Big 5 Sporting Goods
Sales grew only 3%, to $217.8 million, and same-store sales fell 0.2%. This was the first time in 11 years that Big 5 experienced a quarterly decrease in comps, and it happened even despite some promotional activity. Earnings, meanwhile, fell 21%, to $0.26 a share. And here's a red-flag alert for you -- last month, it changed auditors.
Even the greatest hitters have slumps, but for Big 5, this may be more than just a bad quarter. Comps guidance now calls for a low-digit decline to a low-digit increase, and earnings expectations cast a wide net of $1.22 to $1.42 per share, after the company pulled in $1.35 last year. The Wall Street consensus had been for $1.41.
Management cited a challenging macroeconomic environment and the retailer's perennial favorite -- the weather -- as the culprits for the softer results and the weaker road ahead. Other sporting-goods retailers, such as Dick's Sporting Goods
We do know of one item specific to Big 5: the auditor change. As Big 5 explained in an announcement, "The Company lacked the necessary depth of personnel with adequate technical accounting expertise to ensure the preparation of interim and annual financial statements in accordance with GAAP." Now, this should trouble people. The company is taking steps to gain the competence it needs to adequately prepare its financial statements, but Big 5 warned that doing so will also require a cost increase.
Given the prospect of slowing growth and higher costs, there might be better investing alternatives out there. If management can't prepare its financial reports properly, investors would be prudent to sit on the sidelines for now.
Want to find the best small caps before the market catches on? See what we've recommended in Motley Fool Hidden Gems. The first 30 days are on us.
Fool contributor Larry Rothman is happy to receive feedback, and he promises to read it when he's not being wrestled by his three children. Feel free to email him at firstname.lastname@example.org. He doesn't have any positions in the companies mentioned.