Shares of Big 5 Sporting Goods Corporation (BGFV -8.88%) rose 24.8% in November, according to data from S&P Global Market Intelligence, after the sporting-goods retailer announced strong third-quarter 2016 results.
To be fair, this didn't come as a complete surprise; in October, I noted that Big 5 Sporting Goods shares jumped after Deutsche Bank analyst Mike Baker increased his rating and per-share price target on Big 5 stock, citing climbing merchandise margins and accelerating sales trends given the bankruptcy liquidations of several competitors.
Sure enough, Big 5 Sporting Goods enjoyed a solid 6.8% increase in same-store sales during the quarter, while revenue still climbed 3.3%, to $279 million -- and this despite an unfavorable $8.9 million impact to net sale comparisons given a calendar shift from a 53-week fiscal year in 2015. Meanwhile, net income per share climbed more than 35% year over year, to $0.38.
"We are very pleased to deliver an exceptionally strong third-quarter performance," Big 5 CEO Steven Miller added, "with earnings meaningfully above the prior year as well as the high end of our guidance range. Results were driven by strong sales growth, including increases in both customer transactions and average sale, as well as improved merchandise margins, and clearly reflected the benefit from the closure of over 200 Sports Authority and Sport Chalet store locations in our markets."
On top of that, Big 5 Sporting Goods was able to take advantage of its strong cash flow to reduce borrowings under its credit facility by $42.4 million, or 65%, compared with last year's third quarter, even as it continued to repurchase shares and announced a 20% increase to its quarterly dividend, to $0.15 per share.
In the end, assuming Big 5 Sporting Goods can sustain this momentum and continue capitalizing on the diverted traffic from its former competitors, while at the same time improving its balance sheet and rewarding shareholders through capital returns, I see no reason its stock won't also continue delivering market-beating returns going forward.