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Big 5 Sporting (BGFV) Tops Q2 Earnings & Sales, Stock Up
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Shares of Big 5 Sporting Goods Corp. (BGFV - Free Report) surged 14.1% in after-hours trading yesterday after the company reported better-than-expected top- and bottom-line results for second-quarter 2016. Adjusted earnings of 11 cents per share in the second quarter were well ahead of the Zacks Consensus Estimate of 3 cents. However, earnings fell 26.7% from 15 cents in the year-ago quarter.
Including one-time items, the company’s earnings per share of 10 cents, fell 16.7% from 12 cents earned in the prior-year quarter.
Net sales of this Zacks Rank #3 (Hold) company inched up 0.4% to $241.4 million and surpassed the Zacks Consensus Estimate of $238 million. The company’s top-line comparisons from last year gained from a calendar shift due to 53 weeks in 2015, which led 2016 to start a week later. This resulted in the pre-Fourth of July holiday sales moving from third quarter last year to second quarter in 2016.
Additionally, the calendar led to a shift in the Easter Holiday store closings to the first quarter this year against second quarter last year. The company’s second-quarter net sales gained from these shifts by about $6.8 million.
Comparable store sales (comps) for the quarter declined 1.7%, meeting the lower end of management’s expectations. Though the aforementioned calendar shifts did not meaningfully hurt comps, a low single-digit decline in customer transactions slightly compensated by a low single-digit rise in average sale in the quarter led to the fall.
Going by the comps trend during the quarter, June was slightly better with a marginal increase in comps. However, comps for April and May declined in the low mid-single-digit range and low single-digits, respectively. During the quarter, the persistent industry headwinds from the winding down of rivals Sports Authority and Sport Chalet continued to weigh on the company’s sales performance. However, the company reached an inflection point by the end of June as gains from the already-closed rival stores started to offset the unfavorable effects from the competitors that are in the process of liquidating.
Looking at product categories, while the apparel and hard goods businesses continued to bear the unfavorable impacts from liquidation sales, the footwear category performed slightly better.
Costs & Margins
Gross profit came in at $76.3 million, down 1.3% from the comparable year-ago level. Moreover, gross profit margin contracted 50 bps to 31.6% in second-quarter 2016 due to distribution and store occupancy cost, alongside flat merchandise margins.
Selling, general and administrative (SG&A) expenses, as a percentage of sales, fell 30 bps to 29.9%. On a dollar basis, SG&A expenses decreased 0.6% to $72.3 million due to proxy contest costs in 2015, partly negated by higher employee labor and benefit-related expense in second-quarter 2016.
Consequently, the company’s operating profit of $4 million declined 13% year over year. Also, operating margin contracted 20 bps to 1.7%.
Financial Position
Big 5 Sporting had cash of $8.1 million, long-term debt of $57.4 million, and total shareholders’ equity of $194.7 million as of Jul 3, 2016.
During the first half of 2016, the company’s operating cash flows totaled $16.4 million. Capital expenditure for the period was $6.8 million, excluding non-cash acquisitions.
For 2016, the company currently anticipates capital expenditures, excluding non-cash acquisitions, in the range of $15–$18 million.
Dividend & Share Repurchase
Big 5 Sporting declared a quarterly cash dividend of 12.5 cents, payable on Sep 15, 2016, to shareholders on record as of Sep 1.
The company also authorized a new $25 million share buyback program, replacing its previous program which had $2.9 million available for repurchases.
Store Update
During the quarter, Big 5 Sporting opened two new stores in Gardena, CA and Nogales, Arizona, while it shut down one store. As of Jul 3, 2016, the company’s total store count was 435.
During the third quarter, the company plans to open two new stores, while shutting down five outlets. For 2016, the company targets opening nearly 5–8 new stores, while closing 10.
Outlook
The company revealed that the third quarter has started on a strong note, evident from a quarter to date comps growth in the high mid-single-digit range. Comps are mainly gaining from the closing of several rival stores in its markets, which has led customers to acknowledge the ease of shopping at Big 5 Sporting given its wide range of product assortments and value. Going forward, the company remains keen on making the most of the opportunities available due to this industry consolidation by focusing on its merchandise mix and stepping up promotional activities.
For third-quarter 2016, the company expects comps to increase in the mid to high single-digit range. It also envisions earnings in the range of 23–30 cents per share. Further, the company anticipates third-quarter sales to bear an adverse impact of nearly $9 million from the calendar shift from 53 weeks in 2015 that resulted in pre-Fourth of July holiday sales moving into the second quarter this year compared with the third quarter last year. Also, the company’s third-quarter earnings are expected to be affected by nearly 8–9 cents due to the aforementioned calendar shift.
