Big 5 Sporting Goods Corporation (NASDAQ:BGFV) reported its first quarter financial results for fiscal year 2024, indicating a challenging macroeconomic environment that pressured consumer discretionary spending and impacted sales. The company experienced a decrease in net sales and same-store sales, while managing to grow merchandise margins and maintain healthy inventory levels. The first quarter results were consistent with the company's guidance, and the outlook for the second quarter suggests a continuation of current trends, including a projected decrease in same-store sales.
Key Takeaways
- Net sales for Q1 2024 were $193.4 million, a decrease from $224.9 million in the prior year.
- Same-store sales decreased by 13.5% in Q1 2024.
- Merchandise margins increased by nearly 50 basis points compared to the prior year.
- Inventory levels were reduced by 12.5% year-over-year at the end of Q1.
- The company reduced selling and administrative expenses by $3.8 million year-over-year.
- Net loss for Q1 2024 was $8.3 million, or $0.38 per basic share.
- The company declared a quarterly cash dividend of $0.05 per share.
Company Outlook
- Anticipated same-store sales decrease in the high single-digit range for Q2 2024.
- Projected net loss per basic share for Q2 2024 is expected to be between $0.40 and $0.55.
- Capital expenditures for the full year 2024 are expected to be between $13 million and $18 million.
- Plans to open approximately five new stores and close four stores, aiming for a total of approximately 425 stores by year-end.
Bearish Highlights
- The challenging macroeconomic environment continues to weigh on consumer discretionary spending.
- Sales were unfavorably impacted by extreme weather volatility across several markets.
- Gross profit margin for Q1 2024 decreased to 31.2% from 33.4% in the previous year.
Bullish Highlights
- Merchandise margin gains were achieved despite the sales headwinds.
- Expense management led to significant savings, with a focus on mitigating the impact of minimum wage increases.
- The company's cash balance increased to $12.6 million from $9.2 million at the end of the previous quarter.
Misses
- The net loss for Q1 2024 was significantly higher compared to a net income in Q1 2023.
- EBITDA turned negative at $6.6 million in Q1 2024 versus a positive $4.5 million in Q1 2023.
Q&A Highlights
- The call did not feature a Q&A session.
Big 5 Sporting Goods highlighted several strategies to navigate the current economic landscape, including optimizing merchandise margins, managing inventory levels, and controlling expenses. The company remains focused on these areas as it enters the second quarter, which includes key retail periods around Memorial Day and Father's Day. Despite the current challenges, Big 5 Sporting Goods expressed cautious optimism about the potential for normalized weather patterns to drive store traffic and spending in the upcoming summer season.
InvestingPro Insights
In light of Big 5 Sporting Goods Corporation's (BGFV) first quarter performance for fiscal year 2024, several metrics and tips from InvestingPro provide a deeper understanding of the company's current financial standing and future prospects.
InvestingPro Data metrics indicate that BGFV has a market capitalization of $77.87 million, which is relatively small, suggesting that the stock could be more susceptible to market volatility. The company's Price / Book ratio, as of the last twelve months ending Q4 2023, stands at a low 0.32, which might attract investors looking for potentially undervalued stocks. Despite a significant decrease in revenue growth of -11.13% over the last twelve months, BGFV has managed to maintain a dividend yield of 5.65%, which is considerable and could be appealing to income-focused investors.
InvestingPro Tips highlight that BGFV is currently trading at a low Price / Book multiple, which can be a sign that the stock is undervalued relative to its assets. Additionally, the company has upheld its commitment to shareholders by maintaining dividend payments for 21 consecutive years. This consistency in dividend payments, combined with the current high yield, could be a significant factor for investors seeking stable income streams during uncertain economic times.
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The provided data and tips are particularly relevant to the article as they give context to BGFV's financial results, dividend reliability, and stock valuation amidst the macroeconomic challenges discussed. With the outlook for Q2 suggesting a continuation of current trends, these insights can help investors make more informed decisions regarding Big 5 Sporting Goods Corporation.
