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Big 5 Sporting (BGFV) Continues to Bottom: What’s Ahead?


Big 5 Sporting Goods Inc. BGFV is not immune to the turmoil in the sporting goods industry, which has compelled companies selling athletic goods to scramble for options to gain business. This El Segundo, CA-based company had seen good times last year following significant market share gain owing to the consolidation and closure of smaller rival stores.

Stock Continues to Bottom

Shares of Big 5 Sporting have slumped 26.5% since it reported second-quarter 2017 results on Aug 1 and 38.3% quarter to date, much wider than the industry’s fall of 3.1% and 6.1% in the respective periods. In the past month, the stock has slumped as much as 9%, reflecting the persistent decline. That said, let’s find out what led to the fall of the company’s once strong performance.

What Went Wrong in Q2?

Cycling of benefits from the increased sales witnessed last year owing to closure of rival stores, along with a challenged industry impacted the second-quarter 2017 results. Consequently, the company reported lower-than-expected earnings in the second quarter, after four consecutive beats in the preceding quarters. Additionally, the top line lagged due to diminished demand for some hardgoods product categories, mainly linked to firearms, camping and water sports. Moreover, sales were hurt by the calendar shift of Easter and Fourth of July holidays, when the company’s stores remain closed, in to the second quarter this year compared with the first quarter in the prior-year.

Big 5 Sporting Goods Corporation Price, Consensus and EPS Surprise

Big 5 Sporting Goods Corporation Price, Consensus and EPS Surprise | Big 5 Sporting Goods Corporation Quote

Moreover, Big 5 Sporting expects sales comparisons to remain tough in the third quarter due to the cycling of benefits from increased sales witnessed in the prior-year quarter related to the closure of rival stores. It also anticipates the retail environment to remain challenging. Consequently, it guided comps to decline in the low single-digit range for the third quarter, while earnings are envisioned in the range of 22-32 cents per share.

Intense Competition Plagues Sports Industry

The sporting goods industry seems to be in doldrums, as customers are jumping on the dot-com bandwagon, leaving lesser options for brick-and-mortar retailers. Consequently, the sporting goods space has grown extremely competitive and promotional, thus creating pressure on margins and bottom line. While most retailers are trying all means to enhance omni-channel capabilities, competition from online giant Amazon.com Inc. AMZN still remains a major threat.

In fact, this has been a major concern not only for Big 5 Sporting, but also for big-wigs in the sporting goods industry. Some of the names that have been hurt by this scenario include DICK’s Sporting Goods Inc. DKS, Hibbett Sports, Inc. HIBB, Foot Locker Inc. FL and The Finish Line, Inc. FINL, as evident from their recent performances and tepid outlook. Additionally, vendors like NIKE, Adidas and Under Armour resorting to more direct selling options is likely to plague the top lines of these sporting goods retailers. Aptly, the industry is currently among the bottom 10% of the 265 Zacks Industries.

Bottom Line

The above discussion makes it clear that the competition in the sporting goods industry is definitely taking a toll on Big 5 Sporting’s performance, which currently sports a Zacks Rank #5 (Strong Sell). Staying away from the stock is also advisable as the current Growth Score of D, indicates there is limited scope for the revival in the stock’s downward trend.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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