter was within the guidance range we originally provided in
late February and subsequently withdrew due to the uncertainties
surrounding COVID-19. As the consumer environment rapidly
deteriorated in March due to COVID-19, our team quickly implemented
decisive actions to protect our employees, our customers, and our
business. Many of the states, counties and cities in which we
operate recognized our stores as essential and we were able to
remain open or re-open many of our stores. We were able to
quickly implement new operational protocols so our stores could
operate in accordance with evolving social distancing
guidelines. As consumers reacted to COVID-19, our nimble
buying and distribution infrastructure has pivoted to fulfill
demand for a rapidly shifting merchandise mix across our impacted
markets. Similarly, our team has worked hard over the past
two months to reduce expenses throughout the organization in
response to the loss of revenue and uncertainties created by
COVID-19.”
Mr. Miller continued, “Big 5’s unique
combination of value, selection, service and convenience has
perhaps never been more relevant than in this disruptive
period. Even as we dramatically reduced our advertising as
part of our cost savings efforts, consumers are finding us in their
local neighborhoods, and we are satisfying their needs with our
full-line merchandise assortment. April was a challenging
month due to COVID-19 with a large portion of our stores
temporarily closed as well as the suspension of youth baseball and
other recreational activities, but we have been experiencing
significant improvement in sales on a weekly basis in May as many
of our stores re-open and consumers seek activities that fit within
social distancing guidelines. Our business is in a solid
financial position, reinforced by additional capital resources from
our credit facility, a disciplined expense reduction strategy,
accelerating inventory turns, and anticipated positive operating
cash flow through the first two months of the fiscal second
quarter. I am extremely grateful for the commitment of our
Big 5 employees throughout the organization and thank them for
their perseverance in the challenging environment.”
First Quarter Fiscal 2020As
previously reported, same store sales decreased 10.8% for the first
quarter of fiscal 2020, compared to a 4.6% increase for the first
quarter of fiscal 2019. Net sales for the fiscal 2020 first
quarter were $217.7 million compared to net sales of $245.3 million
for the first quarter of fiscal 2019.
Gross profit for the fiscal 2020 first quarter
decreased 14.9% to $64.6 million, compared to $75.9 million in the
first quarter of the prior year. The Company’s gross profit
margin was 29.6% in the fiscal 2020 first quarter versus 30.9% in
the first quarter of the prior year. Merchandise margins were
essentially flat versus the prior year, decreasing 8 basis points,
reflecting strong margin performance through mid-March prior to the
impact of COVID-19, which was offset by a shift in product mix to
lower margin products during the early stages of the consumer
response to the pandemic. The decrease in gross profit margin
largely reflects negative leverage of expenses on the lower sales
base, partially offset by higher costs capitalized into
inventory.
Selling and administrative expense decreased
$1.2 million in the fiscal 2020 first quarter primarily due to
lower print advertising costs during the period. As a
percentage of net sales, selling and administrative expense
increased to 32.8%, versus 29.6% in the prior year, as a result of
the decrease in net sales.
Net loss for the first quarter of fiscal 2020
was $4.6 million, or $0.22 per basic share, which was consistent
with guidance of a loss per share in the range of $0.15 to $0.25
per basic share that the Company originally provided on February
25, 2020, and subsequently withdrew on March 24, 2020, due to the
uncertainties surrounding COVID-19. This compares to net
income for the first quarter of fiscal 2019 of $1.7 million, or
$0.08 per diluted share.
Second Quarter UpdateThe
Company’s fiscal second quarter began on March 30, 2020, and ends
on June 28, 2020. As previously announced, beginning on March
20, 2020, the Company temporarily closed approximately one-half of
its retail store locations in response to state and local shelter
orders related to the COVID-19 outbreak. At the end of April,
approximately one-quarter of the Company’s stores remained
temporarily closed, and as of today, all of the Company’s stores
that were temporarily closed due to COVID-19 are now open in some
capacity, with less than 10% of the open stores operating for
curbside business only in compliance with local
regulations.
