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Big 5 (BGFV) Raises Q4 Earnings Guidance on Solid Top Line
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After a spate of holiday season sales results from retailers, it was Big 5 Sporting Goods Corp.'s (BGFV - Free Report) turn to come up with fourth-quarter and fiscal 2016 sales numbers. Though top-line results for both periods lagged estimates and dipped year over year, the company remains encouraged by the results as the lag is attributable to the inclusion of an extra week in the sales numbers for the respective periods in fiscal 2015. However, for comparison purpose, the comparable-store sales (comps) numbers for the respective fiscal 2015 periods used the comparable 13-week and 52-week periods.
Encouraged by top-line performance, the company raised the lower end of its earnings guidance for the fourth quarter and provided its estimates for fiscal 2016.
Though shares of Big 5 did not react much to the news, the stock has returned a solid 44.8% in the past one year. This marks a significant outperformance compared with the Zacks categorized Retail–Miscellaneous/Diversified industry’s growth of 15.2% in the same period.
Q4 Sales Results
Net sales for the fiscal fourth quarter declined 3.2% to $266.3 million from $275 million in the year-ago quarter and were below the Zacks Consensus Estimate of $273.6 million. However, comparable-store sales (comps) rose 3.1% from the prior-year quarter.
Comps for the period gained mainly from the rise in both customer transactions and average sales owing to the company’s actions to capitalize on the opportunities presented by the rationalization in the retail sporting goods industry. The primary reason for the competitive rationalization in the markets where it operates is the recent liquidation of rivals Sports Authority and Sport Chalet.
Additionally, comps in the quarter benefited from the improved merchandise margins that escalated nearly 70 basis points. Evidently, merchandise inventories remained strong at quarter-end with per-store inventories inching down only 1% from the year-ago quarter, leading the company to enhance its balance sheet strength. During the quarter, the company used its positive cash flows to lower debt by slashing borrowings under its credit facility by 82% from $54.8 million to $10 million at year-end.
From the product category perspective, the company’s hardgoods and apparel categories posted comps gains, while comps for the footwear category were slightly down. Hardgoods posted comps growth in the mid-single-digit range, while comps for apparel increased in the low-single digit.
Fiscal 2016 Sales Results
Big 5 reported net sales of $1.02 billion for fiscal 2016, falling a penny short of both the prior-year figure and the Zacks Consensus Estimate of $1.03 billion. Comps for the fiscal increased 1.7%.
Guidance
Given the robust sales results, the sporting goods retailer narrowed its earnings per share guidance range towards the higher-end of its previously forecasted range. The company now expects earnings per share for the fiscal fourth quarter in the band of 34–35 cents, compared with the previous guidance of 25–35 cents as well as 20 cents recorded in the year-ago quarter.
For fiscal 2016, Big 5 anticipates earnings per share in the range of 76–77 cents a share compared with 70 cents earned in fiscal 2015. The Zacks Consensus Estimate currently stands at 30 cents a share for the quarter and 80 cents per share for fiscal 2016, both significantly below the company’s revised forecast.
Further, the company remains encouraged by the continuation of the positive sales trends witnessed in the fourth quarter into fiscal 2017 as well. The company expects to continue gaining from the closing of several rival stores in its markets, as well as the favorable winter weather that started at the end of the fourth quarter and is likely to continue through most of its Western markets.
The overall performance of retailers reveals that the holiday season, which is the key sales season for retailers, was challenging this year. Retailers continued to feel the pinch of declining customer traffic at stores and malls as online stores hogged the limelight. Retailers like Kohl's Corporation (KSS - Free Report) and Macy’s Inc. (M - Free Report) also fell prey to these industry hurdles, owing to which holiday comps for both declined 2.1%. The drab holiday sales compelled these bellwethers to slash their earnings outlook for fiscal 2016.
Conversely, The Gap Inc.’s (GPS - Free Report) holiday comps rose 2%, fuelled by solid consumer response witnessed at its namesake and Old Navy brands.
