Earnings call transcript: Big 5 Sporting Goods Q4 2024 misses forecasts

Big 5 Sporting Goods Corporation (NASDAQ:BGFV), with a market capitalization of just $30.5 million, reported a challenging fourth quarter for 2024, missing both earnings and revenue forecasts. The company posted an EPS of -$0.95 compared to the forecasted -$0.19, and revenue of $181.6 million, falling short of the expected $210.28 million. Following the announcement, Big 5’s stock experienced a 3.65% increase in after-hours trading, reaching $1.42, despite a 4.53% drop during the regular session. InvestingPro analysis indicates the company’s overall financial health score is weak, with particularly concerning metrics in profitability and growth.

Key Takeaways

• Q4 2024 EPS of -$0.95 missed the forecast of -$0.19.
• Revenue fell to $181.6 million, below the $210.28 million forecast.
• Same-store sales declined by 6.1%.
• Stock price rose 3.65% in after-hours trading.
• The company plans to close 15 stores in fiscal 2025.

Company Performance

Big 5 Sporting Goods faced a tough quarter with a net loss of $20.9 million, or $0.95 per share, compared to a net loss of $69.1 million for the full year. The company’s net sales for Q4 2024 were $181.6 million, a decrease from $196.3 million in the same period last year, contributing to a concerning 12.6% revenue decline over the last twelve months. This decline reflects ongoing challenges in consumer discretionary spending, exacerbated by adverse weather conditions impacting sales of winter products. According to InvestingPro data, the company operates with a significant debt burden of $285.2 million, though it maintains a current ratio of 1.46, indicating adequate short-term liquidity.

Financial Highlights

• Revenue: $181.6 million, down from $196.3 million year-over-year.
• Earnings per share: -$0.95, compared to the forecast of -$0.19.
• Gross profit: $51.2 million, down from $59.2 million the previous year.
• Gross profit margin: 28.2%, a decrease from 30.2%.

Earnings vs. Forecast

The company missed its EPS forecast by a significant margin, reporting -$0.95 against an expected -$0.19. Revenue also fell short, coming in at $181.6 million compared to the forecasted $210.28 million. This represents a substantial negative surprise, reflecting ongoing challenges in the retail sector.

Market Reaction

Despite disappointing earnings results, Big 5’s stock price increased by 3.65% in after-hours trading, reaching $1.42. This movement contrasts with the 4.53% decline during the regular session, suggesting some investor optimism or short-covering activity post-announcement. The stock remains near its 52-week low of $1.37, having lost over 73% in the past year. InvestingPro analysis suggests the stock is currently trading below its Fair Value, with a notably low Price/Book ratio of 0.15. Subscribers to InvestingPro can access 15 additional key insights about Big 5’s financial position and market performance.

Outlook & Guidance

For Q1 2025, Big 5 anticipates a continued decline in same-store sales in the mid to high single digits, with a projected net loss per share between $0.75 and $0.85. The company plans to focus on optimizing its store portfolio and managing expenses, with capital expenditures expected to be between $4 million and $8 million for 2025.

Executive Commentary

CEO Steve Miller emphasized the company’s focus on controllable elements, stating, "We remain very focused on the elements of our business most within our control." He also highlighted the impact of weather on consumer spending: "Consumer spending in this category is especially discretionary and of course responsive to weather conditions." CFO Barry Emerson (NYSE:EMR) noted the financial flexibility provided by the amended credit agreement, which extends to December 2029.

Risks and Challenges

• Macroeconomic pressures affecting consumer spending.
• Weather-related impacts on seasonal product sales.
• Continued store closures and restructuring efforts.
• Competitive pressures within the sporting goods sector.
• Inventory management challenges amid fluctuating demand.

Q&A

No specific Q&A session details were provided in the earnings call transcript.

Full transcript - Big 5 Sporting Goods Corporation (BGFV) Q4 2024:

Conference Operator: Good day, ladies and gentlemen. Welcome to the Big five Sporting Goods Fourth Quarter twenty twenty four 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, Chief Financial Officer of Big Five Sporting Goods. At this time, for opening remarks and introductions, I’d like to turn the conference over to Mr. Miller. Please go ahead, sir.

