Big 5 Sporting Goods Corp. (BGFV) reported fourth quarter 2010 earnings per share of 25 cents, beating the Zacks Consensus Estimate by 2 cents, but declining 21.9% from 32 cents per share reported in the same quarter last year. We however note that fiscal 2010 comprised 52 weeks as against 53 weeks in the previous year.
For fiscal 2010, the company reported earnings per share of $1.01, ahead of the Zacks Consensus Estimate of 99 cents, but below the year-ago figure of $1.04.
Quarter in Detail
Net sales decreased to $226.7 million in the fourth quarter from $237.6 million in the year-earlier period. Sales also failed to match up to the Zacks Consensus Estimate of $228 million. Same store sales decreased 0.7% on a year-over-year basis.
Gross profit decreased 6.2% to $75.8 million and the gross margin shrunk 60 basis points to 33.4% as a result of a 20 basis point decline in merchandise margins and higher store occupancy costs.
Selling and administrative expense as a percentage of net sales increased 110 basis points to 30.5% in the fourth quarter of fiscal 2010 attributable to increased store-related expenses on a higher store count.
The company has increased the quarterly cash dividend to 75 cents a share from 5 cents a share of outstanding common stock to be paid on March 22, 2011 to stockholders of record as on March 8, 2011.
Looking Ahead
For the first quarter 2011 management expects earnings per share to come in a band of 15 cents to 22 cents. Same store sales are pegged in a negative low single-digit to positive low single-digit range. Till date, in the first quarter, the company has relocated two stores and closed two stores that were relocated in late 2010.
The company currently anticipates opening between 10 and 15 net new stores during fiscal 2011.
Big 5 Sporting Goods Corp. operates as a sporting goods retailer in the western U.S. The company offers athletic shoes, apparel, accessories and a broad selection of outdoor and athletic equipment for team sports, fitness, camping, hunting, fishing, tennis, golf, snowboarding, and in-line skating.
Big 5 Sporting operates in a highly fragmented specialty retail sector and faces intense competition from national chains, such as Dick’s Sporting Goods Inc Commo (DKS), and Hibbett Sports Inc. (HIBB); mass merchandisers, such as Wal-Mart Stores Inc. (WMT) and Target Corp. (TGT), as well as regional and local sporting goods stores. This puts Big 5 Sporting under severe stress to maintain profitability.
We currently have a Zacks #5 rank for Big 5 Sporting, which translates into a Strong Sell rating. Our long-term recommendation on the stock is Underperform.
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