Q1 2025 Big 5 Sporting Goods Corp Earnings Call

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 and with us today are Mr. Steve Miller, President and Chief Executive Officer, and Mr. Barry Emerson, Chief Financial Officer of Big 5 Sporting Goods.

Ladies and gentlemen, welcome to the Big five sporting goods first quarter 2025 earnings results Conference call.

Speaker Change: 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 five sporting goods.

Steve Miller: At this time, for opening remarks and introductions, I'd like to turn the floor over to Mr. Miller. Thank you. You may begin. 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.

Speaker Change: At this time for opening remarks, and introductions I'd like to turn the floor. Mr. Miller. Thank you you may begin.

Barry Emerson: Thank you operator, good afternoon, everyone. Welcome to our 2025 first quarter conference call to date, we will review our financial results for the first quarter of fiscal 2025 as well as to provide an outlook for the second quarter I will now turn the call over to Barry to read our Safe Harbor statement. Thanks, Steve.

Barry Emerson: 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 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.

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 <unk>.

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.

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.

Steve Miller: Please refer to our press release to find a reconciliation of certain non-GAAP financial measures referenced in today's call. 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%.

Barry Emerson: Please refer to our press release to find a reconciliation of certain non-GAAP financial measures referenced in today's call.

Barry Emerson: Barry.

Barry Emerson: We were able to deliver a first quarter top and bottom line performance that was consistent with our expectation.

Barry Emerson: Spice pressures from macroeconomic and weather related headwinds net.

Barry Emerson: Net sales for the first quarter were $175 $6 million compared to $193 4 million in the prior year with same store sales were down seven 8% compared to the first quarter of fiscal 2024.

Barry Emerson: Our sales in January and February were particularly difficult as we fought against highly unfavorable seasonal weather comparisons which resulted in winter related sales there were down nearly 25%.

Steve Miller: Although we experienced pockets of more normal, seasonal winter weather, the southern tier of our store footprint was especially challenging. 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.

Barry Emerson: Although we experienced pockets of more normal seasonal winter weather, the southern tier of our store footprint was especially challenged.

Barry Emerson: That said sales trend improved substantially in March as positive winter weather set in late in the season.

Barry Emerson: Same store sales were flat versus the prior year, which included an approximate 300 basis point benefit associated with the Easter calendar shift that's a holiday when our stores are closed moved into the second quarter of this year versus being in the first quarter of last year.

Barry Emerson: This performance in March marked a significant improvement from the double digit declines we experienced earlier in the quarter.

Steve Miller: Looking at our major merchandise categories on the 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. We ended the quarter with inventory up 6.5% year over year. This increase reflects earlier receipts of seasonal merchandise compared to last year.

Barry Emerson: Looking at our major merchandize categories, and a same store basis for the quarter hard goods decreased four 7% apparel declined eight 7% and footwear was down 11, 8%.

Barry Emerson: Apparel and footwear were the categories most impacted by the unfavorable weather comparisons.

Barry Emerson: Our transactions for the period were down five 3% and our average sale was down two 5%.

Barry Emerson: For the first quarter, our merchandise margins decreased 78 basis points compared to the prior year.

<unk> product mix shifts along with promotional efforts to drive sales to value conscious consumers.

Barry Emerson: We ended the quarter with inventory up six 5% year over year.

Barry Emerson: This increase reflects earlier receipts of seasonal merchandise compared to last year.

Steve Miller: 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 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.

Barry Emerson: This timing difference has proved advantageous not only are we better prepared as we move through spring and enter the cell summer selling periods. We've also significantly mitigated the near term impact from tariffs.

Barry Emerson: Increased tariff costs provided us valuable time to the advanced negotiations with our vendors.

Barry Emerson: 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 the lower inventory position year over year at year end.

Barry Emerson: As part of our broader strategic initiatives, we continue to optimize our store portfolio to focus our resources on our most productive stores.

Steve Miller: We closed eight stores in the first quarter of fiscal 2025 and anticipate closing approximately seven additional stores over the remainder of the year.

Barry Emerson: We closed eight stores in the first quarter of fiscal 2025, and anticipate closing approximately seven additional stores over the remainder of the year.

Steve Miller: Turning now to our second quarter. 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 condition.

Barry Emerson: Turning now to our second quarter.

Barry Emerson: 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.

Barry Emerson: Notwithstanding the fluidity of the macroeconomic conditions the key to our results this quarter, we'll be capitalizing and sales opportunities around the higher volume period surrounding Morial Memorial day father's day and the start of summer.

Steve Miller: The key to our results this quarter will be capitalizing in 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 geography.

Barry Emerson: We believe we are well prepared for this period, yet with healthy inventory levels of key products, which we received a flash of any tariff impact.

Barry Emerson: 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.

Steve Miller: 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 future. 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.

Barry Emerson: Before I close I want to briefly touch on the broader tariff situation.

Barry Emerson: As I mentioned, we brought in extra product in advance of the tariffs, which should minimize any tariff impacts in the near term.

Barry Emerson: 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.

