BGFV Big 5 Sporting Goods Corporation
Sector financial performance:
This company, which is primarily a traditional retailer of sport goods selling hardline (more than 50% of total sales) and shoes& apparels, has been grouped into traditional sporting goods retailer sector in sport goods & service industry.
It seems that the demand for sports goods has been weak and declining in the past several years as indicated by the decreasing same store sales in the typical retailers during the same period of time. The downward trend seems to be speeding up as indicated by the average growth in the same store sales (down 3.4 and 1.7% for 2018 and 2017 respectively). The decrease in the same store sales has been reflected primarily in some of equipment categories such as hunting and skiing and apparels generally. We have seen strong demand for footwear products, especially branded products.
Due to intensive promotion and deleveraging of store related expenses as a result of expansion of new stores, companies’ margin went worse in the past several years. As revenue went down, their EBI/share went down by 25% and 27% in 2018 and 2017 respectively. The typical gross margin for retailers in this sector is about 31% in 2018, the SG&A as percentage of sales is 27%, and the operating margin was down to about 4% in 2018. And the EBI/sales ratio was about 3% in 2018.
The typical enterprise price/EBI ratio is 12.
It seems that the demand for sport goods of this company has been weak in the past several years and declined significantly in the first three months of 2018 as indicated by same store data. The downward trend seems to be influencing all categories.
The first three months of fiscal 2018 compared with the same period of the 2017 (ended mar 31 2018)
Net revenue decreased about 7.3%.
Same store sales decreased 7.5% due to the decrease in transactions offset by increase in transaction size in all of categories.
Fiscal 2017 compared with fiscal 2016
Net revenue decreased about 1.1%.
Same store sales decreased 1.2% due to the decrease in transactions offset by increase in transaction size. The decrease was mainly reflected in snow-related products and firearm related products offset by increase in apparel and footwear.
Fiscal 2016 compared with fiscal 2015
Net revenue increased about 1.3% (excluding less weeks).
Same store sales increased 1.7% due to the decrease in transactions offset by increase in transaction size. The increase was mainly reflected in all categories.
Its gross margin (including merchandise and occupancy) was flat at around 32%. With the increased SG&A as percentage of sales (up to about 31% in 2018), its operating margin went down to about 1% currently. Its EBI/share declined significantly in the past two years.
This company is having an enterprise price/EBI ratio of 59 and enterprise price/sales ratio of 0.25. We think that its stock was relatively overvalued COMPARED similar sport good retailer –HIBBETT SPORTS, INC.
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