Full transcript - Big 5 Sporting Go (BGFV) Q1 2024:
Operator: Good day, ladies and gentlemen. Welcome to the Big 5 Sporting Goods First Quarter 2024 Earnings Results Conference Call. Today's call is being recorded. With us today are Mr. Steve Miller, President and Chief Executive Officer; and Mr. Barry Emerson (NYSE:EMR), Chief Final Officer of Big 5 Sporting Goods. At this time, for opening remarks and introductions, I would like to turn the conference over to Mr. Miller. Please go ahead, sir.
Steven Miller: Thank you, operator. Good afternoon, everyone. Welcome to our 2024 first quarter conference call. Today, we will review our financial results for the first quarter of fiscal 2024 as well as provide an outlook for the second quarter. I will now turn the call over to Barry to read our safe harbor statement.
Barry Emerson: Thanks, Steve. Except for statements of historical facts, any remarks that we may make about our future expectations, plans, and prospects constitute forward-looking statements 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 that may cause our actual results in current and future periods to differ materially from forecasted results. These risks and uncertainties include those more fully described in our annual reports on Form 10-K, our quarterly reports on Form 10-Q, and our other filings, with the Securities and Exchange Commission. We undertake no obligation to revise or update any forward-looking statements that may be made from time to time by us or on our behalf.
Steven Miller: Thank you, Barry. Our first quarter results were consistent with our guidance and continue to reflect a challenging macroeconomic environment that pressuring consumer discretionary spending. Our results were also impacted by extreme weather volatility across many of our markets that was generally unfavorable to our business over the course of the quarter. Net sales for the first quarter were $193.4 million compared to $224.9 million in the prior year with same-store sales down 13.5%. As anticipated, sales comparisons were impacted by the calendar shift of the Easter holiday when our stores are closed from the second quarter of 2023 to the first quarter of 2024. We believe this calendar shift negatively impacted our first quarter same-store sales by roughly 100 basis points. From a category perspective, apparel was down approximately 16%, hard goods was down approximately 14% and footwear was down approximately 10%. While we were encouraged that our average ticket was up slightly year-over-year, our transaction count was down low-double-digits, which we believe reflects the soft discretionary spending environment. In the face of the top-line sales headwinds, we have continued to focus on the aspects of the business that we have more control over. We were relatively pleased with the results we achieved from our efforts in optimizing merchandise margins, maintaining healthy inventory levels relative to sales, and managing expenses. For the first quarter, we grew our merchandise margins by nearly 50 basis points versus the prior year. Our winter-related product margins were particularly strong as that category benefited from the freshness of our product this winter season following strong sell-through in the prior year's winter season. Margins also benefited from our overall inventory management and we are pleased to achieve merchandise margin gains, while also reducing year-over-year inventory levels by 12.5% as of the end of the quarter. Diligent expense management continues to be another focal point for us and we reduced our first quarter selling and administrative expense by $3.8 million year-over-year. A large contributor to the expense savings resulted from closely managing our store labor hours, which we've been particularly focused on to mitigate the impact of substantial increases in minimum wage rates across our markets. Expense management has always been one of our strengths and this focus is particularly important now given the inflationary pressures and challenging sales environment. Turning now to current sales trends. In the second quarter to date, we have continued to feel effects from the ongoing macro headwinds that are impacting consumer discretionary spending and same-store sales are running down in the high-single-digits, including a benefit from being open an extra day in the second quarter related to the calendar shift of the Easter holiday. The first half of the second quarter is a relatively low volume period for our business. The key to the second quarter always revolves around the higher volume periods surrounding Memorial Day and Father's Day along with the start of summer. We feel very positive about our product assortment and inventory position as we transition seasons. Warmer and drier weather has the potential to be a strong driver of store traffic and spending over the balance of the quarter, especially compared to last year when these factors at the start of summer were relatively unfavorable for us. We are cautiously optimistic that this year our business will benefit from more normalized weather patterns. That said, our primary challenge in the near term will be contending with the confluence of macroeconomic variables that are continuing to weigh on discretionary spending patterns. We believe that when conditions improve, our proven business model which focuses on providing customers with the optimal mix of value, selection, service, and convenience will position us to resume positive sales and earnings growth and in turn create value for our shareholders. While we continue to work hard to energize our sales, we will remain diligently focused in managing our merchandise margins, inventory levels, and expenses. With that, I'll now turn it over to Barry to provide additional details regarding our first-quarter performance and second-quarter outlook.
