Big 5 Misses by Small Margin - Analyst Blog

Big 5 Sporting Goods Corp. (BGFV) reported third quarter 2010 earnings per share of 31 cents missing Zacks Consensus estimates by a penny. Earnings per share also decreased 16.2% compared to same quarter last year.

Quarter in Detail

Net sales increased marginally to $231.8 million from $231.6 million year-over-year. The sales also could not match up to the Zacks Consensus Estimates of $233 million.

The only marginal increase in net sales was attributable to the negative impact of the calendar shift. The company is in a 52 week fiscal year this year, compared to a 53 weeks fiscal year in 2009. The high volume sales week was moved out of the third quarter and a lower volume sales week was put into the third quarter.

Same store sales however increased 2% on a year over year basis.

Management points out that the company produced positive same store sales over each month of the period and it was due to a larger customer base.

Gross profit decreased 1.4% to $77.4 million and the gross margin declined by half percentage points to 33.4%, driven by a decline in merchandise margins of roughly 50 basis points.

Company has declared a quarterly cash dividend of 5 cents per share of outstanding common stock to be paid on December 15, 2010 to stockholders of record as of December 1, 2010.

Sporting Ahead

For the following quarter management expects the EPS to be in the range of 25 to 33 cents with expectation of same store sales to be in the positive low single-digit range. Company has already opened two new stores in the fourth quarter and plans to open five more in the rest of the quarter.

Management expects to reap in benefit from the upcoming holiday seasons, though the economic and consumer spending habit is unpredictable.

Conclusion

Estimates for the quarter had been stable in the run-up to the earnings release. The current Zacks Consensus Estimate for fiscal 2012 of $1.23 is down from $1.24 thirty days ago. The full-year Zacks Consensus Estimate for fiscal 2011 dipped by a cent to $1.08 compared to estimates seven days ago.

Big 5 Sporting exists in an intense competition from national chains, mass merchandisers and regional stores, which exerts severe pressure on its profitability. Moreover, seasonal nature of business and risks associated with sourcing from foreign countries also undermine the company s future operating performance.

We currently have a Zacks #4 rank for Big 5 Sporting which translates into a Sell rating.