What happened

Shares of Big 5 Sporting Goods (BGFV 1.87%) were climbing today as the retailer posted another blowout earnings report, riding a boom in demand for outdoor and sporting equipment during the pandemic.

As of 11:59 a.m. EDT on Wednesday, the stock was up 26.1%.

A clerk helping a customer at a sporting goods store

Image source: Getty Images.

So what

Same-store sales jumped 31.8%, well ahead of the company's previous guidance at 20%, with broad-based strength in apparel, footwear, hard goods, and particularly strong sales of winter-related products, a sign Americans were looking to spend more time outside due to social distancing. Stimulus checks, school reopenings, and the resumption of team sports also helped drive the retailer's growth. The performance also benefited from lapping a 10.8% decline in comps in the year-ago quarter, when weakness from the pandemic started.

Overall revenue in the quarter rose 25% to $272.8 million, and the company saw profitability surge, with gross margin jumping 630 basis points to 35.9% and selling, general, and administrative expenses falling from 32.8% of revenue to 25.7%. As a result, earnings per share jumped from a loss of $0.22 in the quarter a year ago to a profit of $0.96, showing the company has made a stunning turnaround. That also beat an estimate of $0.50 from the only analyst covering the stock.

As a sign of confidence in its momentum and cash position, management increased its quarterly dividend by 20% to $0.18, and declared a special dividend of $1. After the dividend hike, the small-cap stock offers a yield of about 3%.

CEO Steven Miller said: "We are pleased to report record first-quarter results driven by a combination of top-line sales strength, merchandise margin expansion, and an improved cost structure. Our team continues to do a tremendous job satisfying the incredible consumer demand we are seeing across our diverse product mix."

Now what

Big 5, which operates in the western U.S., expects the momentum to continue into the second quarter, calling for a comps increase of 22% to 27% and EPS of $1.05 to $1.25, lapping a quarter in which comps fell 4.2%.

The retailer's shares have gone on an incredible run over the last year, gaining nearly 2,000% as sales have boomed during the pandemic and the stock initially plunged last March, like most discretionary retail stocks. Based on current results for Big 5, shares look cheap, but demand for sporting goods is likely to normalize as the reopening progresses and Americans return to their pre-pandemic lifestyles.