Big 5 Sporting Goods Corp.’s stock price dropped after a poor third quarter earnings report.
The share price of the El Segundo sports and outdoor recreation equipment and apparel retailer declined by almost 12% from the close of $1.89 on Oct. 29, the day it released its third quarter earnings after the market closed, and the close the following day of $1.67.
Big 5 reported on Oct. 29, a net loss of about $30 million (-$1.36 a share) for the quarter ending Sept. 29, compared with net income of $1.9 million (8 cents) in the same period of the previous year. Revenue fell by nearly 8% from the third quarter of the prior year to $221 million.
The share price closed at $1.78 on Nov. 7, which represents a 66% decline in value in the last 52-week period when the stock hit $5.25 on Nov. 7 of last year.
Pressure on customers’ spending
Steven Miller, the chief executive of Big 5, said that its third quarter performance reflects the impact of ongoing economic pressure on consumer discretionary spending.
Despite the challenges the retailer faces, Miller said he is encouraged by the fact that it has seen sequential improvement in same store sales.
“With this positive trajectory in our sales and our enhanced promotional plans and product assortment, we are optimistic about the potential of the approaching holiday season,” Miller said in a statement. “That said, we are mindful of how inflation continues to strain consumers’ budgets and of the multitude of distractions that are impacting consumer purchasing decisions in the near-term.”
Miller added, “Throughout this prolonged period of uncertainty, we have been steadfast in our commitment to inventory management and cost control, which we believe has fortified our ability to navigate ongoing market conditions while creating opportunities to capitalize on any favorable macroeconomic shifts.”
Miller said in a conference call to discuss the third quarter earnings that Big 5 saw relatively consistent trends across its major merchandise categories which it believes speaks to the pervasiveness of the inflationary pressures that are impacting its core customers.
“Our apparel and footwear categories were each down approximately 9% and hard goods was down approximately 6%,” Miller said. “Despite the overall sales pressure, our average ticket remained relatively stable, declining low single digits while our transaction count was down mid-single digits.”
Looking at the fourth quarter outlook, Miller said that the company anticipates same store sales in the range of positive low single digits to negative low single digits compared to the fourth quarter of last year.
Over the course of last year’s fourth quarter, Big 5’s markets experienced warm weather and a lack of snow that impacted sales of winter-related products, which were down by nearly 40% versus the prior year of 2022, Miller added.
“While our outlook anticipates that we should benefit from more normalized weather this year, it also anticipates a continuation of the persistent macroeconomic challenges to consumer spending,” Miller stated.
Additionally, Thanksgiving comes later this year, which compresses the traditional holiday shopping season to account for this shift and help energize what has been a pressured and distracted consumer, he continued.
“We are adjusting our promotional strategy ahead of Thanksgiving in an effort to stimulate sales activity in what has traditionally been a seasonally slow period,” Miller said.
