Economy and weather little help at Big 5

EL SEGUNDO, Calif. -- The weak sales and profits reported Wednesday by West Coast sporting goods retailer Big 5 weren’t a surprise, as the company had warned Wall Street more than a month ago that financial results would be below expectations.

For example, same-stores sales for the 13-week fourth quarter of 2010 declined 0.7% when compared with the comparable period the prior years. However, total sales and profit comparisons were challenged by the fact that Big 5’s most recent fourth quarter compared a 13-week period to a 14-week period the prior year. As a result, sales declined to $227 million from $238 million, and net income declined to $4 million, or 18 cents per diluted share, compared with net income of $6.4 million, or 29 cents per diluted share, for prior year. The fourth-quarter earnings per share figure were negatively affected by seven cents due to a charge related to settlement of a lawsuit.

“Our business continues to be challenged by the economy in many of our markets, which, along with extreme variances in weather patterns, has created inconsistency in our recent sales trends,” said Steven Miller, Big 5’s chairman, president and CEO. “While we achieved same-store sales in the positive low-single-digit range for October and positive mid-single-digit range for November, which included the Black Friday weekend, these gains were offset as our sales turned negative over the key three-week gift shopping period preceding Christmas.”

Miller noted that after the holidays positive sales trends resumed and continued until mid-January as the company’s markets experienced favorable winter weather conditions. Big 5 operates nearly 400 small format stores in 12 Western states with the majority located in California.

Elaborating further on the sales climate in Big 5’s markets, Miller noted, “Sales weakened considerably between mid-January and mid-February, as unseasonably warm and dry weather conditions reduced demand for winter products in many of our markets. Our same-store sales are currently running down in the low-single-digit range for the quarter to date, compared to a mid-single-digit same-store sales increase during the same time period last year.”

As for the future, Miller talked about enhancing shareholder value and Big 5’s solid financial condition, but qualified his outlook for potential weakness in first-quarter sales by referencing challenging economic conditions.

“Although continued uncertainty in the economy and a lack of visibility as to the timing and degree of a recovery has made it difficult to predict consumer demand, we continue to believe that our proven business strategy will positively impact sales, earnings and cash flow, and over the long-term will deliver a solid performance for our shareholders,” Miller said.

The company is forecasting comps will either increase or decrease in the low single digits and isn’t backing away from growth plans for the current year. After expanding its store count last year by 14 units to end its fiscal year with 398 stores, the company’s current plans call for the addition of 10 to 15 new stores averaging around 11,000-sq.-ft. However, first quarter profits forecast in a range of 15 to 22 cents a share are expected to be below the prior-year level of 23 cents.