Big 5 Sporting Goods Q1 2025 Earnings Call Transcript

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April 29, 2025

There are 3 speakers on the call.

Operator

Good day, and gentlemen. Welcome to the Big five Sporting Goods First Quarter twenty twenty five Earnings Results Conference Call. Today's call is being recorded. And with us today are Mr. Steve Miller, President and Chief Executive Officer and Mr.

Operator

Barry Emerson, Chief Financial Officer of Big five Sporting Goods. At this time, for opening remarks and introductions, I'd like to turn the floor over to Mr. Miller. Thank you. You may begin.

Speaker 1

Thank you, operator. Good afternoon, everyone. Welcome to our twenty twenty five first quarter conference call. Today, we will review our financial results for the first quarter of fiscal twenty twenty five, as well as provide an outlook for the second quarter. I will now turn the call over to Barry to read our Safe Harbor statement.

Speaker 2

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 ks, 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.

Speaker 2

Please refer to our press release to find a reconciliation of certain non GAAP financial measures referenced in today's call.

Speaker 1

Thank you, Barry. We were able to deliver a first quarter top and bottom line performance that was consistent with our expectations despite pressures from macroeconomic and weather related headwinds. Net sales for the first quarter were $175,600,000 compared to $193,400,000 in the prior year with same store sales down 7.8% compared to the first quarter of fiscal twenty twenty four. Our sales in January and February were particularly difficult as we fought against highly unfavorable seasonal weather comparisons, which resulted in winter related sales that were down nearly 25%. Although we experienced pockets of more normal seasonal winter weather, the southern tier of our store footprint was especially challenged.

Speaker 1

That said, sales trending improved substantially in March as positive winter weather set in late in the season. March same store sales were flat versus the prior year, which included an approximate 300 basis point benefit associated with the Easter calendar shift as the holiday when our stores are closed moved into the second quarter this year versus being in the first quarter last year. This performance in March marked a significant improvement from the double digit declines we experienced earlier in the quarter. Looking at our major merchandise categories on a same store basis for the quarter, hard goods decreased 4.7%, apparel declined 8.7% and footwear was down 11.8%. Apparel and footwear were the categories most impacted by the unfavorable weather comparison.

Speaker 1

Our transactions for the period were down 5.3% and our average sale was down 2.5%. For the first quarter, our merchandise margins decreased 78 basis points compared to the prior year, reflecting product mix shifts along with promotional efforts to drive sales to value conscious consumers. We ended the quarter with inventory up 6.5% year over year. This increase reflects earlier receipts of seasonal merchandise compared to last year. This timing difference has proved advantageous.

Speaker 1

Not only are we better prepared as we move through spring and enter the key summer selling period, we've also significantly mitigated the near term impact from tariff increased tariff costs, providing us valuable time to advance negotiations with our vendors. Although our inventory levels are currently higher than last year, we anticipate that they will normalize relative to last year as we move through summer and expect to be in a lower inventory position year over year at year end. As part of our broader strategic initiatives, we continue to optimize our store portfolio to focus our resources on our most productive stores. We closed eight stores in the first quarter of fiscal twenty twenty five and anticipate closing approximately seven additional stores over the remainder of the year. Turning now to our second quarter, our quarter to date sales are down in the high single digit range, in part reflecting an approximate negative 400 basis point impact from one less sales day in the period to date due to the Easter calendar shift.

Speaker 1

Notwithstanding the fluidity of the macroeconomic conditions, the key to our results this quarter will be capitalizing on sales opportunities around the higher volume periods surrounding Memorial Day, Father's Day and the start of summer. We believe we are well prepared for this period with healthy inventory levels of key products, which we received in front of any tariff impact. We are encouraged by the early reads of our summer seasonal categories that we've experienced on the occasions thus far when we've seen snippets of warm weather in our geographies. Before I close, I want to briefly touch on the broader tariff situation. As I mentioned, we brought in extra product in advance of the tariffs, which should minimize any tariff impacts in the near term.

