Q3 2024 Big 5 Sporting Goods Corp Earnings Call
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Speaker Change: Good day ladies and gentlemen, welcome to the Big Five Sporting Grids 3rd Quarter, 2024 earnings results conference call. David's call is being recorded. With us today are Mr. Steve Miller, President and Chief Executive Officer, Mr. Barry Emerson, Chief Financial Officer of Big Five Sporting Grids.
Speaker Change: At this time for Upper New Marks and Introductions, I left it turn of work over to Mr. Miller. Please go ahead.
Steve Miller: Thank you, operator. Good afternoon, everyone. Welcome to our 2024 third quarter conference call. Today, we will review our financial results for the third quarter of fiscal 2024, 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.
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 Security Litigation Reform Act of 1995.
Barry Emerson: 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.
Barry Emerson: 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.
Barry Emerson: 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.
Barry Emerson: Please refer to our press release to find a reconciliation of certain non-GAAP financial measures referenced in today's call.
Speaker Change: Thank you, Barry. Our third quarter results reflected ongoing economic headwinds influencing consumer spending.
Speaker Change: Net sales for the third quarter were $220.6 million compared to $239.9 million in the prior year, with same-store sales down 7.5%.
Speaker Change: Although our sales remain under pressure, we're encouraged by the sequential improvement in same-store sales each quarter this year, a trend that has continued through the first month of our fourth quarter.
Speaker Change: From a product category perspective, in the third quarter, we saw relatively consistent trends across our major merchandise categories, which we believe speaks to the pervasiveness of the inflationary pressures that are impacting our core customer.
Speaker Change: Our apparel and footwear categories were each down approximately nine percent and hard goods was down approximately six percent.
Speaker Change: Despite the overall sales pressure, our average ticket remained relatively stable, declining low single digits, while our transaction count was down mid-single digits.
Speaker Change: Our merchandise margins in the third quarter decreased 119 basis points compared to the prior year.
Speaker Change: While we're focused on optimizing our gross profit dollars, we are mindful of the need to drive top-line sales in this challenging environment.
Speaker Change: We are carefully evaluating our pricing strategies across categories and looking to target areas where we believe we can benefit from energizing sales by being responsive to market conditions.
Speaker Change: Our team continues to do an excellent job managing inventory. As of the end of the quarter, our inventory levels were down 8.7% year-over-year, reflecting our ongoing efforts to align inventories with our sales performance.
Speaker Change: This disciplined approach provides us flexibility to capitalize on opportunistic buys and will keep us well positioned to respond swiftly to evolving consumer demand when macroeconomic conditions improve.
Speaker Change: Now commenting on our fourth quarter outlook.
Speaker Change: We anticipate same-store sales in the range of positive low single digits to negative low single digits compared to the 2023 fourth quarter.
Speaker Change: Last year, over the course of the fourth quarter, our markets experienced extraordinarily warm weather and a lack of snow that significantly impacted sales of winter-related products, which were down nearly 40 percent versus the prior year.
Speaker Change: While our outlook anticipates that we should benefit from more normalized weather this year, it also anticipates a continuation of the persistent macro economic challenges to consumer spending.
Speaker Change: Additionally, the Thanksgiving holiday falls late in the calendar this year, which compresses the traditional holiday shopping season.
Speaker Change: In closing, although we continue to face a challenging environment, we are encouraged by the sequential improvement in same-store sales each quarter this year, and as I mentioned, that trend has continued into the fourth quarter.
Speaker Change: We believe our inventories are well positioned for the holiday season. We have been effective in managing through clearance products, and that has enabled us to enhance our product assortments.
Speaker Change: A number of our product categories are contributing to the improvements in our sales trending and we are particularly excited with the early reads in our fall and winter apparel.
Speaker Change: Our focus has been and continues to be on managing the aspects of our business that are within our control. By doing so, we believe we are well positioned to navigate through this current period of constrained discretionary spending.
Speaker Change: With that, I'll now turn it over to Barry to provide additional details regarding our third quarter performance and fourth quarter outlook.
Barry Emerson: Thanks, Steve.
Barry Emerson: Gross profit for the fiscal 2024 third quarter was $64.2 million, compared to gross profit of $79.6 million in the third quarter of the prior year.
Barry Emerson: Our gross profit margin of 29.1% in the 2024 third quarter compared to 33.2% in the third quarter of last year.
