Big 5 Sporting Goods Corporation (NASDAQ:BGFV) Q1 2025 Earnings Call Transcript

Big 5 Sporting Goods Corporation (NASDAQ:BGFV) Q1 2025 Earnings Call Transcript April 29, 2025

Operator: Good day, ladies and gentlemen. Welcome to the Big 5 Sporting Goods First Quarter 2025 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 floor over to Mr. Miller. Thank you. You may begin.

Steve Miller: Thank you, operator. Good afternoon, everyone. Welcome to our 2025 first quarter conference call. Today, we will review our financial results for the first quarter of fiscal 2025 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.

Barry Emerson: 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: 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 $175.6 million compared to $193.4 million in the prior year, with same-store sales down 7.8% compared to the first quarter of fiscal 2024. 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. 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. 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.

Q&A Session

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. 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 2025 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. 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. Looking further down the road, it is a fluid situation. And like all retailers, we will continue to closely monitor tariffs and their impact on 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.

Barry Emerson: Thanks, Steve. Gross profit for the fiscal 2025 first quarter was $54.3 million compared to gross profit of $60.4 million in the first quarter of the prior year. Our gross profit margin of 30.9% in the 2025 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 2025 first quarter decreased $0.6 million compared to the prior year. 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 2025 first quarter versus 36.9% in the 2024 first 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 first quarter of fiscal 2025 was $17.3 million or $0.78 per basic share compared to a net loss of $8.3 million 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 2024, net loss for the first quarter of fiscal 2025 does not reflect an income tax benefit which was recorded in the year ago period. For ease of reference, our net loss for the first quarter of fiscal 2024 reflected an income tax benefit of $2.8 million.

EBITDA was negative $12 million for the first quarter of fiscal 2025 compared to negative EBITDA of $6.5 million in the first quarter last year. Turning to the balance sheet. Our merchandise inventory at the end of the first quarter of fiscal 2025 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. Reviewing our capital spending, our CapEx, excluding noncash acquisitions, totaled $1.7 million for the first quarter of fiscal 2025, primarily reflecting store-related remodeling and distribution center investments.

For the 2025 full year, we expect CapEx in the range of $4 million to $7 million, mainly representing investments in store-related remodeling. Now looking at our cash flow. Net cash used in operating activities was $15.3 million in the first quarter of fiscal 2025. This compares to net cash provided by operating activities of $8.2 million last year. 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 2025 first quarter, we had $30.9 million of borrowings outstanding under our $150 million credit facility and a cash balance of $3.9 million. Now, I’ll spend a moment on guidance. For the fiscal 2025 second quarter, we expect same-store sales to be down in the low to mid-single-digit range compared to the 2024 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’s stores are closed from the first quarter of fiscal 2024 and into the second quarter of fiscal 2025 and with the 4th of July holiday which will move one day further into the third quarter this year. Fiscal 2025 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 2024 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.

Steve Miller: Thank you, Barry. Thank you all for joining us on 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 second quarter.

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