The largest shareholder in Big 5 Sporting Goods Corp. is looking to take a more active role in the retailer at a time when it could use some help.
Stadium Capital Management LLC, a New Canaan, Conn., hedge fund, said it wants to add a representative to the board of the El Segundo retailer, which has recently struggled with declining sales and falling stock prices.
In an Aug. 17 13-D filing with the Securities and Exchange Commission, Stadium said it had boosted its shareholdings to a little more than 15 percent of Big 5’s stock and said it has talked with the company about naming a representative to the board. It is to meet with the nominating committee next month.
Beyond that, it’s unclear what the hedge fund has in mind. It typically has been a passive investor.
Stadium’s request comes in the midst of the company’s struggles to attract customers in the weak economy.
Big 5 was one of last week’s biggest gainers on the LABJ Stock Index, rising 7 percent to close at $7.39 on Aug. 24. (See page 44.) But that’s still a 53 percent drop from the beginning of the year when the company was trading above $15.
Jeff Green, president of Phoenix retail consulting firm Jeff Green Partners, said Big 5 is a small player in the competitive sporting goods market.
“You’ve got big sporting goods stores that are expanding like crazy all over the country,” he said, noting that retailers such as Sports Authority of Englewood, Colo., and Dick’s Sporting Goods of Coraopolis, Pa., operate more stores in more states. “Big 5 has a lot of competitive pressure.”
Big 5, which sells athletic goods such as shoes, apparel, accessories and equipment at 395 stores in 12 states, reported earlier this month that weak market conditions have continued to hurt business.
Customer traffic to Big 5 stores decreased in the second quarter compared with the year before, causing revenue to drop less than 1 percent to $220 million. Net income dropped nearly 35 percent to $3.12 million due to lower merchandise margins, and higher expenses for sales and administration.
Steven Miller, the company’s chief executive, attributed Big 5’s weak quarterly performance to the recession.
“During the second quarter, we continued to battle very challenging economic headwinds in the majority of our markets,” he said in a statement. “We experienced a decline in customer traffic, as we believe our consumer again reduced purchases of discretionary items in response to the difficult environment.”
He added that cool weather at the beginning of summer in some of Big 5’s markets also drove down sales at the start of the quarter since fewer people purchased apparel and equipment for summer sports and activities.
Big 5 and Stadium did not return calls requesting comment for this story.
