Big 5 Sporting Goods Q4 2024 Earnings Report

Big 5 Sporting Goods EPS Results

• Actual EPS: -$0.95
• Consensus EPS: -$0.96
• Beat/Miss: Beat by +$0.01
• One Year Ago EPS: N/A

Big 5 Sporting Goods Revenue Results

• Actual Revenue: $181.62 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Big 5 Sporting Goods Announcement Details

• Quarter: Q4 2024
• Date: 2/25/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, February 25, 2025
• Conference Call Time: 5:00PM ET

Big 5 Sporting Goods (NASDAQ:BGFV), Inc. (NASDAQ: BGFV) is a specialty retailer of sporting goods, athletic apparel and footwear in the United States. Founded in 1955 and headquartered in El Segundo, California, the company operates a chain of retail stores designed to serve a broad range of sports enthusiasts, from casual exercisers to competitive athletes. Its product assortment spans basketball, baseball, football, cycling, camping, fishing and water sports, as well as fitness equipment and lifestyle apparel.

The company’s retail network includes over 400 stores located primarily in the western United States. These brick-and-mortar outlets are complemented by an e-commerce platform that offers online ordering, curbside pickup and home delivery options. Big 5’s merchandising strategy emphasizes value pricing, national and private-label brands, and seasonal promotions to attract both cost-conscious shoppers and brand-loyal customers.

Throughout its history, Big 5 Sporting Goods has focused on community engagement and grassroots marketing, often partnering with youth sports organizations and local teams. The company expanded gradually from its California roots into neighboring states such as Arizona, Colorado, Nevada, Oregon, Utah and Washington, establishing a regional footprint that leverages supply-chain efficiencies and localized inventory management.

Leadership at Big 5 includes President and Chief Executive Officer Steven G. Miller, who joined the company in 2008 and was named CEO in 2011. Under his tenure, the company has modernized store layouts, enhanced its digital presence and refined its private-label offerings. Big 5’s board and management team continue to pursue a multichannel growth strategy aimed at strengthening its market position within the competitive sporting goods retail sector.

Big 5 Sporting Goods Q4 2024 Earnings Call Transcript

Key Takeaways

• Net sales fell to $181.6 million in Q4, with same‐store sales down 6.1% year‐over‐year, reflecting ongoing macroeconomic headwinds and soft winter product demand.
• Fourth-quarter net loss widened to $20.9 million (or $0.95 per share) versus a loss of $8.9 million (or $0.41 per share) in the prior year period.
• Gross profit margin contracted to 28.2% from 30.2% a year ago, driven by higher occupancy and distribution costs and a 23 basis-point decline in merchandise margins.
• Inventory levels were reduced by 5.6% year-over-year to better align with sales trends and maintain flexibility for opportunistic buying.
• Plans to close 15 underperforming stores in fiscal 2025 (including eight already closed) aim to reallocate capital and improve cost efficiency across the network.

Presentation

[Operator]

Good day, ladies and gentlemen. Welcome to the Big 5 Sporting Goods Fourth Quarter 2024 Earnings Results Conference Call. Today's call is being recorded. With us today are Mr. Steve Miller, President and Chief Executive Officer, and Mr. Barry Emerson, Chief Financial Officer of Big 5 Sporting Goods. At this time, for opening remarks and introductions, I'd like to turn the conference over to Mr. Miller. Please go ahead, sir.

[Steve Miller, President and CEO at Big 5 Sporting Goods]

Thank you, Operator. Good afternoon, everyone. Welcome to our 2024 Fourth Quarter Conference Call. Today, we will review our financial results for the fourth quarter of Fiscal 2024, as well as provide an outlook for the first quarter of Fiscal 2025. I will now turn the call over to Barry to read our Safe Harbor Statement.

[Barry Emerson, CFO at Big 5 Sporting Goods]

Thanks, Steve. Except for statements of historical fact, any remarks that we may make about our future expectations, plans, and prospects constitute forward-looking statements made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results in current and future periods to differ materially from forecasted results. These risks and uncertainties include those more fully described in our annual reports on Form 10-K, our quarterly reports on Form 10-Q, and our other filings with the Securities and Exchange Commission. We undertake no obligation to revise or update any forward-looking statements that may be made from time to time by us or on our behalf. Please refer to our press release to find a reconciliation of certain non-GAAP financial measures referenced in today's call.

