GlobeNewswire Inc | Oct 27, 2020 04:01PM EDT

October 27, 2020

-- GENERATESRECORD THIRD QUARTER NET INCOME OF $28.4 MILLION AND EARNINGS PER DILUTED SHARE OF $1.31 -- QUARTER-END REVOLVER BORROWINGS OF ZERO, WITH CASH POSITION OF $55.7 MILLION -- FISCAL OCTOBER SAME STORE SALES INCREASE 15.1% -- DOUBLES QUARTERLY CASH DIVIDEND FROM $0.05 TO $0.10 PER SHARE

EL SEGUNDO, Calif., Oct. 27, 2020 (GLOBE NEWSWIRE) -- Big 5 Sporting Goods Corporation (Nasdaq: BGFV) (the Company, we, our, us, Big 5), a leading sporting goods retailer, today reported financial results for the fiscal 2020 third quarter ended September 27, 2020.

Steven G. Miller, the Companys Chairman, President and Chief Executive Officer, said, I am pleased to report an exceptional third quarter, which represents the strongest sales and earnings performance in our 65-year history. During this unprecedented time, our product offerings are resonating with consumers who are looking for ways to stay healthy and active. Clearly, customers are recognizing our stores as a convenient and safe environment to fulfill their fitness and outdoor recreational needs. Additionally, we continue to benefit from substantial cost reductions that have enabled us to achieve meaningful operating leverage. I am extremely proud of our teams tremendous dedication and execution during these challenging times.

Mr. Miller continued, Our success navigating the COVID-19 environment to date has substantially strengthened our balance sheet and enhanced our financial flexibility. At the end of the third quarter, we had zero borrowings on our revolver and nearly $56 million in cash. As a result, our Board of Directors has authorized an increase in our regular cash dividend to double its prior rate. Looking at the fourth quarter, we have continued to see solid momentum with sales increasing 15.1% for our fiscal October period. We believe our inventory is well positioned for the upcoming winter and holiday seasons. That said, we recognize there is tremendous uncertainty impacting the consumer environment over the coming months and we are prepared to be nimble and make adjustments as necessary.

Third Quarter Fiscal 2020Same store sales increased 14.8% for the third quarter of fiscal 2020, compared to a 0.3% increase for the third quarter of fiscal 2019. Net sales for the fiscal 2020 third quarter were $305.0 million compared to net sales of $266.2 million for the third quarter of fiscal 2019.

Gross profit for the fiscal 2020 third quarter was $110.0 million, compared to $86.0 million in the third quarter of the prior year. The Companys gross profit margin was 36.1% in the fiscal 2020 third quarter versus 32.3% in the third quarter of the prior year. The increase in gross profit margin largely reflects higher merchandise margins, which increased 277 basis points versus the prior year period, driven by a favorable shift in product mix toward certain higher margin categories and by more limited promotional activity versus the prior year period. Gross profit margin also reflects reduced store occupancy and warehousing costs as a percentage of net sales, partially offset by lower distribution costs capitalized into inventory for the quarter.

Selling and administrative expense decreased $5.6 million in the fiscal 2020 third quarter versus the prior year period primarily due to lower advertising expense and employee labor expense reflecting reduced store operating hours during the period. As a percentage of net sales, selling and administrative expense decreased to 23.4%, versus 28.9% in the prior year, as a result of the cost containment measures and higher sales volume in the third quarter.

Net income for the third quarter of fiscal 2020 was $28.4 million, or $1.31 per diluted share, which compares to net income of $6.4 million, or $0.30 per diluted share, in the third quarter of fiscal 2019.

For the 39-week period ended September 27, 2020, net sales were $750.6 million compared to net sales of $752.4 million in the first 39 weeks of the prior year. Same store sales increased 0.4% in the first 39 weeks of 2020 versus the comparable prior year period. Net income for the first 39 weeks of fiscal 2020 was $34.9 million, or $1.63 per diluted share, including a $0.13 per diluted share net benefit recorded in the second quarter related to rent abatement savings and a recovery in eminent domain litigation, partially offset by special employee recognition bonus awards. This compares to net income for the first 39 weeks of fiscal 2019 of $8.1 million, or $0.38 per diluted share, including a $0.02 per diluted share charge for the write-off of deferred tax assets related to share-based compensation.

Balance SheetThe Companys merchandise inventories at the end of the fiscal 2020 third quarter decreased 18.0% compared to the prior year. The Company completed the fiscal 2020 third quarter with zero borrowings under its revolving credit facility and a cash position of $55.7 million, reflecting a $111.3 million improvement in net cash (cash less revolver borrowings) on a year-over-year basis and a $74.0 million improvement in net cash compared to the end of the fiscal 2020 second quarter.

