Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Big 5 Sporting Goods (NASDAQ:BGFV) were losing some size today, shrinking as much as 19% after the company reported second-quarter earnings.

So what: The sporting goods chain actually beat earnings estimates, delivering a per-share profit of $0.28 on expectations of $0.26; however, a 5% revenue increase to $239.9 million was short of estimates of $243.7 million. Same-store sales, a key figure in retail, grew by 4.4%, but management predicted a low-single-digit increase in the current quarter. Third-quarter EPS guidance of $0.40 to $0.45 also disappointed the market, as analysts had predicted a per-share profit of $0.45.

Now what: Despite the market's reaction, this was far from a terrible report. Shares seem to have crashed mostly because they had been bid up so much in the first place. Before today's drop, they had more than tripled over the last year after a series of strong earnings beats lifted the stock. The company was also a beneficiary of the gun fever that gripped the nation following the Newtown, Conn., massacre as gun buyers lit up registers in anticipation of increased regulation. With that debate retired and largely forgotten, however, sales have slowed for Big 5, making today's move a reasonable correction.


Fool contributor Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.