Q3 2020 Big 5 Sporting Goods Corp Earnings Call

With us today are Mr., Steve Miller, President and Chief Executive Officer, and Mr., Barry Emerson, Chief Financial Officer of being five sporting goods at this time for opening remarks, and introduction I'd like to turn the conference over to Mr. moment. Please go ahead Sir.

Thank you operator, good afternoon, everyone welcome to our 2023rd quarter Conference call. Today, We will review our financial results for the third quarter of fiscal 2020, as well as provide an outlook for the fourth quarter I will now turn the call over to Barry to read our Safe Harbor statement.

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 995 forward.

Forward looking statements involve known and unknown risks and uncertainties that may cause our actual results and 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 maybe made from time to time by us on our behalf.

Thank you Barry.

I am pleased to report remarkably strong third quarter results, along with continued sales and margin momentum through the first month of our fourth quarter.

From both a sales and earnings standpoint, our third quarter performance was by far the strongest of any quarter in our history.

With so many people looking to stay healthy and active in the current environment. Our recent sales have benefited tremendously from recreational trends, which correspond nicely with our product mix.

We have seen exceptional sales strength across a broad array of our home fitness and outdoor recreational product categories.

While we recognize that these searches and demand have been truly extraordinary and are unlikely to continue at this level indefinitely.

We do believe that the ongoing consumer shift favoring fitness and recreation should benefit our business in the long run.

Along with the sales and margin strength, our bottom line results reflect adjustments to our cost structure, there are producing significant operating leverage.

Our success driving sales with reduced operating costs as substantially strengthened our balance sheet over.

Over the course of the third quarter, we have fully paid down our revolving debt and we had a cash balance of nearly $56 million at the end of the quarter.

This is the first time in our history as a publicly traded company that we have operated with zero debt.

Reflecting this balance sheet strength, our board of directors has authorized an increase in our regularly quarterly cash dividends to double the prior rate from five cents to 10 cents per share.

Now I will take a few moments to touch on our third quarter results and then provide some color on our fourth quarter to date.

Net sales for the fiscal 2023rd quarter were $305 million compared to net sales of $266.2 million for the third quarter of fiscal 2019. So.

Same 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.

Our sales strength was broad based across our geographic markets.

Looking at the rollout of the quarter as previously reported our same store sales were up 31.9% for July.

We then were up 7.9% in August and 5.9% in September.

We achieved these sales increases in August and September despite extraordinary headwinds in our team sports and back to school related categories. As a result of the COVID-19.

Sales of team sports products were negatively impacted by widespread suspension and cancellation of league season.

And the shift to virtual schooling across the vast majority of our markets led to weak back to school related sales.

Although sales of team sports products were down significantly year over year throughout the quarter. The drag was more pronounced in August and September.

Excluding team sports product our comp sales would have exceeded 20% in August and in September.

Additionally, sales in late August and in September were negatively impacted by widespread wildfires throughout our western markets, which causes poor air quality that limited outdoor activity.

From a product category standpoint, same store sales in our hard goods category increased nearly 40% for the quarter driven by extraordinary demand for products related to home fitness and outdoor recreation Adcs.

Additionally, sales reflects strong demand for firearms related products.

Same store sales for our apparel category decreased in the high single digits in our footwear category decreased in the high teens.

The entire decrease in our apparel category was attributable to weak sales of team sports apparel.

Similarly, lack of team sports activities significantly impacted sales of pleaded footwear, which accounted for most of the decrease in overall footwear sales.

Footwear was also impacted by weak back to school sales.

On a year over year basis, we experienced a significant increase in our average sale driven by increases both in the number of units per sale and then the average price per unit, which was partially offset by a mid single digit decrease in customer transactions.

We also achieved a remarkable expansion of our merchandise margins in the third quarter, increasing 277 basis points compared to the third quarter of 2019, when margins were up 94 basis points over the prior year period.

A reduction in promotional activity along with favorable product mix shifts were the key drivers of the margin gains.

Looking at the fourth quarter, we are off to a strong start with sales increasing 15.1% for our fiscal October period, which ended this past Sunday.

We're also seeing strong.