Cash Dividend In light of the current strength of the Companys business, cash flow generation, and balance sheet, the Companys Board of Directors has declared an increase in its quarterly cash dividend from $0.05 per share of outstanding common stock to $0.10 per share of outstanding common stock, which will be paid on December 15, 2020 to stockholders of record as of December 1, 2020.

Fourth QuarterOutlookSame store sales for the Companys fiscal October 2020 period increased 15.1% versus the prior year period. Merchandise margins continue to trend positively for the fiscal 2020 fourth quarter-to-date period compared to the prior year period, reflecting less promotional activity and a favorable shift in product mix toward certain higher margin categories.

The Company continues to benefit from certain aspects of its expense reduction initiatives that were implemented in response to the uncertainties of COVID-19, including labor expense savings due to reduced store operating hours and advertising expense savings due to significantly reduced print advertising. The Company expects these savings to create the potential for significant operating leverage for the fourth quarter.

As discussed in this release and the Companys other public filings, the Company has experienced dramatic swings in its sales trends due to the widespread closure of its stores, other disruptions related to COVID-19 and surges in consumer demand related to the pandemic. The dramatic shifts in consumer demand and the uncertainties of these unprecedented circumstances, including any future impact on consumer spending from any stimulus benefits or election impacts, the uncertainty surrounding consumer spending for the upcoming holiday season, and the potential for increased COVID-19 outbreaks and related restrictions over the course of the winter, make it difficult for the Company to accurately forecast the months ahead.

In light of the uncertainty in the current environment, for the fourth quarter of fiscal 2020 the Company is providing wide sales and earnings guidance ranges and expects earnings to reflect expense savings primarily from reductions in advertising and store operating hours. So long as conditions relating to the COVID-19 pandemic, including any regulations issued in response to the pandemic, or other conditions do not materially impact the Companys ability to continue to operate its stores, the Company believes it is reasonable to expect same store sales over the remainder of the fiscal 2020 fourth quarter in the range of -5% to +5% compared to the comparable period during the prior year. Assuming the Company achieves sales within that range over the remainder of the quarter, the Company would expect same store sales for the full fourth quarter of fiscal 2020 to be in the range of flat to +7% compared to the comparable period during the prior year and for earnings per diluted share for the quarter to be in the range of $0.35 to $0.60, which includes an after-tax insurance settlement benefit of approximately $2.1 million, or $0.10 per diluted share, associated with a fire at the Companys Pasadena, California store. This compares to a fiscal 2019 fourth quarter same store sales decrease of 0.6% and earnings per diluted share of $0.02, including a $0.02 per diluted share charge for asset impairment.

As a result of the fiscal calendar, the fourth quarter of fiscal 2020 will include 14 weeks and the fourth quarter last year included 13 weeks. The Companys same store sales guidance above reflects comparable 14-week periods.

As a reminder, the Companys fourth quarter typically reflects lower quarterly earnings compared to the third quarter due to the combination of seasonally lower sales volumes in the first half of the quarter until the holiday sales period, the related promotional environment associated with holiday sales and higher expenses during the holidays for store labor and advertising compared to the third quarter.

Store OpeningsThe Company did not open any new stores or permanently close any stores during the third quarter, ending with 431 stores in operation, which compares to 433 stores in operation in the prior year period. During the third quarter, all of the Companys stores were open for in-store shopping, subject to appropriate social distancing restrictions and with reduced operating hours. For the fiscal 2020 fourth quarter, the Company expects to permanently close approximately one store. Including that expected closure in the fourth quarter, for the fiscal 2020 full year, the Company expects to permanently close approximately four stores.

Conference Call InformationThe Company will host a conference call and audio webcast today, October 27, 2020, at 2:00 p.m. Pacific (5:00 p.m. Eastern), to discuss financial results for the third quarter of fiscal 2020. To access the conference call, participants in North America may dial (877) 407-9039 and international participants may dial (201) 689-8470. Participants are encouraged to dial in to the conference call ten minutes prior to the scheduled start time. The call will also be broadcast live over the Internet and accessible through the Investor Relations section of the Companys website at www.big5sportinggoods.com. Visitors to the website should select the Investor Relations link to access the webcast. The webcast will be archived and accessible on the same website for 30 days following the call. A telephonic replay will be available through November 3, 2020 by calling (844) 512-2921 to access the playback; the passcode is 13711576.

About Big 5 Sporting Goods CorporationBig 5 is a leading sporting goods retailer in the western United States, operating 431 stores under the Big 5 Sporting Goods name as of the fiscal quarter ended September 27, 2020. Big 5 provides a full-line product offering in a traditional sporting goods store format that averages 11,000 square feet. Big 5s product mix includes athletic shoes, apparel and accessories, as well as a broad selection of outdoor and athletic equipment for team sports, fitness, camping, hunting, fishing, tennis, golf, winter and summer recreation and roller sports.