Fiscal 2020 second quarter same store sales
through the fiscal May period ended May 24, 2020 were down
approximately 19% versus the prior year period. However, the
Company’s sales trends have been sequentially improving on a weekly
basis as customer demand has improved, stores have re-opened and
shelter orders have loosened. Same store sales for the
Company’s fiscal April period declined approximately 39% versus the
prior year period, and same store sales for the fiscal May period
increased slightly versus the prior year period, with same store
sales increasing approximately 15% for the last two weeks of the
fiscal May period compared to the prior year period even though a
number of stores remained closed or limited to curbside operation
during that time. Merchandise margins are also trending
positively for the fiscal 2020 second quarter-to-date period
compared to the prior year period, reflecting strong margin
acceleration in May.
To manage through the COVID-19 impacts, the
Company has implemented reduced store hours for its open stores,
has limited the number of customers in its stores at any one time
to comply with local orders and allow for appropriate social
distancing, and in some locations is providing curbside order and
pickup capabilities. Given the uncertainties of COVID-19, in
an effort to preserve capital, the Company has implemented a number
of expense reduction initiatives throughout the organization,
including reducing store operating hours, advertising, and planned
capital spending in fiscal 2020. As a result, for the first
two months of the fiscal second quarter the Company has
significantly reduced its operating expenses.
On March 30, 2020, the Company exercised the
accordion feature under its credit agreement to increase the
aggregate commitments under the credit facility from $140 million
to $165 million. In order to enhance the Company’s financial
flexibility during the COVID-19 pandemic, the Company drew down
additional amounts under its credit facility, and as of May 26,
2020 had total outstanding indebtedness under the credit facility
of approximately $122 million, compared to the Company’s highest
borrowing level of approximately $143 million on March 31, 2020,
and compared to $66.6 million outstanding at the end of fiscal
2019. As of May 26, 2020, the Company’s cash position, net of
outstanding checks, totaled approximately $58 million, compared to
approximately $61 million and $8.2 million as of March 31, 2020,
and the end of fiscal 2019, respectively.
Merchandise inventories increased 6% in the
first quarter fiscal 2020 compared to the prior year period.
However, the Company has since adjusted certain merchandise
inventory orders and as a result of these adjustments and the
improving sales trends over the course of the second
quarter-to-date, inventories as of May 26, 2020 were down
approximately 9% compared to the prior year.
Quarterly Cash Dividend In an
effort to enhance financial flexibility during the COVID-19
pandemic, the Company is pursuing expense reduction and cash
preservation initiatives throughout the organization. In
connection with that effort and as previously announced, the
Company’s Board of Directors suspended the Company’s quarterly cash
dividend until further notice.
GuidanceDue to the disruption
from COVID-19 on the Company’s store operations and the uncertainty
related to its duration and impact on consumers, the Company is not
providing guidance for its fiscal 2020 second quarter at this time
other than the quarter-to-date information discussed above.
Store OpeningsDuring the first
quarter of fiscal 2020, the Company permanently closed three
stores, ending with 431 stores in operation. For the fiscal
2020 full year, the Company does not currently anticipate opening
any new stores and expects to permanently close approximately five
stores, including the three stores closed during the first quarter,
all of which were previously selected for closure prior to the
COVID-19 pandemic.
Conference Call InformationThe
Company will host a conference call and audio webcast today, May
27, 2020, at 2:00 p.m. Pacific (5:00 p.m. Eastern), to discuss
financial results for the first quarter fiscal 2020. To
access the conference call, participants in North America may dial
(877) 407-9039 and international participants may 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 telephonic
replay will be available through June 3, 2020 by calling (844)
512-2921 to access the playback; the passcode is 13704025.