[Steve Miller, President and CEO at Big 5 Sporting Goods]

Thank you, Barry. Our fourth quarter results were consistent with our previously announced expectations, delivering earnings in the middle of our guidance range despite ongoing challenges to our top-line performance. Net sales for the fourth quarter were $181.6 million compared to $196.3 million in the prior year, with same-store sales down 6.1%. These sales reflect a continuation of the persistent macroeconomic headwinds, which have been impacting consumer discretionary spending. Additionally, our winter-related product sales over the fourth quarter were soft relative to expectations, as winter weather conditions were unfavorable, particularly across our Southern tier of stores where we experienced drought-like conditions. The dry conditions were a huge factor in contributing to the environment that led to the tragic wildfires that devastated the Greater Los Angeles area last month. Looking at our major merchandise categories on a same-store basis, apparel declined 1.3%, footwear was down 5.4%, and hard goods decreased 8.7%.

[Steve Miller, President and CEO at Big 5 Sporting Goods]

Our average sale was down 2.3%, with transactions down 3.8%. Our merchandise margins in the fourth quarter decreased 23 basis points compared to the prior year. In the face of ongoing sales challenges, we remained focused on how best to optimize gross profit dollars. We ended the quarter with inventory down 5.6% year over year, reflecting our efforts to align inventory levels with sales. This positioning enables us to deploy inventory more productively across our network while maintaining flexibility to capitalize on opportunistic buying opportunities that align with our customers' value orientation. As part of our broader strategic initiatives, we continue to optimize our store portfolio to focus our resources on our most productive stores. We anticipate closing 15 stores in Fiscal 2025, including eight locations that we have already closed in the first quarter.

[Steve Miller, President and CEO at Big 5 Sporting Goods]

This strategic footprint rationalization enables us to reallocate capital and inventory to our best-performing locations while driving meaningful cost efficiencies across our network. Turning to the beginning of our Fiscal 2025, sales trends remain challenged, as we have yet to see improvement in the macroeconomic conditions that are affecting consumer discretionary spending. Additionally, our winter business, which is highly significant to our first quarter performance, has continued to be very soft relative to last year. Consumer spending in this category is especially discretionary and, of course, responsive to weather conditions. We have experienced a distinct geographic bifurcation in our winter product sales due to weather variances, with our southern markets continuing to experience well below normal snowfall. Over the balance of the quarter, although our winter business is still potentially meaningful, as we transition seasons, spring-related activities, including the ramp-up of baseball, become the key drivers to our business.

[Steve Miller, President and CEO at Big 5 Sporting Goods]

We believe our inventories are well-positioned for this transition, with positive enhancements to our product assortments. In closing, as we continue to navigate the current dynamic environment, we remain very focused on the elements of our business most within our control, including working to closely manage merchandise margins, expenses, and inventory levels. We believe this focused approach strengthens our ability to drive growth as business conditions improve. With that, I'll now turn it over to Barry to provide additional details regarding our fourth quarter performance and first quarter outlook.

[Barry Emerson, CFO at Big 5 Sporting Goods]

Thanks, Steve. Gross profit for the Fiscal 2024 4th Quarter was $51.2 million compared to gross profit of $59.2 million in the 4th Quarter of the prior year. Our gross profit margin of 28.2% in the 2024 4th Quarter compared to 30.2% in the 4th Quarter last year. The decrease in gross profit margin versus the prior year primarily reflected higher store occupancy and distribution expense, including costs capitalized into inventory as a percentage of net sales, and lower merchandise margins of 23 basis points. Overall selling and administrative expense for the Fiscal 2024 4th Quarter decreased $1 million compared to the prior year. The year-over-year reduction primarily reflected lower labor costs and a gain of $0.9 million related to an insurance settlement.

