Published:
Big 5 Sporting Goods Corporation Announces Fiscal 2008 Second Quarter Results
EL SEGUNDO, Calif., July 31 /PRNewswire-FirstCall/ -- Big 5 Sporting Goods
Corporation (Nasdaq: BGFV), a leading sporting goods retailer, today reported
financial results for the fiscal 2008 second quarter ended June 29, 2008.
For the fiscal 2008 second quarter, net sales were $209.0 million,
compared to net sales of $217.8 million for the second quarter of fiscal 2007.
Same store sales declined 7.6% for the second quarter, primarily due to a
mid-single digit decrease in customer traffic and continued weakness in the
roller shoe product category, which accounted for approximately 140 basis
points of the same store sales decline during the second quarter.
Gross profit for the fiscal 2008 second quarter was $68.4 million,
compared to $74.8 million in the second quarter of the prior year. The
Company's gross profit margin was 32.7% in the fiscal 2008 second quarter
versus 34.3% in the second quarter of the prior year. The Company achieved an
11 basis-point increase in product selling margins and lowered overall
distribution center expenses versus the prior year despite operating 22 more
stores and experiencing increased freight costs due to higher fuel prices.
These benefits were offset by higher store occupancy costs and a $1.5 million
one-time pre-tax charge to correct an error in the Company's previously
recognized straight-line rent expense, substantially all of which pertained to
prior periods and accumulated over a period of 15 years. This charge
accounted for approximately 75 basis points of the decline in gross profit
margin during the second quarter.
Selling and administrative expense as a percentage of net sales was 30.8%
in the fiscal 2008 second quarter versus 29.1% in the second quarter of the
prior year, primarily due to lower sales levels and higher store-related
expenses reflecting an increased store count.
Net income for the second quarter of fiscal 2008 was $1.7 million, or
$0.08 per diluted share, compared to net income of $5.9 million, or $0.26 per
diluted share, for the second quarter of fiscal 2007.
For the 26 week period ended June 29, 2008, net sales decreased $13.0
million, or 3.0%, to $421.9 million from net sales of $434.9 million for the
same period last year. Same store sales decreased 6.4% in the first 26 weeks
of fiscal 2008 versus the same period last year. Net income was $5.8 million,
or $0.27 per diluted share, for the first 26 weeks of fiscal 2008, compared to
net income of $13.5 million, or $0.59 per diluted share, for the same period
last year.
Results for the second quarter and first 26 weeks of fiscal 2008 include a
one-time pre-tax charge of $1.5 million, or $0.04 per diluted share, to
correct an error in the Company's previously recognized straight-line rent
expense, substantially all of which pertained to prior periods and accumulated
over a period of 15 years. The Company has determined this charge to be
immaterial to its prior year and current year financial statements.
"Given the challenging sales environment, we are pleased with our second
quarter earnings results, which came in at the high end of our expectations on
an operational basis, but were impacted by the one-time charge relating to
lease accounting," said Steven G. Miller, the Company's Chairman, President
and Chief Executive Officer. "We achieved meaningful savings ahead of our plan
in several major expense areas of our business, including store-level,
distribution center, advertising and corporate administrative expense. We
continued with our strong inventory management and completed the second
quarter with chain-wide product inventories down from the prior year while
operating 22 additional stores. On a per-store basis, product inventories
were down 6.3% versus the prior year. We have further improved inventory
comparisons during the third quarter to date."
Mr. Miller continued, "We believe that we have a solid grasp on the
controllable aspects of our business in the current environment and remain
committed to our overall business model, including securing quality new store
locations, refining our merchandise mix and promotional plans, managing
inventory and controlling expenses."
Quarterly Cash Dividend
The Company's Board of Directors has declared a quarterly cash dividend of
$0.09 per share of outstanding common stock, which will be paid on September
15, 2008 to stockholders of record as of August 29, 2008. Based on the
current price of the Company's stock, this dividend equates to an annualized
dividend yield of approximately 4%.
