Big 5 Sporting Goods Corporation (BGFV), Hibbett Sports, Inc. (HIBB), Dicks Sporting Goods Inc (DKS): Three Takeaways From This Sports Retailer’s Earnings

Big 5 Sporting Goods Corporation (NASDAQ:BGFV) has emerged an unlikely favorite in the sports retail space, trading higher by 215% over the last year. Meanwhile, competitors Hibbett Sports, Inc. (NASDAQ:HIBB) and Dicks Sporting Goods Inc (NYSE:DKS) have traded slightly lower over the last year. Therefore, with Big 5 currently trading lower by 17%, here are three reasons that Big 5 is a post-earnings buy!

Same-store sales

I’ve said on many occasions, in retail, same-store sales are golden. A company can easily throw up new stores to boost revenue, but the growth of existing stores is what drives margin growth, which, therefore, creates shareholder value.

Big 5 Sporting Goods Corporation (NASDAQ:BGFV)Looking at the last quarter alone, Big 5 Sporting Goods Corporation (NASDAQ:BGFV) increased its same store sales by 4.4% year-over-year, which is consistent with the company’s full-year outlook. Dick’s, the largest sports retailer in the space, saw a 3.8% same store sales decline in its last quarter, and is expected to see a rise of just 2% in 2013. Moreover, Hibbett Sports, Inc. (NASDAQ:HIBB) grew its sales less than 1% in its quarter, and also expects a 2% rise in 2013.

Therefore, Big 5 Sporting Goods Corporation (NASDAQ:BGFV)’s same-store sales growth is more than double that of its competitors. This means that Big 5 is attracting new consumers at a rate that exceeds the industry’s growth.

Bottom line growth

As I said, one of the reasons that you want to see same-store sales growth is because it impacts margins. For example, if a company’s costs to operate a store with staff, utility bills, and taxes remain the same, but a company’s revenue per store rises, then profits are naturally going to be higher.

This is what Big 5 Sporting Goods Corporation (NASDAQ:BGFV) has accomplished. During the last quarter, the company’s net income grew 135% year-over-year. This income growth is far greater than the company’s 6% revenue growth in the same period, indicating significant margin improvements.

In the same period, Hibbett grew revenue 3%, but the company’s net income growth was flat. Hibbett has an operating margin of 14%, which many believe is near peak margins for this particular space.

Dicks Sporting Goods Inc (NYSE:DKS) did a little better than Hibbett, but not nearly as well as Big 5 Sporting Goods Corporation (NASDAQ:BGFV). Dick’s grew revenue 4% and its net income increased nearly 15%. This reflects healthy growth, and once again, we can revert back to its operating margins of 9% to find the reason why Dick’s has improved.

Hence, if Hibbett’s 14% operating margin is ideal efficiency in the space, then Dick’s’ 9% has room to improve. With that said, Big 5’s operating margin of 3.9% easily has the most to gain, and is the reason that the company’s bottom line is growing so rapid.

Valuation

The most important measure to any investment is a company’s valuation relative to its peers. I have discussed this aspect in great detail, and when looking at Big 5 Sporting Goods Corporation (NASDAQ:BGFV) relative to its competitors, you can definitely see Big 5’s value.