Why Big 5 Sporting Goods Shares Tumbled

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.

Big 5 may have peaked, but there are plenty of solid plays in retail. To learn about two retailers with especially good prospects, take a look at The Motley Fool's special free report: "The Real Cash Kings Changing the Face of Retail." In it, you'll see how these two cash kings are able to consistently outperform and how they're planning to ride the waves of retail's changing tide. You can access it by clicking here.

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Related Tickers

9/23/2016 4:00 PM
BGFV $14.36 Down -0.09 -0.62%
Big 5 Sporting Goo… CAPS Rating: **