Share Repurchases
During the fiscal 2008 second quarter, the Company repurchased 210,474
shares of its common stock for a total expenditure of $1.7 million. As of the
end of the fiscal 2008 second quarter, the Company had approximately $15.0
million available for future stock repurchases under its $20.0 million share
repurchase program authorized in the fiscal 2007 fourth quarter.
Guidance
The Company's guidance for the remainder of fiscal 2008 assumes that sales
will continue to be impacted by a challenging consumer environment. Based on
that assumption, the Company is providing the following guidance:
-- For the fiscal 2008 third quarter, a decline in same store sales in
the mid-single digit range and earnings per diluted share in the range of
$0.14 to $0.20; and
-- For the fiscal 2008 full year, a decline in same store sales in the
mid-single digit range. Based on the Company's results for the first half of
fiscal 2008 and outlook for the second half of the year, the Company now
expects earnings per diluted share for the fiscal 2008 full year in the range
of $0.60 to $0.80.
A material improvement or decline in the overall consumer environment
during the remainder of the year could materially impact the Company's
performance relative to this guidance.
Store Openings
The Company opened six new stores during the second quarter of fiscal
2008, including one relocation of a store that was closed after the end of the
quarter. The Company ended the second quarter with 370 stores in operation.
The Company anticipates opening four new stores during the fiscal 2008 third
quarter, and has closed the store that was relocated during the second
quarter. The Company anticipates opening approximately 20 new stores, net of
relocations and closures, during fiscal 2008.
Conference Call Information
The Company will host a conference call and audio webcast today at 2:00
p.m. Pacific (5:00 p.m. EDT) to discuss financial results for the fiscal 2008
second quarter. The webcast will be available at
http://www.big5sportinggoods.com and archived for 30 days. Visitors to the
website should select the "Investor Relations" link to access the webcast.
About Big 5 Sporting Goods Corporation
Big 5 is a leading sporting goods retailer in the westernUnited States,
operating 369 stores in 11 states under the "Big 5 Sporting Goods" name. Big
5 provides a full-line product offering in a traditional sporting goods store
format that averages 11,000 square feet. Big 5's product mix includes
athletic shoes, apparel and accessories, as well as a broad selection of
outdoor and athletic equipment for team sports, fitness, camping, hunting,
fishing, tennis, golf, snowboarding and in-line skating.
Except for historical information contained herein, the statements in this
release are forward-looking and made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Forward-looking
statements involve known and unknown risks and uncertainties, which may cause
Big 5's actual results in current or future periods to differ materially from
forecasted results. Those risks and uncertainties include, among other things,
continued or worsening weakness in the consumer spending environment, the
competitive environment in the sporting goods industry in general and in Big
5's specific market areas, inflation, product availability and growth
opportunities, seasonal fluctuations, weather conditions, changes in cost of
goods, operating expense fluctuations, disruption in product flow or increased
costs related to distribution center operations, changes in interest rates,
credit availability and economic conditions in general. Those and other risks
and uncertainties are more fully described in Big 5's filings with the
Securities and Exchange Commission, including its Annual Report on Form 10-K
for the fiscal year ended December 30, 2007 and its Quarterly Report on Form
10-Q for the fiscal quarter ended March 30, 2008. Big 5 conducts its business
in a highly competitive and rapidly changing environment. Accordingly, new
risk factors may arise. It is not possible for management to predict all such
risk factors, nor to assess the impact of all such risk factors on Big 5's
business or the extent to which any individual risk factor, or combination of
factors, may cause results to differ materially from those contained in any
forward-looking statement. Big 5 undertakes no obligation to revise or update
any forward-looking statement that may be made from time to time by it or on
its behalf.