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Big 5 (BGFV) Raises Q4 Earnings Guidance on Solid Top Line
After a spate of holiday season sales results from retailers, it was Big 5 Sporting Goods Corp.'s (BGFV - Free Report) turn to come up with fourth-quarter and fiscal 2016 sales numbers. Though top-line results for both periods lagged estimates and dipped year over year, the company remains encouraged by the results as the lag is attributable to the inclusion of an extra week in the sales numbers for the respective periods in fiscal 2015. However, for comparison purpose, the comparable-store sales (comps) numbers for the respective fiscal 2015 periods used the comparable 13-week and 52-week periods.
Encouraged by top-line performance, the company raised the lower end of its earnings guidance for the fourth quarter and provided its estimates for fiscal 2016.
Though shares of Big 5 did not react much to the news, the stock has returned a solid 44.8% in the past one year. This marks a significant outperformance compared with the Zacks categorized Retail–Miscellaneous/Diversified industry’s growth of 15.2% in the same period.
Q4 Sales Results
Net sales for the fiscal fourth quarter declined 3.2% to $266.3 million from $275 million in the year-ago quarter and were below the Zacks Consensus Estimate of $273.6 million. However, comparable-store sales (comps) rose 3.1% from the prior-year quarter.
Comps for the period gained mainly from the rise in both customer transactions and average sales owing to the company’s actions to capitalize on the opportunities presented by the rationalization in the retail sporting goods industry. The primary reason for the competitive rationalization in the markets where it operates is the recent liquidation of rivals Sports Authority and Sport Chalet.
Additionally, comps in the quarter benefited from the improved merchandise margins that escalated nearly 70 basis points. Evidently, merchandise inventories remained strong at quarter-end with per-store inventories inching down only 1% from the year-ago quarter, leading the company to enhance its balance sheet strength. During the quarter, the company used its positive cash flows to lower debt by slashing borrowings under its credit facility by 82% from $54.8 million to $10 million at year-end.
From the product category perspective, the company’s hardgoods and apparel categories posted comps gains, while comps for the footwear category were slightly down. Hardgoods posted comps growth in the mid-single-digit range, while comps for apparel increased in the low-single digit.
Fiscal 2016 Sales Results
Big 5 reported net sales of $1.02 billion for fiscal 2016, falling a penny short of both the prior-year figure and the Zacks Consensus Estimate of $1.03 billion. Comps for the fiscal increased 1.7%.
Guidance
Given the robust sales results, the sporting goods retailer narrowed its earnings per share guidance range towards the higher-end of its previously forecasted range. The company now expects earnings per share for the fiscal fourth quarter in the band of 34–35 cents, compared with the previous guidance of 25–35 cents as well as 20 cents recorded in the year-ago quarter.
For fiscal 2016, Big 5 anticipates earnings per share in the range of 76–77 cents a share compared with 70 cents earned in fiscal 2015. The Zacks Consensus Estimate currently stands at 30 cents a share for the quarter and 80 cents per share for fiscal 2016, both significantly below the company’s revised forecast.
Further, the company remains encouraged by the continuation of the positive sales trends witnessed in the fourth quarter into fiscal 2017 as well. The company expects to continue gaining from the closing of several rival stores in its markets, as well as the favorable winter weather that started at the end of the fourth quarter and is likely to continue through most of its Western markets.
This California-based company, which is expected release its complete financial results by the end of February, currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Conclusion
The overall performance of retailers reveals that the holiday season, which is the key sales season for retailers, was challenging this year. Retailers continued to feel the pinch of declining customer traffic at stores and malls as online stores hogged the limelight. Retailers like Kohl's Corporation (KSS - Free Report) and Macy’s Inc. (M - Free Report) also fell prey to these industry hurdles, owing to which holiday comps for both declined 2.1%. The drab holiday sales compelled these bellwethers to slash their earnings outlook for fiscal 2016.
Conversely, The Gap Inc.’s (GPS - Free Report) holiday comps rose 2%, fuelled by solid consumer response witnessed at its namesake and Old Navy brands.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>