About Big 5 Sporting Goods
CorporationBig 5 is a leading sporting goods retailer in
the western United States, operating 431 stores under the “Big 5
Sporting Goods” name as of the fiscal quarter ended March 29,
2020. 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, public health issues
(including those caused by COVID-19), 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 |
CONDENSED
CONSOLIDATED BALANCE SHEETS |
(Unaudited) |
(In thousands,
except share amounts) |
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March 29,2020 |
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December 29,2019 |
ASSETS |
|
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Current
assets: |
|
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|
Cash |
$ |
44,203 |
|
|
$ |
8,223 |
|
Accounts receivable, net of allowances of $64 and $58,
respectively |
|
7,834 |
|
|
|
13,646 |
|
Merchandise inventories, net |
|
312,347 |
|
|
|
309,315 |
|
Prepaid expenses |
|
8,129 |
|
|
|
9,680 |
|
Total current assets |
|
372,513 |
|
|
|
340,864 |
|
|
|
|
|
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|
Operating
lease right-of-use assets, net |
|
269,996 |
|
|
|
262,588 |
|
Property and
equipment, net |
|
66,347 |
|
|
|
68,414 |
|
Deferred
income taxes |
|
12,974 |
|
|
|
13,619 |
|
Other
assets, net of accumulated amortization of $2,126 and $2,043,
respectively |
|
3,273 |
|
|
|
3,315 |
|
Total assets |
$ |
725,103 |
|
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$ |
688,800 |
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LIABILITIES
AND STOCKHOLDERS' EQUITY |
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Current
liabilities: |
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Accounts payable |
$ |
73,244 |
|
|
$ |
83,655 |
|
Accrued expenses |
|
53,111 |
|
|
|
64,935 |
|
Current portion of operating lease liabilities |
|
71,969 |
|
|
|
71,542 |
|
Current portion of finance lease liabilities |
|
2,522 |
|
|
|
2,678 |
|
Total current liabilities |
|
200,846 |
|
|
|
222,810 |
|
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Operating
lease liabilities, less current portion |
|
213,336 |
|
|
|
206,806 |
|
Finance
lease liabilities, less current portion |
|
3,978 |
|
|
|
4,787 |
|
Long-term
debt |
|
124,275 |
|
|
|
66,559 |
|
Other
long-term liabilities |
|
7,610 |
|
|
|
7,466 |
|
Total liabilities |
|
550,045 |
|
|
|
508,428 |
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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
25,487,561 and 25,314,289 shares, respectively; outstanding
21,837,348 and 21,664,076 shares, respectively |
|
254 |
|
|
|
252 |
|
Additional paid-in capital |
|
120,430 |
|
|
|
120,054 |
|
Retained earnings |
|
96,901 |
|
|
|
102,593 |
|
Less: Treasury stock, at cost; 3,650,213 shares |
|
(42,527 |
) |
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|
(42,527 |
) |
Total stockholders' equity |
|
175,058 |
|
|
|
180,372 |
|
Total liabilities and stockholders' equity |
$ |
725,103 |
|
|
$ |
688,800 |
|
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BIG 5
SPORTING GOODS CORPORATION |
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS |
|
(Unaudited) |
|
(In thousands,
except per share data) |
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13 Weeks Ended |
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March 29,2020 |
|
|
March 31,2019 |
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Net sales |
$ |
217,736 |
|
|
$ |
245,286 |
|
|
|
|
|
|
|
|
Cost of
sales |
|
153,181 |
|
|
|
169,410 |
|
|
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Gross profit |
|
64,555 |
|
|
|
75,876 |
|
|
|
|
|
|
|
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Selling and
administrative expense |
|
71,370 |
|
|
|
72,611 |
|
|
|
|
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|
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Operating (loss) income |
|
(6,815 |
) |
|
|
3,265 |
|
|
|
|
|
|
|
|
Interest
expense |
|
735 |
|
|
|
776 |
|
|
|
|
|
|
|
|
(Loss) income before taxes |
|
(7,550 |
) |
|
|
2,489 |
|
|
|
|
|
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Income tax
(benefit) expense |
|
(2,939 |
) |
|
|
825 |
|
|
|
|
|
|
|
|
Net (loss) income |
$ |
(4,611 |
) |
|
$ |
1,664 |
|
|
|
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(Loss)
earnings per share: |
|
|
|
|
|
|
Basic |
$ |
(0.22 |
) |
|
$ |
0.08 |
|
Diluted |
$ |
(0.22 |
) |
|
$ |
0.08 |
|
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|
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Weighted-average shares of common stock outstanding: |
|
|
|
|
|
|
Basic |
|
21,149 |
|
|
|
21,029 |
|
Diluted |
|
21,149 |
|
|
|
21,054 |
|
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Contact:
Big 5 Sporting Goods CorporationBarry EmersonSr. Vice President
and Chief Financial Officer(310) 536-0611
ICR, Inc.John MillsManaging Partner(646) 277-1254
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