Speaker 1

Looking further down the road, it is a fluid situation and like all retailers, we will continue to closely monitor tariffs and their impact in the supply chain, consumer sentiment, and consequently, consumer discretionary spending. The overall environment is uncertain right now, but as matters progress, we will remain nimble and evolve as needed by adjusting our purchasing. In the meantime, we are focused on the aspects of our business that we can best control to continue delivering value to our customers as we have throughout our long history. With that, I'll now turn it over to Barry to provide additional details regarding our first quarter performance and second quarter outlook.

Speaker 2

Thanks, Steve. Gross profit for the fiscal twenty twenty five first quarter was $54,300,000 compared to gross profit of $60,400,000 in the first quarter of the prior year. Our gross profit margin of 30.9% in the twenty twenty five first quarter compared to 31.2 in the first quarter last year. The slight decrease in gross profit margin versus the prior year primarily reflected higher store occupancy expense as a percentage of net sales and a decrease in merchandise margins of 78 basis points. Overall selling and administrative expense for the fiscal twenty twenty five first quarter decreased $600,000 compared to the prior year.

Speaker 2

The year over year reduction primarily reflected decreases in labor costs and reduced credit card fees related to lower sales. As a percent of net sales, selling and administrative expense was 40.3 in the twenty twenty five first quarter versus 36.9% in the twenty twenty four first quarter, reflecting the lower sales base. We continue to focus on managing considering the ongoing economic challenges. Now looking at our bottom line, net loss for the first quarter of fiscal twenty twenty five was $17,300,000 or $0.78 per basic share compared to a net loss of $8,300,000 or $0.38 per basic share in the first quarter last year. Due to the valuation allowance related to deferred tax assets that we established in the third quarter of fiscal twenty twenty four, net loss for the first quarter of fiscal twenty twenty five does not reflect an income tax benefit, which was recorded in the year ago period.

Speaker 2

For ease of reference, our net loss for the first quarter of fiscal twenty twenty four reflected an income tax benefit of $2,800,000 EBITDA was negative $12,000,000 for the first quarter of fiscal twenty twenty five compared to negative EBITDA of $6,500,000 in the first quarter last year. Turning to the balance sheet. Our merchandise inventory at the end of the first quarter of fiscal twenty twenty five increased 6.5% year over year. The increase primarily reflects our earlier scheduling of spring and summer merchandise deliveries compared to last year when we experienced delays in receiving certain categories of product and missed sales opportunities. As Steve mentioned, we believe our inventory is well positioned to drive sales during the upcoming summer season.

Speaker 2

Reviewing our capital spending, our CapEx excluding non cash acquisitions totaled $1,700,000 for the first quarter of fiscal twenty twenty five, primarily reflecting store related remodeling and distribution center investments. For the 2025 full year, we expect CapEx in the range of 4,000,000 to 7,000,000 mainly representing investments in store related remodeling. Now looking at our cash flow. Net cash used in operating activities was $15,300,000 in the first quarter of fiscal twenty twenty five. This compares to net cash provided by operating activities of $8,200,000 last year.

Speaker 2

The decrease was primarily attributed to increased funding of merchandise inventory and a larger net loss in the current period. As of the end of our twenty twenty five first quarter, we had $30,900,000 of borrowings outstanding under our $150,000,000 credit facility and a cash balance of 3,900,000.0 Now I'll spend a moment on guidance. For the fiscal twenty twenty five second quarter, we expect same store sales to be down in the low to mid single digit range compared to the twenty twenty four second quarter. Our same store sales guidance reflects an expectation that macroeconomic headwinds will continue through the second quarter. This guidance also reflects the combined negative impact of calendar shifts associated with the Easter holiday during which the company stores are closed from the first quarter of fiscal twenty twenty four and into the second quarter of fiscal twenty twenty five and with the fourth of July holiday, which will move one day further into the third quarter this year.

Speaker 2

Fiscal twenty twenty five second quarter net loss per basic share is expected in the range of $0.75 to $0.90 which reflects no tax benefit for the period compared to fiscal twenty twenty four second quarter net loss per basic share of $0.46 which reflected a tax benefit of $0.16 per basic share. That concludes our prepared remarks. I will now turn the call back to Steve for some closing comments.

Speaker 1

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

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.

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Big 5 Sporting Goods Q1 2025
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