Steve Miller: The overall environment is uncertain right now, but as matters progress, we will remain nimble and evolve as needed by adjusting our purchasing policy. 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.

Barry Emerson: The overall environment is uncertain right now, but its matters progress, we will remain nimble and evolve as needed by adjusting our purchasing.

Barry Emerson: 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.

Barry Emerson: With that, I'll now turn it over to Barry to provide additional details regarding our first quarter performance and second quarter outcome. 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.

Barry Emerson: With that I'll now turn it over Barry to provide additional details regarding our first quarter performance and second quarter outlook.

Barry Emerson: Thanks, Steve.

Barry Emerson: 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.

Barry Emerson: Profit margin of 39% 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.

Barry Emerson: In merchandise margins of 78 basis points.

Barry Emerson: Overall selling at 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 at 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.

Barry Emerson: Overall, selling and administrative expense for the fiscal 'twenty 25, 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.

Barry Emerson: As a percent of net sales selling and administrative expense was 43% in the 2025 first quarter versus 36, 9% in the 'twenty 'twenty four first quarter, reflecting the lower sales base, we continue to focus on managing the expenses within our control considering the ongoing economic challenges.

Barry Emerson: As.

Barry Emerson: 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.

Barry Emerson: Now looking at our bottom line net loss for the first quarter of fiscal 2025 was $17 3 million or 78 cents per basic share compared to a net loss of $8 3 million or <unk> 38 cents per basic share in the first quarter last year.

Barry Emerson: 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.

Barry Emerson: For ease of reference our net loss for the first quarter of fiscal 'twenty 'twenty four reflected an income tax benefit of $2 8 million.

Barry Emerson: 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 non-cash acquisitions, totaled $1.7 million for the first quarter of fiscal 2025, primarily reflecting store-related remodeling and distribution center investment.

Barry Emerson: 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.

Barry Emerson: Turning to the balance sheet, our merchandise inventory at the end of the first quarter of fiscal 'twenty twenty-five increased six 5% year over year.

Barry Emerson: 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.

Barry Emerson: The upcoming summer season.

Barry Emerson: Reviewing our capital spending our capex, excluding noncash acquisitions totaled $1 7 million for the first quarter of fiscal 'twenty twenty-five, primarily reflecting store related remodeling and distribution center investments.

Barry Emerson: For the 2025 full year, we expect CapEx in the range of $4-7 million, mainly representing investments in store-related remodeling.

Barry Emerson: So the 2025 full year, we expect capex in the range of $4 million to $7 million, mainly representing investments in store related remodeling.

Barry Emerson: 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.

Barry Emerson: 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.

Barry Emerson: The decrease was primarily attributed to increased funding of merchandise inventory and a larger net loss in the current period.

Barry Emerson: As of the end of our 20 2025 first quarter.

Barry Emerson: We had $30 9 million of borrowings outstanding under our $150 million credit facility and a cash balance of $3 9 million.

Barry Emerson: Now I'll spend a moment on 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.

Barry Emerson: Now I'll spend a moment on guidance.

Barry Emerson: For the fiscal 'twenty twenty-five second quarter, we expect same store sales to be down in the low to mid single digit range compared to the 'twenty 'twenty four second quarter.

Barry Emerson: Our same store sales guidance reflects an expectation that macroeconomic headwinds will continue through the second quarter.

Barry Emerson: This guidance also reflects the combined negative impact of calendar shifts associated with the Easter holiday, during which the company 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.

Barry Emerson: This guidance also reflects the combined negative impact of calendar shifts associated with the Easter holiday during which the company stores are closed from the first quarter of fiscal 'twenty 'twenty four and into the second quarter of fiscal 2025.

Barry Emerson: With the fourth of July holiday, which will move one day further end of the third quarter. This year.

Barry Emerson: Fiscal 2025 second quarter net loss for basic share is expected in the range of 75 to 90 cents, which reflects no tax benefit for the period, compared to fiscal 2024 second quarter net loss per basic share of 46 cents, which reflected a tax benefit of 16 cents per basic share.

Barry Emerson: Fiscal 'twenty 'twenty five second quarter net loss per basic share is expected in the range of 75 to 90 cents.

Barry Emerson: Which reflects no tax benefit for the period compared to fiscal 'twenty 'twenty four second quarter net loss per basic share of <unk> 46 cents, which reflected a tax benefit of 16 cents per basic share.

Barry Emerson: That concludes our prepared remarks.

Barry Emerson: That concludes our prepared remarks, I will now turn the call back to Steve for some closing comments. Thank you Barry. Thank you all for joining us on today's call. We appreciate your interest in big five sporting goods and look forward to speaking with you again after the conclusion of our second quarter.

Steve Miller: I will now turn the call back to Steve for some closing comments. Thank you, Barry. Thank you all for joining us in today's call.

Steve Miller: 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.

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

Barry Emerson: Mhm.

Barry Emerson: [music].

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Barry Emerson: Yeah.

Barry Emerson: Okay.

Barry Emerson: [music].