Except for historical information contained herein, the statements in this release are forward-looking and 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 and other factors that may cause Big 5s actual results in current or future periods to differ materially from forecasted results. These risks and uncertainties include, among other things, the economic impacts of COVID-19 on Big 5s business operations, including as a result of regulations that may be issued in response to COVID-19, changes in the consumer spending environment, fluctuations in consumer holiday spending patterns, increased competition from e-commerce retailers, breach of data security or other unauthorized disclosure of sensitive personal or confidential information, the competitive environment in the sporting goods industry in general and in Big 5s specific market areas, inflation, product availability and growth opportunities, changes in the current market for (or regulation of) firearm-related products, disruption in product flow, seasonal fluctuations, weather conditions, changes in cost of goods, operating expense fluctuations, increases in labor and benefit-related expense, changes in laws or regulations, including those related to tariffs and duties, public health issues (including those caused by COVID-19), impacts from civil unrest or widespread vandalism, lower than expected profitability of Big 5s e-commerce platform or cannibalization of sales from Big 5s existing store base which could occur as a result of operating the e-commerce platform, litigation risks, stockholder campaigns and proxy contests,risks related to Big 5s historically leveraged financial condition, changes in interest rates, credit availability, higher expense associated with sources of credit resulting from uncertainty in financial markets and economic conditions in general. Those and other risks and uncertainties are more fully described in Big 5s filings with the Securities and Exchange Commission, including its Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. Big 5 conducts its business in a highly competitive and rapidly changing environment. Accordingly, new risk factors may arise. It is not possible for management to predict all such risk factors, nor to assess the impact of all such risk factors on Big 5s business or the extent to which any individual risk factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Big 5 undertakes no obligation to revise or update any forward-looking statement that may be made from time to time by it or on its behalf.

FINANCIAL TABLES FOLLOW

BIG 5 SPORTING GOODS CORPORATIONCONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited)(In thousands, except share amounts) September December 27, 2020 29, 2019ASSETS Current assets: Cash $ 55,695 $ 8,223 Accounts receivable, net of allowances of $45 and 11,018 13,646 $58, respectivelyMerchandise inventories, net 254,512 309,315 Prepaid expenses 9,192 9,680 Total current assets 330,417 340,864 Operating lease right-of-use assets, net 290,374 262,588 Property and equipment, net 60,064 68,414 Deferred income taxes 14,494 13,619 Other assets, net of accumulated amortization of 3,008 3,315 $2,310 and $2,043, respectivelyTotal assets $ 698,357 $ 688,800 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 87,048 $ 83,655 Accrued expenses 74,158 64,935 Current portion of operating lease liabilities 75,316 71,542 Current portion of finance lease liabilities 2,417 2,678 Total current liabilities 238,939 222,810 Operating lease liabilities, less current portion 230,705 206,806 Finance lease liabilities, less current portion 2,967 4,787 Long-term debt ? 66,559 Other long-term liabilities 12,513 7,466 Total liabilities 485,124 508,428 Commitments and contingencies Stockholders' equity: Common stock, $0.01 par value, authorized 50,000,000 shares; issued 25,555,381 and25,314,289 shares, respectively; outstanding 255 252 21,905,168 and 21,664,076 shares, respectivelyAdditional paid-in capital 121,262 120,054 Retained earnings 134,243 102,593 Less: Treasury stock, at cost; 3,650,213 shares (42,527 ) (42,527 )Total stockholders' equity 213,233 180,372 Total liabilities and stockholders' equity $ 698,357 $ 688,800

BIG 5 SPORTING GOODS CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)(In thousands, except per share data) 13 Weeks Ended 39 Weeks Ended September September September September 27, 2020 29, 2019 27, 2020 29, 2019 Net sales $ 304,959 $ 266,150 $ 750,630 $ 752,401 Cost of sales 194,924 180,158 503,847 517,416 Gross profit 110,035 85,992 246,783 234,985 Selling and administrative 71,337 76,886 201,040 221,676expenseOther income ? ? (2,500 ) ? Operating income 38,698 9,106 48,243 13,309 Interest expense 199 683 1,683 2,197 Income before income taxes 38,499 8,423 46,560 11,112 Income tax expense 10,106 2,026 11,642 3,023 Net income $ 28,393 $ 6,397 $ 34,918 $ 8,089 Earnings per share: Basic $ 1.33 $ 0.30 $ 1.64 $ 0.38 Diluted $ 1.31 $ 0.30 $ 1.63 $ 0.38 Weighted-average shares of common stock outstanding:Basic 21,310 21,132 21,237 21,093 Diluted 21,725 21,154 21,464 21,125



Contact:Big 5 Sporting Goods CorporationBarry EmersonSr. Vice President and Chief Financial Officer(310) 536-0611

ICR, Inc.John MillsManaging Partner(646) 277-1254