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Why Shares of Big 5 Sporting Goods Corp. Slumped Today

By Timothy Green – Mar 2, 2016 at 7:20AM

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The retailer beat analyst estimates, but lackluster guidance coupled with the Sports Authority bankruptcy filing seem to be weighing on the stock.

Image Source: Big 5 Sporting Goods.

What: Shares of Big 5 Sporting Goods Corp. (BGFV 1.78%) slumped on Wednesday following the company's fourth-quarters earnings report. While Big 5 beat analyst estimates for both revenue and earnings, the stock was down about 10% at 11:20 a.m. EST on Wednesday.

So what: Big 5 reported quarterly revenue of $275 million, up 9.9% year over year, and about $1.5 million higher than analysts were expecting. Same-store sales increased by just 0.1%, but an extra week during the fourth quarter of 2015 helped drive a near double-digit revenue increase. The company closed one store during the fourth quarter, and Big 5 plans a net reduction of two-to-five stores during fiscal 2016.

Big 5 reported adjusted earnings of $0.22 per share, which excludes a $0.02 charge, $0.03 higher than the average analyst estimate. On a GAAP basis, EPS of $0.20 rose 54% year over year, driven mostly by higher revenue. CEO Steven Miller pointed to other factors, as well. "We are pleased to have achieved earnings per share slightly above the high end of our guidance range for the fourth quarter, driven by growth in average sale and expansion of merchandise and operating margins."

Now what: While Big 5's results were generally positive, a couple of factors could have contributed to the stock's decline on Wednesday. First, the company's guidance was far from stellar, with same-store sales expected to be in the negative low single-digit to positive low single-digit range during the first quarter. Earnings are expected to be in the range of a net loss of $0.05 per share to a net gain of $0.02 per share, compared to a gain of $0.11 per share during the first quarter of 2014.

Miller pointed to an extremely competitive and promotional retail environment in Big 5's earnings press release, and investors may be reeling from the announcement on Wednesday that Sports Authority, a privately held sporting goods chain, filed for bankruptcy. With Big 5 closing stores and posting meager same-store sales growth, investors may be concerned that the company could eventually suffer the same fate.

Timothy Green has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.

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