Barry Emerson: Thanks, Steve. Gross profit for the fiscal 2024 first quarter was $60.4 million compared to gross profit of $75.1 million in the first quarter of the prior year. Our gross profit margin of 31.2% in the 2024 first quarter compared to 33.4% in the first quarter of last year. The decrease in gross profit margin versus the prior year primarily reflected higher store occupancy and distribution expense including cost capitalized into inventory as a percentage of net sales. Merchandise margins for the quarter, first quarter of 2024 increased 48 basis points versus the prior year. Overall selling and administrative expense for the fiscal 2024 first quarter decreased $3.8 million compared to the prior year. The year-over-year reduction primarily reflected lower employee labor expense. As a percent of net sales, selling, and administrative expense was 36.9% in the 2024 first quarter versus 33.4% in the 2023 first quarter, reflecting the lower sales base. Now looking at our bottom line. Net loss for the first quarter of fiscal 2024 was $8.3 million or $0.38 per basic share. This compares to net income of $0.2 million or $0.01 per diluted share in the first quarter of 2023. EBITDA was negative $6.6 million for the first quarter of fiscal 2024 compared to a positive $4.5 million in the first quarter of last year. Turning to the balance sheet. Our merchandise inventory at the end of the first quarter decreased 12.5% year-over-year. As Steve indicated, this reduction reflects our efforts to manage inventory levels lower considering the soft sales environment. Reviewing our capital spending, our CapEx excluding noncash acquisitions totaled $1.8 million for the first quarter of fiscal 2024, primarily representing investments in store-related remodeling, distribution center equipment, and computer hardware and software purchases. For the 2024 full year, we continue to expect CapEx in the range of $13 million to $18 million. For the balance of fiscal 2024, we anticipate opening approximately five new stores and closing approximately four stores as part of our ongoing efforts to optimize our store base resulting in approximately 425 stores in operation at the end of the year. Now looking at our cash flow, net cash provided by operating activities was $8.2 million in the first quarter of fiscal 2024. This compares to net cash provided by operating activities of $12.3 million in the comparable period last year. The year-over-year decrease in our operating cash flow primarily reflected lower net income, partially offset by a smaller decrease in accrued expenses. Our balance sheet at the end of the first quarter of fiscal 2024 remains healthy. We had zero borrowings under our credit facility and a cash balance of $12.6 million up from $9.2 million at the end of Q4 '23. Today, we announced that our Board of Directors declared a quarterly cash dividend of $0.05 per share. Now I'll spend a moment on guidance. For the fiscal 2024 second quarter, we expect same-store sales to decrease in the high single-digit range compared to the 2023 second quarter. Our same-store sales guidance reflects an expectation that macroeconomic headwinds will continue to impact consumer discretionary spending over the balance of the quarter. Although fiscal second-quarter net sales comparisons to the prior year will benefit from the calendar shift of the Easter holiday, this benefit is expected to be offset by the 4th of July holiday shifting two days further into our fiscal third quarter this year. Fiscal 2024 second-quarter net loss per basic share is expected in the range of $0.40 to $0.55, which compares to 2023 second-quarter loss per basic share of $0.01. That concludes our prepared remarks. I will now turn the call back to Steve for closing comments.
Steven Miller: Thank you, Barry. Thank you all for joining us on today's call. We appreciate your interest in Big 5 Sporting Goods and look forward to speaking with you again after the conclusion of our second quarter.
Operator: Thank you, sir. Ladies and gentlemen, this does conclude today's conference. Thank you for joining us.
End of Q&A:
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