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Why Big 5 Sporting Goods Stock Was Slipping Today

By Jeremy Bowman – Aug 4, 2021 at 4:08PM

Key Points

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A blowout earnings report wasn't enough to please investors.

What happened

Shares of Big 5 Sporting Goods (BGFV -0.25%) were moving lower today after the sporting goods retailer posted second-quarter earnings last night. While the company reported blowout numbers as it lapped the lockdown quarter a year ago, guidance seemed to underwhelm investors. 

As a result, the stock was down 9.6% at 3:25 p.m. EDT.

A person paying for some items at a sporting goods store.

Image source: Getty Images.

So what

The western-U.S. chain reported comparable sales growth of 31.2%, or 33.4% growth on a two-year basis. Overall revenue was up 43% to $326 million, which was well ahead of the consensus at $291.7 million.

Results were strong further down the income statement as well, as gross margin increased from 31.7% to 38.9% with merchandise margins improving and as it gained leverage on store occupancy costs. Earnings per share more than tripled from $0.52 to $1.63, which crushed expectations at $1.08. 

The company also announced a 39% dividend increase, raising its quarterly payout to $0.25. That marked its fourth dividend hike in just the last year, bringing the payout from $0.05 to $0.25. That's a clear sign of how the business has excelled during the pandemic. 

CEO Steven Miller touted the company's performance, but also acknowledged that growth would begin to slow, saying, "Although we are cycling the peak of the 2020 COVID-19 related sales surge and we are being impacted by the widely reported supply chain disruptions and staffing challenges in the retail industry, we have continued to produce strong sales growth and margins versus historical pre-pandemic levels." That may explain why the stock is down today.

Now what

In its third-quarter guidance, the company called for flat to mid-single-digit comparable sales growth, lapping a 14.8% increase in the quarter a year ago. On the bottom line, it sees earnings per share of $0.95-$1.15, which is down from $1.31 a year ago but better than estimates at $0.86.

Big 5 had been one of the biggest winners during the pandemic as its stock rose more than 5,000% from trough to peak. While the business is still executing effectively, comparisons are starting to get difficult, especially on the bottom line, as it laps last year's blowout growth.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Big 5 Sporting Goods Stock Quote
Big 5 Sporting Goods
$12.04 (-0.25%) $0.03

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