Steve Miller, President and Chief Executive Officer, Big Five Sporting Goods: Thank you, operator. Good afternoon, everyone. Welcome to our twenty twenty four fourth quarter conference call. Today, we will review our financial results for the fourth quarter of fiscal twenty twenty four as well as provide an outlook for the first quarter of fiscal twenty twenty five. I will now turn the call over to Barry to read our Safe Harbor statement.

Barry Emerson, Chief Financial Officer, Big Five Sporting Goods: Thanks, Steve. Except for statements of historical fact, 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.

Please refer to our press release to find a reconciliation of certain non GAAP financial measures referenced in today’s call.

Steve Miller, President and Chief Executive Officer, Big Five Sporting Goods: Thank you, Barry. Our fourth quarter results were consistent with our previously announced expectations, delivering earnings in the middle of our guidance range despite ongoing challenges to our top line performance. Net sales for the fourth quarter were $181,600,000 compared to $196,300,000 in the prior year with same store sales down 6.1%. These sales reflect a continuation of the persistent macroeconomic headwinds which have been impacting consumer discretionary spending. Additionally, our winter related product sales over the fourth quarter were soft relative to expectations as winter weather conditions were unfavorable, particularly across our southern tier of stores where we experienced drought like conditions.

The dry conditions were a huge factor in contributing to the environment that led to the tragic wildfires that devastated the Greater Los Angeles area last month. Looking at our major merchandise categories on a same store basis, apparel declined 1.3%, footwear was down 5.4% and hard goods decreased 8.7%. Our average sale was down 2.3% with transactions down 3.8%. Our merchandise margins in the fourth quarter decreased 23 basis points compared to the prior year. In the face of ongoing sales challenges, we remain focused on how best to optimize gross profit dollars.

We ended the quarter with inventory down 5.6% year over year, reflecting our efforts to align inventory levels with sales. This positioning enables us to deploy inventory more productively across our network, while maintaining flexibility to capitalize on opportunistic buying opportunities that align with our customers’ value orientation. As part of our broader strategic initiatives, we continue to optimize our store portfolio to focus our resources on our most productive stores. We anticipate closing 15 stores in fiscal twenty twenty five, including eight locations that we have already closed in the first quarter. This strategic footprint rationalization enables us to reallocate capital and inventory to our best performing locations while driving meaningful cost efficiencies across our network.

Turning to the beginning of our fiscal twenty twenty five, sales trends remain challenged as we have yet to see improvement in the macroeconomic conditions that are affecting consumer discretionary spending. Additionally, our winter business, which is highly significant to our first quarter performance, has continued to be very soft relative to last year. Consumer spending in this category is especially discretionary and of course responsive to weather conditions. We have experienced a distinct geographic bifurcation in our winter product sales due to weather variances with our Southern markets continuing to experience well below normal snowfall. Over the balance of the quarter, although our winter business is still potentially meaningful as we transition seasons, spring related activities including the ramp up of baseball become the key drivers to our business.

We believe our inventories are well positioned for this transition with positive enhancements to our product assortments. In closing, as we continue to navigate the current dynamic environment, we remain very focused on the elements of our business most within our control, including working to closely manage merchandise margins, expenses and inventory levels. We believe this focused approach strengthens our ability to drive growth as business conditions improve. With that, I’ll now turn it over to Barry to provide additional details regarding our fourth quarter performance and first quarter outlook.

Barry Emerson, Chief Financial Officer, Big Five Sporting Goods: Thanks, Steve. Gross profit for the fiscal twenty twenty four fourth quarter was $51,200,000 compared to gross profit of $59,200,000 in the fourth quarter of the prior year. Our gross profit margin of 28.2% in the twenty twenty four fourth quarter compared to 30.2% in the fourth quarter last year. The decrease in gross profit margin versus the prior year primarily reflected higher store occupancy and distribution expense, including costs capitalized in inventory as a percentage of net sales and lower merchandise margins of 23 basis points. Overall selling and administrative expense for the fiscal twenty twenty four fourth quarter decreased $1,000,000 compared to the prior year.

