Big 5 Sporting Goods (BGFV, Financial), is a sporting goods company that sells merchandise under private label brands like Court Casuals, Golden Bear, Harsh, Pacifica, Rugged Exposure and Triple Nickel; and licensed trademarks, including Beach Feet, Bearpaw, Body Glove, GoFit, Hi-Tec, Morrow and The Realm. The retailer started fiscal 2015 on a solid footing, beating analysts’ estimates on top and bottom line.
First-quarter numbers
Big 5 registered comparable-store sales, or comps, growth of 3.9% year over year, with January being the strongest month registering double-digit comps growth. The performance was good across all categories with apparel being the star performer, followed by footwear.
On the back of decent comps growth, sales grew 5.3% year-over-year to $231.3 million. This is despite the impact of port strike on the West Coast, which delayed shipments. Analysts were expecting $0.75 million lower. This was helped by the volatility in firearms and ammunition category offering less of a drag versus the year-ago period.
During the quarter the sporting goods retailer closed three stores, with one being part of  a relocation initiative that started in fiscal 2014.
Gross profit margin increased to 31.5% versus 31.4% in the year-ago quarter. As a result, net income came in at $2.3 million or $0.11 per diluted share versus $0.09 per share in the year-ago quarter. Excluding one-time charges, earnings per share clocked $0.14 against analysts’ expectation of $0.11.
So, the sporting goods retailer delivered estimate-beating results in the first-quarter fiscal 2015.
Bolstering store count
At the end of the quarter, Big 5 was operating a total of 437 stores. To drive growth, Big 5 will be opening ten net new stores during fiscal 2015. In addition, the retailer will be spending on bolstering the distribution facility to support growth in the long run.
Investor friendly
Being an investor-friendly company, Big 5 repurchased 76,073 shares of common stock, valued at $0.9 million. The company still has $6.2 million available for stock repurchases under its $20 million share repurchase program.
Share buyback will drive bottom-line growth as a result of reduced share count. In addition, the company paid a quarterly dividend of $0.10 per share.
Lack of strong omni-channel
However, one area where Big 5 lags its peers –Â Cabela’s (CAB, Financial), Dick’s Sporting (DKS, Financial) –is the omni-channel/ecommerce sales. Steve Miller, CEO, had the following to say in a Q&A session during earnings call:
“As we said, sales from ecommerce were immaterial to 2004 given the launch timing our phased approach for ramping up the product in the platform. We didn't expect that e-commerce to be a game changer for our business, and it hasn’t been a game changer but for 2015, again we don't expect ecommerce to be material to either sales or income, what our focus in ecommerce was certainly to create another sales channel for our customers; we’ve done that now, and we’re evaluating and measuring the initial customer response.”
In my opinion, Big 5 really will need to step up its game in this sales channel because ecommerce is really becoming important for brick-and-mortar stores. If it doesn’t, then it may see customers switching to competitors like Cabela’s and Dick’s Sporting and others in the long run.
The company is investing in new POS system based on Oracle. Barry Emerson, CFO, had this to say during earnings call:
“The new system will have functionality, more functionality than our existing system including some more advanced pricing and promotions ability, loyalty program capabilities, and will also integrate with our ecommerce system. I mean, we’re very excited about the new system, but it's a little ways off now.”
Big 5 is gradually shifting away from print advertising to digital promotion in order to drive growth, and this trend is expected to continue, going forward, as it allows addressing a larger customer base.
Outlook
For the second quarter, Big 5 expects the comps to grow in low to mid-single-digit range. Earnings per share is expected to be in the range of $0.12 to $0.17 excluding cost incurred related to the publicly disclosed proxy contest.
Final words
Big 5 started the fiscal 2015 with solid estimate-beating results. The company is confident of sustaining the momentum, going forward. Currently it is trading near its 52-week high and next five-year growth is pegged at a CAGR of 14%. Additionally, there has been no downward revision in EPS in the last 30 days.
However, one factor that can be a thorn in the neck is the lack of strong ecommerce and omni-channel initiatives. This is where Cabela’s and Dick’s emerge as clear winners. However, investors who would want to spread their investments across different retailers in sporting goods category, Big 5 can be one stock to consider.