FINANCIAL TABLES FOLLOW
BIG 5 SPORTING GOODS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share amounts)
June 29, December 30,
2008 2007
ASSETS
Current assets:
Cash and cash equivalents $5,717 $9,741
Accounts receivable, net of allowances of
$298 and $405, respectively 9,198 14,927
Merchandise inventories, net 251,399 252,634
Prepaid expenses 7,725 7,069
Deferred income taxes 7,550 8,051
Total current assets 281,589 292,422
Property and equipment, net 91,396 93,244
Deferred income taxes 14,797 12,780
Other assets, net of accumulated amortization
of $267 and $241, respectively 1,024 1,044
Goodwill 4,433 4,433
Total assets $393,239 $403,923
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $100,415 $95,310
Accrued expenses 47,782 62,429
Current portion of capital lease obligations 1,308 1,649
Total current liabilities 149,505 159,388
Deferred rent, less current portion 23,483 22,075
Capital lease obligations, less current portion 1,765 2,279
Long-term debt 103,334 103,369
Other long-term liabilities 7,657 7,657
Total liabilities 285,744 294,768
Commitments and contingencies
Stockholders' equity:
Common stock, $0.01 par value, authorized
50,000,000 shares; issued 23,004,087 and
22,894,987 shares, respectively; outstanding
21,631,549 and 22,012,691 shares,
respectively 229 228
Additional paid-in capital 91,795 90,851
Retained earnings 36,047 34,137
Less: Treasury stock, at cost; 1,372,538
and 882,296 shares, respectively (20,576) (16,061)
Total stockholders' equity 107,495 109,155
Total liabilities and stockholders'
equity $393,239 $403,923
BIG 5 SPORTING GOODS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
13 Weeks Ended 26 Weeks Ended
June 29, July 1, June 29, July 1,
2008 2007 2008 2007
Net sales $208,995 $217,846 $421,861 $434,853
Cost of sales (1) (2) 140,620 143,085 281,903 284,337
Gross profit (1) (2) 68,375 74,761 139,958 150,516
Selling and administrative
expense (1) 64,393 63,466 127,623 125,255
Operating income 3,982 11,295 12,335 25,261
Interest expense 1,156 1,473 2,745 2,922
Income before income taxes 2,826 9,822 9,590 22,339
Income taxes 1,102 3,879 3,746 8,809
Net income (2) $1,724 $5,943 $5,844 $13,530
Earnings per share:
Basic $0.08 $0.26 $0.27 $0.60
Diluted $0.08 $0.26 $0.27 $0.59
Dividends per share $0.09 $0.09 $0.18 $0.18
Weighted-average shares of common
stock outstanding:
Basic 21,684 22,691 21,785 22,683
Diluted 21,693 22,847 21,793 22,825
(1) Historically, the Company has presented total depreciation and
amortization expense separately on the face of the interim unaudited
condensed consolidated statement of operations and corporate
headquarters' occupancy costs within cost of sales. In the fourth
quarter of fiscal 2007, as presented in our Annual Report on Form
10-K for the year ended December 30, 2007, the Company
retrospectively changed the classification of distribution center and
store occupancy depreciation and amortization expense to cost of
sales and store equipment and corporate headquarters' depreciation
and amortization expense to selling and administrative expense.
Depreciation and amortization expense is no longer presented
separately in the interim unaudited condensed consolidated statement
of operations. The corporate headquarters' occupancy costs are now
included in selling and administrative expense. The Company
reclassified its prior period interim unaudited condensed
consolidated statement of operations and related discussion and
analysis to conform to the new presentation, which increased cost of
sales and decreased gross profit for the 13 weeks and 26 weeks ended
July 1, 2007, by $2.3 million and $4.6 million, respectively, and
increased selling and administrative expense for the 13 weeks and 26
weeks ended July 1, 2007, by $1.9 million and $3.8 million,
respectively, from amounts previously reported. This reclassification
had no effect on the Company's previously reported operating or net
income, interim unaudited condensed consolidated balance sheet and
interim unaudited condensed consolidated statement of cash flows, and
is not considered material to any previously reported consolidated
financial statements.
(2) In the second quarter of fiscal 2008, the Company recorded a pre-tax
charge of $1.5 million to correct an error in its previously
recognized straight-line rent expense, substantially all of which
related to prior periods and accumulated over a period of 15 years.
This charge reduced net income by $0.9 million, or $0.04 per diluted
share. The Company determined this charge to be immaterial to its
prior periods' and current year consolidated financial statements.
SOURCE Big 5 Sporting Goods Corporation
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