The year over year reduction primarily reflected lower labor costs and a gain of $900,000 related to an insurance settlement. As a percent of net sales, selling and administrative expense was 39.3% in the twenty twenty four fourth quarter versus 36.9% in the twenty twenty three fourth quarter, reflecting the lower sales base. We continue to focus on managing the expenses within our control considering the ongoing economic challenges. Now looking at our bottom line, net loss for the fourth quarter of fiscal twenty twenty four was $20,900,000 or $0.95 per basic share, which included a $0.04 per basic share gain related to an insurance settlement. This compares to a net loss of $8,900,000 or $0.41 per basic share in the fourth quarter last year.

Because of the valuation allowance related to the deferred tax assets established in the third quarter of fiscal twenty twenty four, net loss for the fourth quarter of fiscal twenty twenty four does not reflect an income tax benefit. Net loss for the fourth quarter of fiscal twenty twenty three reflects an income tax benefit of $4,500,000 Adjusted EBITDA was negative $16,400,000 in the fourth quarter of fiscal twenty twenty four compared to negative adjusted EBITDA of $8,700,000 in the fourth quarter last year. Briefly reviewing our full year results for fiscal twenty twenty four, net sales were $795,500,000 compared to net sales of $884,700,000 in the prior year. Same store sales decreased 9.4% for fiscal twenty twenty four versus the comparable prior year period. Net loss for fiscal twenty twenty four was $69,100,000 or $3.15 per basic share and included a non cash charge for the establishment of a valuation allowance related to deferred tax assets of $21,800,000 or $0.99 per basic share recorded in the third quarter, along with the aforementioned gain related to an insurance settlement.

This compares to a net loss for fiscal twenty twenty three of $7,100,000 or $0.33 per basic share. Adjusted EBITDA was negative $36,700,000 for the 2024 full year compared to positive $7,300,000 in the prior year. Turning to the balance sheet, our merchandise inventory at the end of the fourth quarter of fiscal twenty twenty four decreased 5.6% year over year. This reduction reflects our efforts to manage inventory levels lower in response to the soft sales environment. Reviewing our capital spending, our CapEx excluding non cash acquisitions totaled $10,900,000 for fiscal twenty twenty four, primarily representing investments in store related remodeling, new stores, distribution center equipment and computer hardware and software purchases.

For the 2025 full year, we expect CapEx in the range of $4,000,000 to $8,000,000 representing investments in store related remodeling primarily. Now looking at our cash flow, net cash used in operating activities was $11,400,000 in fiscal twenty twenty four. This compares to net cash provided by operating activities of $18,500,000 last year. The decrease was primarily attributed to a larger net loss in the current period. In December 2024, we amended and extended our $150,000,000 credit agreement with Bank of America, which matures in December of twenty twenty nine.

As of our December year end, we had $13,800,000 of borrowings under this credit facility and a cash balance of $5,400,000 This credit agreement provides us financial flexibility as we navigate this dynamic market environment and execute our strategy. Now I’ll spend a moment on guidance. For the fiscal twenty twenty five first quarter, we expect same store sales to decline in the mid to high single digit range compared to the twenty twenty four first quarter. Our same store sales guidance reflects an expectation that macroeconomic headwinds will continue through the first quarter. On that basis, we expect fiscal twenty twenty five first quarter net loss per basic share in the range of $0.75 to $0.85 which reflects no tax benefit for the period compared to fiscal twenty twenty four first quarter net loss per basic share of $0.38 That concludes our prepared remarks.

I’ll now turn the call back to Steve for closing comments.

Steve Miller, President and Chief Executive Officer, Big Five Sporting Goods: Thank you, Barry. Thank you all for joining us in today’s call. We appreciate your interest in Big Five Sporting Goods and look forward to speaking with you again after the conclusion of our first quarter.

Conference Operator: Thank you. Ladies and gentlemen, this does conclude today’s teleconference. Thank you for your participation. You may now disconnect your lines.

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