Big 5 Sporting Goods Corporation BGFV reported dismal second-quarter 2018 results, wherein it recorded loss per share and sales missed estimates. Also, both top and bottom line declined on a year-over-year basis. This apart, management issued third-quarter guidance, which was below the analysts’ expectations.
Consequently, shares of the company were down 14.7% in the after-hours trading on Jul 31. Also, this Zacks Rank #3 (Hold) company has lost 27.1% in the past three months against the industry’s rally of 7.4%
Q2 in Detail
Big 5 Sporting incurred loss of 1 cent per share against the Zacks Consensus Estimate of earnings of 11 cents. Also, the reported figure compares unfavorably with earnings of 13 cents per share in the prior-year quarter. Management had projected second-quarter earnings per share in the range of 4-12 cents.
Results were hurt by lower sales, decline in comparable store sales (comps) in various categories, contraction in margins and unfavorable weather in the company’s key markets.
Net sales dipped 1.5% to $240 million and missed the Zacks Consensus Estimate of $250 million. Further, comps dropped 2.1% against an increase of 0.9% in the year-ago quarter. Month-wise, comps were up in low single-digits in April, including gains from the Easter calendar shift. However, the metric dipped in low single-digits in May and mid-single-digits in June. Comps were mainly hurt by softness witnessed in the back half of the reported quarter. In addition, unfavorable weather in the company’s key markets during the highest summer selling season impacted comps.
Big 5 Sporting witnessed a mid-single digits decline in the number of customer transactions, while its average sales increased in low single-digits in the quarter under review.
On a categorical basis, comps improved in low-single digits for apparel, while the same declined in low-single digits for footwear and low mid-single digits for hard goods in the second quarter. Comps dipped in hard goods category due to softness across camping and water sports products coupled with persistent weakness in firearm related products.
Big 5 Sporting Goods Corporation Price, Consensus and EPS Surprise
Big 5 Sporting Goods Corporation Price, Consensus and EPS Surprise | Big 5 Sporting Goods Corporation Quote
Costs & Margins
In the reported quarter, gross profit totaled $75.3 million, down nearly 5% from the prior-year quarter. Further, gross margin contracted 110 basis points (bps) to 31.4% due to increased distribution and store occupancy costs, as a percentage of net sales. This was somewhat offset by a 42 bps increase in merchandise margins.
Selling and administrative expenses, as a percentage of sales, increased 70 bps to 31.1%. Also, total selling and administrative expenses grew $0.5 million to $74.7 million backed by rise in employee labor and benefit-related costs, partly offset by a decline in advertising costs.
Additionally, the company recorded operating income of $0.6 million compared with $5.1 million in the year-ago quarter.
Financial Position
Big 5 Sporting had cash of $5.9 million, long-term debt of $90.7 million and total stockholders’ equity of $180.1 million as of Jul 1, 2018.
Management’s capital expenditures, excluding non-cash acquisitions, totaled $5.2 million in the first six months of 2018. For 2018, the company expects capital expenditures in the $14-$18 million band compared with $16-$20 million projected earlier.
Concurrently, the company announced a quarterly cash dividend of 15 cents per share, payable on Sep 14 to shareholders of record as of Aug 31, 2018.
Store Update
In the second quarter, Big 5 Sporting opened two stores while simultaneously shutting down two outlets, including one relocation. As of Jul 1, 2018, the company operated 435 namesake stores.
In 2018, management plans to introduce nearly five and close three stores. Moreover, it intends to introduce one store in the third quarter.
Guidance
Following the quarterly results, management issued guidance for third-quarter 2018. Comps are now projected in the range of flat to up low-single digits. Earnings per share are anticipated in the band of 14-24 cents compared with 28 cents in third-quarter 2017. The Zacks Consensus Estimate for third-quarter earnings is pegged higher at 45 cents, which is likely to witness downward revisions.
Looking For Better-Ranked Retail Stocks? Check These
DICK’S Sporting Goods, Inc. DKS delivered an average positive earnings surprise of 13.4% in the trailing four quarters and carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Tractor Supply Company TSCO, also a Zacks Rank #2 company, has a long-term earnings growth rate of 13.5%.
Five Below, Inc. FIVE has an impressive long-term earnings growth rate of 27.7% and a Zacks Rank of 2.
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