Shares of Big 5 Sporting Goods Corp. (BGFV) plunged 8.25% in yesterday’s after hours trade to $11.90 as the company reported lower-than-expected sales results for the fourth quarter and fiscal 2014 while lowering its earnings outlook for the same period.
Net sales for the fourth quarter rose by less than 1% to $250.3 million from $248 million last year and were below the Zacks Consensus Estimate of $257 million. However, comparable-store sales (comps) slipped 0.5% from the prior-year quarter and also came below the company’s guidance of lower single-digit growth. Last year, the company had posted a 0.5% decline in comps for the fourth quarter.
The decline was primarily attributed to a low single-digit decline in holiday period comps, which more than offset the positive low single-digit comps for October and November. Soft holiday sales came on the back of lower-than-expected sales of firearm and related products as well as the impact of unfavorable weather conditions on the sale of winter-related products in almost all the markets where the company serves.
During the quarter, the company’s apparel and footwear categories reported comps increase in the low single-digit range, while comps for hardgoods dipped in the low single-digit range, mainly accounting for the weak sales of firearm-related products.
Further, despite weaker-than-expected sales and a highly promotional retail backdrop, the company witnessed only a 10 basis points (bps) decline in merchandise margins for the quarter. Merchandise margins were helped by the company’s efficient inventory management.
Big 5 reported net sales of $977.9 million for fiscal 2014, which fell 1.6% year over year from $993.3 million. Top line also fell short of the Zacks Consensus Estimate of $984 million. Further, comps for the year declined 2.9% unlike a 3.9% increase reported in fiscal 2013.
Given the lower-than-expected sales results, the athletic goods retailer lowered its earnings outlook for the fourth quarter and fiscal 2014. The company now estimates fourth-quarter earnings in the band of 14-16 cents per share, lower than the previous guidance of 14-22 cents per share as well as 23 cents recorded in the year-ago quarter.
For fiscal 2014, Big 5 anticipates earnings to range from 68-70 cents a share compared with $1.27 earned in fiscal 2013. The Zacks Consensus Estimate currently stands at 20 cents a share for the quarter and 76 cents per share for fiscal 2014, which are both significantly above the company’s revised forecast.
Though the holiday season was a challenging one for Big 5, the weather being warmer than usual in the markets it serves, the company has benefited from favorable winter weather in the last few days of the fourth quarter. Further, continuation of the favorable weather into the New Year has led to a positive start for Big 5 in 2015. This California-based company, which is expected release its complete financial results by the end of February, currently carries a Zacks Rank #3 (Hold).
The holiday shopping season this year has been an uplifting one for most retailers with many of them reporting solid sales data for the months of November and December. Further, these retailers, including Pacific Sunwear of California Inc. (PSUN) and American Eagle Outfitters Inc. (AEO), raised their outlook for the fourth quarter of fiscal 2014.
Another retailer that posted impressive results this holiday season is Aeropostale Inc. (ARO), which has narrowed its loss estimate for the fourth quarter. This was driven by a 9% decline in comps for November and December, compared with a 15% decline reported in the year-ago period.
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