[Barry Emerson, CFO at Big 5 Sporting Goods]

As a percent of net sales, selling and administrative expense was 39.3% in the 2024 fourth quarter versus 36.9% in the 2023 fourth quarter, reflecting the lower sales base. We continue to focus on managing the expenses within our control, considering the ongoing economic challenges. Now looking at our bottom line, net loss for the fourth quarter of fiscal 2024 was $20.9 million or $0.95 per basic share, which included a $0.04 per basic share gain related to an insurance settlement. This compares to a net loss of $8.9 million or $0.41 per basic share in the fourth quarter last year. Because of the valuation allowance related to the deferred tax assets established in the third quarter of fiscal 2024, net loss for the fourth quarter of fiscal 2024 does not reflect an income tax benefit.

[Barry Emerson, CFO at Big 5 Sporting Goods]

Net loss for the fourth quarter of Fiscal 2023 reflects an income tax benefit of $4.5 million. Adjusted EBITDA was negative $16.4 million in the fourth quarter of Fiscal 2024, compared to negative adjusted EBITDA of $8.7 million in the fourth quarter last year. Briefly reviewing our full-year results for Fiscal 2024, net sales were $795.5 million compared to net sales of $884.7 million in the prior year. Same-store sales decreased 9.4% for Fiscal 2024 versus the comparable prior year period. Net loss for Fiscal 2024 was $69.1 million or $3.15 per basic share and included a non-cash charge for the establishment of a valuation allowance related to deferred tax assets of $21.8 million or $0.99 per basic share recorded in the third quarter, along with the aforementioned gain related to an insurance settlement.

[Barry Emerson, CFO at Big 5 Sporting Goods]

This compares to a net loss for Fiscal 2023 of $7.1 million or $0.33 per basic share. Adjusted EBITDA was negative $36.7 million for the 2024 full year, compared to positive $7.3 million in the prior year. Turning to the balance sheet, our merchandise inventory at the end of the fourth quarter of Fiscal 2024 decreased 5.6% year-over-year. This reduction reflects our efforts to manage inventory levels lower in response to the soft sales environment. Reviewing our capital spending, our CapEx, excluding non-cash acquisitions, totaled $10.9 million for Fiscal 2024, primarily representing investments in store-related remodeling, new stores, distribution center equipment, and computer hardware and software purchases. For the 2025 full year, we expect CapEx in the range of $4-$8 million, representing investments in store-related remodeling primarily. Now looking at our cash flow, net cash used in operating activities was $11.4 million in Fiscal 2024.

[Barry Emerson, CFO at Big 5 Sporting Goods]

This compares to net cash provided by operating activities of $18.5 million last year. The decrease was primarily attributed to a larger net loss in the current period. In December 2024, we amended and extended our $150 million credit agreement with Bank of America, which matures in December of 2029. As of our December year-end, we had $13.8 million of borrowings under this credit facility and a cash balance of $5.4 million. This credit agreement provides us financial flexibility as we navigate this dynamic market environment and execute our strategy. Now I'll spend a moment on guidance. For the Fiscal 2025 1st Quarter, we expect same-store sales to decline in the mid to high single-digit range compared to the 2024 1st Quarter. Our same-store sales guidance reflects an expectation that macroeconomic headwinds will continue through the 1st Quarter.

[Barry Emerson, CFO at Big 5 Sporting Goods]

On that basis, we expect Fiscal 2025 1st Quarter net loss per basic share in the range of $0.75-$0.85, which reflects no tax benefit for the period, compared to Fiscal 2024 1st Quarter net loss per basic share of $0.38. That concludes our prepared remarks. I'll now turn the call back to Steve for closing comments.

[Steve Miller, President and CEO at Big 5 Sporting Goods]

Thank you, Barry. Thank you all for joining us in today's call. We appreciate your interest in Big 5 Sporting Goods and look forward to speaking with you again after the conclusion of our first quarter.

[Operator]

Thank you. Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may now disconnect your line.

Participants

Executives

• Steve Miller, President and CEO

Analysts

• Barry Emerson, CFO at Big 5 Sporting Goods