"While we are pleased with our performance in 2013, we anticipate a very challenging first quarter of 2014 as we face comparisons against the peak of the surge in demand for firearms and ammunition products and favorable winter weather last year,” said Big 5 Chairman, President and CEO Steven G. Miller. “For the start of the first quarter, we have experienced exceptionally unfavorable winter weather in most of our key western markets, with extreme drought conditions leading to reduced demand for winter products.
“Given these factors and the resulting impact on traffic levels in our stores,” Miller continued, “we are currently anticipating a high-single-digit decrease in same store sales for the first quarter. Excluding winter and firearms and ammunition products, our sales are performing positively for the quarter to date. As we look beyond the first quarter, we believe that these pressures will ease to a large degree and we should be in a position to produce positive same store sales over the balance of the year."
Miller made his comments in Big 5's release of audited financial results for the fiscal fourth quarter and year ended Dec. 29, 2013. The official results matched revenue and earnings guidance the retailer provided in mid-January.
Fourth Quarter Results Confirmed
Net sales for the quarter landed at $248.0 million, just as the company had estimated in a mid-January earnings update. Same-store sales decreased 0.5 percent for the fourth quarter of fiscal 2013 on top of a same-store sales increase of 6.5 percent a year earlier. Selling and administrative expense as a percentage of net sales improved to 28.9 percent in the fiscal 2013 fourth quarter from 29.2 percent in the fourth quarter of the prior year.
Gross profit for the quarter reached $80.8 million, or 32.6 percent of revenue, compared to $78.4 million, or 32.2 percent of revenue in the fourth quarter of the prior year. The improvement was attributed primarily to a 47 basis point improvement in merchandise margins.
Net income for the fourth quarter of fiscal 2013 was $5.2 million, or 23 cents per diluted share, including expenses associated with the development of the company's new e-commerce platform of a penny per diluted share, compared to net income for the fourth quarter of fiscal 2012 of $4.0 million, or 19 cents per diluted share. Big 5 had forecast diluted fourth-quarter EPS of 21 cents to 23 cents in mid-January.
"We are pleased to have delivered another quarter of earnings growth in a very challenging retail environment," said Miller. "As we previously reported, our fourth quarter sales comparisons were impacted by cycling against the surge of firearm and ammunition sales during the prior year, as well as the lack of favorable winter weather across our western markets. We were able to offset most of the sales softness caused by these factors with positive performance in a number of our other product categories, which we believe reflects the favorable customer response to our merchandising and marketing strategies. For the quarter, same store sales in our apparel category increased in the low double-digit range, footwear sales were slightly positive and hardgoods sales decreased in the mid-single-digit range, primarily due to the lower demand for firearms and ammunition products. Our ability to improve product margins and control operating expenses enabled us to achieve over 20 percent growth in earnings for the quarter and conclude fiscal 2013 with 84 percent earnings growth over the prior year."
Fiscal 2013 Results
For the fiscal 2013 full year, net sales increased to $993.3 million from net sales of $940.5 million for fiscal 2012. Same-store sales increased 3.9 percent in fiscal 2013 from the prior year. Net income in fiscal 2013 was $27.9 million, or $1.27 per diluted share, including 4 cents per diluted share for legal settlement charges and 2 cents per diluted share for e-commerce development expenses, compared to net income in fiscal 2012 of $14.9 million, or 69 cents per diluted share, including 4 cents per diluted share of store closing and non-cash impairment charges.
Quarterly Cash Dividend
The company's Board of Directors has declared a quarterly cash dividend of 10 cents per share of outstanding common stock, which will be paid on March 21, 2014 to stockholders of record as of March 7, 2014.
Guidance
For the fiscal 2014 first quarter, the company expects same store sales in the negative high single-digit range and earnings per diluted share in the range of 5 cents to 11 cents. This guidance reflects the anticipated continued decrease in demand for firearms and ammunition products and reduced demand for winter products as a result of unfavorable winter weather conditions experienced for the first quarter to date compared to the prior year. In addition, first quarter guidance includes approximately $0.01 per diluted share in anticipated expenses associated with the development of the company's e-commerce platform. For comparative purposes, the company's same store sales increased 10.5 percent and earnings per diluted share were $0.34 for the first quarter of fiscal 2013.
Store Openings
During the fourth quarter of fiscal 2013, the company opened nine stores, ending fiscal 2013 with 429 stores in operation. During the fiscal 2014 first quarter, the company has closed four stores, three as part of relocations that began in fiscal 2013. For the fiscal 2014 full year, the company currently anticipates opening approximately 15 net new stores.
Big 5 is based in El Segundo, CA and operates the bulk of its stores in eight Western States.
BIG 5 SPORTING GOODS CORPORATION
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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(Unaudited)
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(In thousands, except per share data)
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| Fiscal Quarter Ended | Fiscal Year Ended | |||
| December 29, 2013 | December 30, 2012 | December 29, 2013 | December 30, 2012 | |
| Net sales (1) | $ 248,037 | $ 243,608 | $ 993,323 | $ 940,490 |
| Cost of sales | 167,235 | 165,216 | 664,583 | 637,721 |
| Gross profit (1) | 80,802 | 78,392 | 328,740 | 302,769 |
| Selling and administrative expense (1)(2) (3) | 71,773 | 71,237 | 281,313 | 276,797 |
| Operating income | 9,029 | 7,155 | 47,427 | 25,972 |
| Interest expense | 479 | 557 | 1,745 | 2,202 |
| Income before income taxes | 8,550 | 6,598 | 45,682 | 23,770 |
| Income taxes | 3,360 | 2,566 | 17,736 | 8,855 |
| Net income (1)(2) (3) | $ 5,190 | $ 4,032 | $ 27,946 | $ 14,915 |
| Earnings per share: | ||||
| Basic | $ 0.24 | $ 0.19 | $ 1.28 | $ 0.70 |
| Diluted (1)(2) (3) | $ 0.23 | $ 0.19 | $ 1.27 | $ 0.69 |
| Dividends per share | $ 0.10 | $ 0.075 | $ 0.40 | $ 0.30 |
| Weighted-average shares of common stock outstanding: | ||||
| Basic | 21,960 | 21,338 | 21,765 | 21,394 |
| Diluted | 22,207 | 21,673 | 22,083 | 21,616 |
| (1) In fiscal 2013, the Company recorded a pre-tax charge of $1.3 million for legal settlements, of which $0.3 million was classified as a reduction to net sales and $1.0 million was classified as selling and administrative expense. This charge reduced net income by $0.8 million, or $0.04 per diluted share. | ||||
| (2) In the fourth quarter and full fiscal year ended December 30, 2012, the Company recorded pre-tax charges of $0.1 million and $1.2 million, respectively, related to store closing costs. These charges reduced net income in the same periods by $48,000 and $0.8 million, respectively, or $0.00 per diluted share and $0.03 per diluted share, respectively. These charges were recorded in selling and administrative expense. | ||||
| (3) In fiscal 2013 and 2012, the Company recorded pre-tax non-cash impairment charges of $0.1 million and $0.2 million, respectively, related to certain underperforming stores. These charges reduced net income in fiscal 2013 and 2012 by $44,000, or $0.00 per diluted share, and $0.1 million, or $0.01 per diluted share, respectively. These charges were recorded in selling and administrative expense. | ||||
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