Barry Emerson: and higher store occupancy and distribution expense including cost capitalized into inventory as a percentage of net sales.
Barry Emerson: Overall selling at administrative expense for the fiscal 2024 third quarter decreased 1.6 million compared to the prior year. The year-over-year reduction primarily reflected lower legal expense and reduced performance-based incentive accruals.
Barry Emerson: As a percent of net sales, selling at administrative expense was 34% in the 2024 third quarter versus 31.9% in the 2023 third quarter, reflecting the lower sales base.
Barry Emerson: We continue to focus on managing the expenses within our control, considering the challenging economic environment.
Barry Emerson: Now looking at our bottom line, net loss for the third quarter of fiscal 2024 was $29.9 million or $1.36 per basic share.
Barry Emerson: as well as a non-cash store asset impairment charge of $0.7 million or $0.03 per basic share. These non-cash charges have no impact on our operations, liquidity, or debt covenants.
Barry Emerson: For comparison purposes, in the third quarter of 2023, we generated net income of 1.9 million or eight cents per diluted share.
Barry Emerson: Adjusted EBITDA was negative $5.1 million for the third quarter of fiscal 2024 compared to positive EBITDA of $7.4 million in the third quarter last year.
Barry Emerson: Briefly reviewing our results for the first nine months of 2024, net sales were 613.8 million compared to net sales of 688.4 million in the first nine months of last year.
Barry Emerson: Same store sales decreased 10.2% in the first nine months of fiscal 2024 versus the comparable period last year.
Barry Emerson: Net loss for the first nine months of fiscal 2024 was $48.2 million or $2.20 per basic share.
Barry Emerson: including the non-cash valuation allowance for deferred tax assets and the non-cash store asset impairment charge I mentioned.
Barry Emerson: Adjusted EBITDA was negative $20.3 million for the 2024 year-to-date period compared to positive EBITDA of $16 million in the comparable period last year.
Barry Emerson: Turning to the balance sheet, our merchandise inventory at the end of the third quarter of fiscal 2024 decreased 8.7% year-over-year. This reduction reflects our efforts to manage inventory levels lower in response to the soft sales environment.
Barry Emerson: reviewing our capital spending
Barry Emerson: Our CapEx excluding non-cash acquisitions totaled $8.9 million for the first nine months of fiscal 2024, primarily representing investments in store-related remodeling, new stores, distribution center equipment, and computer hardware and software purchases.
Barry Emerson: For the 2024 full year, we expect CapEx in the range of $10 to $14 million.
Barry Emerson: For fiscal 2024, we anticipate opening three new stores and closing 11 stores as part of our ongoing efforts to optimize our store base, resulting in 422 stores in operation at the end of the year.
Barry Emerson: Now looking at our cash flow, net cash provided by operating activities was 9.1 million in the first nine months of fiscal 2024.
Barry Emerson: This compares the net cash provided by operating activities of 21.1 million in the comparable period last year. The decrease is primarily attributed to a net loss in the current period, partially offset by reduced funding of merchandise inventory.
Barry Emerson: As we navigate this dynamic market environment and execute our strategy, we remain focused on maintaining a healthy and flexible financial condition.
Barry Emerson: Now I'll spend a moment on guidance.
Barry Emerson: For the fiscal 2024 fourth quarter, we expect same store sales in the range of positive low single digits to negative low single digits compared to the 2023 fourth quarter.
Speaker Change: As Steve mentioned, our same-store sales guidance reflects an expectation that macroeconomic headwinds will continue, while we also expect that our results will benefit from winter weather normalizing relative to last year.
Speaker Change: In connection with establishing a valuation allowance in the fiscal 2024 third quarter related to deferred tax assets,
Speaker Change: We do not anticipate realizing any income tax benefit in the fiscal 2024 fourth quarter Which will result in a tax revision of approximately zero for the quarter
Speaker Change: On this basis, we expect fiscal 2024 fourth quarter net loss per basic share in the range of $0.80 to $1.05.
Speaker Change: For prior period comparison purposes, assuming an estimated effective tax rate of 26.3%, we expect fiscal 2024 fourth quarter adjusted net loss per basic share in the range of $0.59 to $0.77.
Speaker Change: This compares to fiscal 2023 fourth quarter debt loss per basic share of 41 cents, which was not impacted by the Deferred Tax Asset Valuation Allowance.
Steve Miller: That concludes our prepared remarks. I will now turn the call back to Steve for closing comments. 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 fourth quarter.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.