Some better-ranked stocks in the same industry include ULTA Salon, Cosmetics & Fragrance Inc. (ULTA - Free Report) , Barnes & Noble Inc. and Five Below Inc. (FIVE - Free Report) , each carrying a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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Big 5 Sporting (BGFV) Tops Q2 Earnings & Sales, Stock Up
Shares of Big 5 Sporting Goods Corp. (BGFV - Free Report) surged 14.1% in after-hours trading yesterday after the company reported better-than-expected top- and bottom-line results for second-quarter 2016. Adjusted earnings of 11 cents per share in the second quarter were well ahead of the Zacks Consensus Estimate of 3 cents. However, earnings fell 26.7% from 15 cents in the year-ago quarter.
Including one-time items, the company’s earnings per share of 10 cents, fell 16.7% from 12 cents earned in the prior-year quarter.
Net sales of this Zacks Rank #3 (Hold) company inched up 0.4% to $241.4 million and surpassed the Zacks Consensus Estimate of $238 million. The company’s top-line comparisons from last year gained from a calendar shift due to 53 weeks in 2015, which led 2016 to start a week later. This resulted in the pre-Fourth of July holiday sales moving from third quarter last year to second quarter in 2016.
Additionally, the calendar led to a shift in the Easter Holiday store closings to the first quarter this year against second quarter last year. The company’s second-quarter net sales gained from these shifts by about $6.8 million.
Comparable store sales (comps) for the quarter declined 1.7%, meeting the lower end of management’s expectations. Though the aforementioned calendar shifts did not meaningfully hurt comps, a low single-digit decline in customer transactions slightly compensated by a low single-digit rise in average sale in the quarter led to the fall.
Going by the comps trend during the quarter, June was slightly better with a marginal increase in comps. However, comps for April and May declined in the low mid-single-digit range and low single-digits, respectively. During the quarter, the persistent industry headwinds from the winding down of rivals Sports Authority and Sport Chalet continued to weigh on the company’s sales performance. However, the company reached an inflection point by the end of June as gains from the already-closed rival stores started to offset the unfavorable effects from the competitors that are in the process of liquidating.
Looking at product categories, while the apparel and hard goods businesses continued to bear the unfavorable impacts from liquidation sales, the footwear category performed slightly better.
Costs & Margins
Gross profit came in at $76.3 million, down 1.3% from the comparable year-ago level. Moreover, gross profit margin contracted 50 bps to 31.6% in second-quarter 2016 due to distribution and store occupancy cost, alongside flat merchandise margins.
Selling, general and administrative (SG&A) expenses, as a percentage of sales, fell 30 bps to 29.9%. On a dollar basis, SG&A expenses decreased 0.6% to $72.3 million due to proxy contest costs in 2015, partly negated by higher employee labor and benefit-related expense in second-quarter 2016.
Consequently, the company’s operating profit of $4 million declined 13% year over year. Also, operating margin contracted 20 bps to 1.7%.
Financial Position
Big 5 Sporting had cash of $8.1 million, long-term debt of $57.4 million, and total shareholders’ equity of $194.7 million as of Jul 3, 2016.
During the first half of 2016, the company’s operating cash flows totaled $16.4 million. Capital expenditure for the period was $6.8 million, excluding non-cash acquisitions.
For 2016, the company currently anticipates capital expenditures, excluding non-cash acquisitions, in the range of $15–$18 million.
Dividend & Share Repurchase
Big 5 Sporting declared a quarterly cash dividend of 12.5 cents, payable on Sep 15, 2016, to shareholders on record as of Sep 1.
The company also authorized a new $25 million share buyback program, replacing its previous program which had $2.9 million available for repurchases.
Store Update
During the quarter, Big 5 Sporting opened two new stores in Gardena, CA and Nogales, Arizona, while it shut down one store. As of Jul 3, 2016, the company’s total store count was 435.
During the third quarter, the company plans to open two new stores, while shutting down five outlets. For 2016, the company targets opening nearly 5–8 new stores, while closing 10.
Outlook
The company revealed that the third quarter has started on a strong note, evident from a quarter to date comps growth in the high mid-single-digit range. Comps are mainly gaining from the closing of several rival stores in its markets, which has led customers to acknowledge the ease of shopping at Big 5 Sporting given its wide range of product assortments and value. Going forward, the company remains keen on making the most of the opportunities available due to this industry consolidation by focusing on its merchandise mix and stepping up promotional activities.
For third-quarter 2016, the company expects comps to increase in the mid to high single-digit range. It also envisions earnings in the range of 23–30 cents per share. Further, the company anticipates third-quarter sales to bear an adverse impact of nearly $9 million from the calendar shift from 53 weeks in 2015 that resulted in pre-Fourth of July holiday sales moving into the second quarter this year compared with the third quarter last year. Also, the company’s third-quarter earnings are expected to be affected by nearly 8–9 cents due to the aforementioned calendar shift.
BIG 5 SPORTING Price, Consensus and EPS Surprise
BIG 5 SPORTING Price, Consensus and EPS Surprise | BIG 5 SPORTING Quote
Stocks to Consider
Some better-ranked stocks in the same industry include ULTA Salon, Cosmetics & Fragrance Inc. (ULTA - Free Report) , Barnes & Noble Inc. and Five Below Inc. (FIVE - Free Report) , each carrying a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>