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Big 5 Sporting Goods (BGFV) Up 16.8% Since Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Big 5 Sporting Goods Corporation (BGFV - Free Report) . Shares have added about 16.8% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is BGFV due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Big 5 Sporting Q4 Loss Narrower Than Expected, Sales Lag
Big 5 Sporting incurred an adjusted loss of 10 cents per share, narrower than the Zacks Consensus Estimate loss of 11 cents. The reported figure compares unfavorably with adjusted earnings of 33 cents per share recorded in the prior-ago quarter. Lower sales and weak margins negatively impacted the bottom line.
Including one-time items, loss per share came in at 62 cents versus earnings of 35 cents per share in the year-ago quarter.
Net sales dipped 8.8% to $242.9 million, missing the Zacks Consensus Estimate of $251 million. The decline can be mainly attributed to an extremely challenging performance in December. Sales in December were largely hurt by nearly 50% decrease in core winter product categories due to warmer than normal and dry weather conditions in most of its markets. Lower demand for firearm-related products also hurt the quarterly sales.
Furthermore, comparable store sales (comps) dropped 9.4% against an increase of 3.1% in the year-ago period. Comps declined in all three months of the quarter, with greatest decline witnessed in December. Month-wise, comps dipped in the low-mid single digit range in October, followed by a low-single digit decline in November, where positive comps during the Black Friday weekend aided performance. In December, comps declined in the low-double digit range due to the aforementioned weakness in winter and firearm related products.
On a categorical basis, the company witnessed comps decline in the low-double digit range for apparel, high single-digit range for hardgoods and in mid-single digit range for footwear.
Costs & Margins
Gross profit came in at $72.9 million, down 16.5% from the prior-year quarter. Further, gross margin contracted 280 basis points (bps) to 30% in the quarter due to 126 bps decrease in merchandise margins coupled with higher store occupancy and distribution expenses, as a percentage of net sales.
Selling and administrative expenses, as a percentage of sales, expanded 510 bps to 33.3%. Also, total selling and administrative expenses were up $5.6 million to $80.8 million, courtesy of increased employee labor and benefit-related costs along with non-cash impairment charges.
Consequently, the company incurred operating loss of $7.9 million compared to operating profit of $12.2 million reported in the year-ago quarter. Also, as a percentage of sales, it contracted 130 bps to 3.3%.
Financial Position
Big 5 Sporting had cash of $7.2 million, long-term debt of $45 million and total stockholders’ equity of $187.1 million as of Dec 31, 2017.
Management incurred capital expenditures of $16.5 million in 2017. For 2018, it expects to incur capital expenditures in the $18-$22 million range.
Dividend & Share Repurchase
Big 5 Sporting remains committed to returning cash to shareholders by paying dividends and share repurchases. Apparently, management announced a quarterly cash dividend of 15 cents per share, payable on Mar 23 to shareholders on record as of Mar 9, 2018.
In the fourth quarter, the company bought back 118,609 shares for about $0.8 million. In 2017, it repurchased 795,718 shares for nearly $7.7 million.
As of Dec 31, 2017, the company had about $15.7 million remaining to be repurchased under its $25 million share buyback program.
Store Update
During the reported quarter, Big 5 Sporting inaugurated three outlets that included a relocated store. As of Dec 31, 2017, Big 5 Sporting had 435 stores.
Further, it expects to introduce nearly eight stores with the closure of three stores in 2018.
Guidance
Unfavorable weather conditions continued to hurt winter product sales in first-quarter 2018, especially in January as comps declined in the high teens. However, sales trend improved in February largely owing to non-winter products, which is likely to provide some cushion.
Management issued guidance for the first quarter of 2018. The company now projects comps to decline in the high-single digits. Further, first-quarter loss per share is anticipated in the band of 6-14 cents versus earnings of 24 cents in the first quarter of 2017.
This guidance includes an estimated adverse impact from calendar shift of the Easter holiday into first-quarter 2018 compared with the year-ago quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter. In the past month, the consensus estimate has shifted by 233.3% due to these changes.
Big 5 Sporting Goods Corporation Price and Consensus
At this time, BGFV has an average Growth Score of C, though it is lagging a lot on the momentum front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of this revision indicates a downward shift. Notably, BGFV has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Big 5 Sporting Goods (BGFV) Up 16.8% Since Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Big 5 Sporting Goods Corporation (BGFV - Free Report) . Shares have added about 16.8% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is BGFV due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Big 5 Sporting Q4 Loss Narrower Than Expected, Sales Lag
Big 5 Sporting incurred an adjusted loss of 10 cents per share, narrower than the Zacks Consensus Estimate loss of 11 cents. The reported figure compares unfavorably with adjusted earnings of 33 cents per share recorded in the prior-ago quarter. Lower sales and weak margins negatively impacted the bottom line.
Including one-time items, loss per share came in at 62 cents versus earnings of 35 cents per share in the year-ago quarter.
Net sales dipped 8.8% to $242.9 million, missing the Zacks Consensus Estimate of $251 million. The decline can be mainly attributed to an extremely challenging performance in December. Sales in December were largely hurt by nearly 50% decrease in core winter product categories due to warmer than normal and dry weather conditions in most of its markets. Lower demand for firearm-related products also hurt the quarterly sales.
Furthermore, comparable store sales (comps) dropped 9.4% against an increase of 3.1% in the year-ago period. Comps declined in all three months of the quarter, with greatest decline witnessed in December. Month-wise, comps dipped in the low-mid single digit range in October, followed by a low-single digit decline in November, where positive comps during the Black Friday weekend aided performance. In December, comps declined in the low-double digit range due to the aforementioned weakness in winter and firearm related products.
On a categorical basis, the company witnessed comps decline in the low-double digit range for apparel, high single-digit range for hardgoods and in mid-single digit range for footwear.
Costs & Margins
Gross profit came in at $72.9 million, down 16.5% from the prior-year quarter. Further, gross margin contracted 280 basis points (bps) to 30% in the quarter due to 126 bps decrease in merchandise margins coupled with higher store occupancy and distribution expenses, as a percentage of net sales.
Selling and administrative expenses, as a percentage of sales, expanded 510 bps to 33.3%. Also, total selling and administrative expenses were up $5.6 million to $80.8 million, courtesy of increased employee labor and benefit-related costs along with non-cash impairment charges.
Consequently, the company incurred operating loss of $7.9 million compared to operating profit of $12.2 million reported in the year-ago quarter. Also, as a percentage of sales, it contracted 130 bps to 3.3%.
Financial Position
Big 5 Sporting had cash of $7.2 million, long-term debt of $45 million and total stockholders’ equity of $187.1 million as of Dec 31, 2017.
Management incurred capital expenditures of $16.5 million in 2017. For 2018, it expects to incur capital expenditures in the $18-$22 million range.
Dividend & Share Repurchase
Big 5 Sporting remains committed to returning cash to shareholders by paying dividends and share repurchases. Apparently, management announced a quarterly cash dividend of 15 cents per share, payable on Mar 23 to shareholders on record as of Mar 9, 2018.
In the fourth quarter, the company bought back 118,609 shares for about $0.8 million. In 2017, it repurchased 795,718 shares for nearly $7.7 million.
As of Dec 31, 2017, the company had about $15.7 million remaining to be repurchased under its $25 million share buyback program.
Store Update
During the reported quarter, Big 5 Sporting inaugurated three outlets that included a relocated store. As of Dec 31, 2017, Big 5 Sporting had 435 stores.
Further, it expects to introduce nearly eight stores with the closure of three stores in 2018.
Guidance
Unfavorable weather conditions continued to hurt winter product sales in first-quarter 2018, especially in January as comps declined in the high teens. However, sales trend improved in February largely owing to non-winter products, which is likely to provide some cushion.
Management issued guidance for the first quarter of 2018. The company now projects comps to decline in the high-single digits. Further, first-quarter loss per share is anticipated in the band of 6-14 cents versus earnings of 24 cents in the first quarter of 2017.
This guidance includes an estimated adverse impact from calendar shift of the Easter holiday into first-quarter 2018 compared with the year-ago quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter. In the past month, the consensus estimate has shifted by 233.3% due to these changes.
Big 5 Sporting Goods Corporation Price and Consensus
Big 5 Sporting Goods Corporation Price and Consensus | Big 5 Sporting Goods Corporation Quote
VGM Scores
At this time, BGFV has an average Growth Score of C, though it is lagging a lot on the momentum front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of this revision indicates a downward shift. Notably, BGFV has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.