Earnings call transcript Q4 2022

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Operator

Good day, ladies and gentlemen and welcome to the Big 5 Sporting Goods Fourth Quarter 2022 Earnings Results Conference Call. 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 5 Sporting Goods.

opening over introductions, to for turn like time, conference the Mr. this remarks I’d and to At Miller. Please go ahead, sir.

Steve Miller

financial we Thank you, fourth review quarter Today, XXXX for XXXX an as first to Welcome the well our of will as fiscal operator. Good quarter quarter afternoon, conference of everyone. XXXX. results fourth for outlook provide our the call. fiscal

harbor call I to Barry safe turn our the over statement. now will read to

Barry Emerson

make about Thanks, pursuant remarks may XXXX. Steve. provisions Except that prospects Securities and of historical statements to Private Reform Litigation harbor made future any fact, our constitute for of safe of statements plans the Act expectations, we forward-looking the

filings and or Forward-looking and undertake our our our annual cause materially more to time Form XX-Q statements on uncertainties us in and to differ other and results uncertainties forward-looking time any update fully and forecasted described Form obligation Securities on future with that risks be no results. These our periods include that by statements our from quarterly involve those risks made the may behalf. in XX-K, known on unknown may from We Commission. reports to reports actual or current Exchange revise and

Steve Miller

of the by inflation watching all global Thank which broad-based the face that and last results pandemic you, allowed tremendous disruptions, recognizing few related slowdown chain and us to Barry. the I their we want the closely. start in years, team supply our execution over economic to are deliver

challenges cost an growing sentiment a new for the economic amid the with industry, economic from to of dynamic concern downturn. challenges the for year was of consumer inflation pandemic and increasingly cautious very retail a XXXX persistent set transitioning

unique a blockbuster drivers. in that sales unprecedented Although and demand XXXX, when XXXX reported we benefited from was we not year

with financial earnings year years our model. a inventory. the healthy solid ended compare produced sheet balance pre-pandemic the We We debt in in to free our a reflecting profitability and of XXXX condition and to favorably continued evolution business strong

Turning quarter to fourth our results.

compared As to were which sales fourth our previously high-single for for to low double-digit of quarter decrease. down million XXXX. called low quarter fourth reported, the that the toward range in million of $XXX.X end was $XXX.X net guidance a sales Same-store XX.X%, were the

On transactions high-single with digits. the quarter were fourth a year-over-year average digits basis, down for down mid-single ticket

Our sales a to anticipated. trends to appeared Black generally decelerated up pressures target December inflationary the for than spending discretionary as quarter were greater Friday, initially holiday had leading but in and to economic we extent on uncertainty impact

margins we on of continued face headwinds, top profit focus the the prioritizing to gross have dollars. line In merchandise to optimize

to inventory the We (ph). have not overly result, sake we needed for have closely managed of our clearing be a as profit and promotional

fourth record year, in versus fourth the quarter XXXX margins quarter merchandise prior XXXX. compared by merchandise increased basis our fourth margins the by pre-pandemic Although quarter margins to the XXX XXX declined points over our basis points of

pricing have merchandise positive we on we the Our several past to and pandemic to the promotional benefit prior were changes over trajectory merchandising, from the made margins years. a and continue

our by turn greater structure And by model product. in customized a while significantly advertising, flexibility levels reduced from now inventory. of print chain expense. reducing our assortment greatly evolved been the our cost which to have able clearance reduced merchandise course, We we've As expand wide advertising store, product with in of benefits our less we've operating margins, has our

savings stimulus course levels cycles checks over recreational of unique, many personal activities. the spending different leisure and of volatility the the drive economy of have of certainly successful operating we and is While a history. record higher Whereas robust long benefited help economic our on current XXXX track a from weathering that environment including

products. discretionary of of consumer seen particularly we've XXXX, course softening significant a in the Over for sentiment spending

offset respects in to in have price realities in play. our more business environment, those customers, macroeconomic points we than forces the that While the benefits benefits provide been to this and due some by values our of our broader

current now Turning our to trends.

our the year. date, We to low-single our benefiting our are sales quarter versus first demand products. year-over-year in down drove last from seasonal range in winter same-store digit running saw growth that sales the markets weather winter favorable in For January positive for

seeking opportunity to hits of capitalize convenient to the ability footprint. advantage highlights when Our the in on winter store fun this outfit weather customers our snow

partially winter by for categories. trends was softer However, other in products the product across offset strong demand January

less and winter spoke winter our that the quarter, anticipate to increasing February, same-store of remained course reflecting spending remain results become negative, our about earlier. balance first have will quarter. have progressively impactful overall discretionary the I environment sales into the sales challenging but pressures products our over strong of that We the the In on over the the shifted

remain our this winter carryover will of as positively remain with is for setting inventory a ensure are the Given strength, to of winter inventories they and seasonal is closely inventory strength last arise. environment that opportunistic ours positioned to current take we well believe we our We below of up advantage we position. historical year evaluating our the this pleased buys, be year. these Overall, significantly that opportunities

to top equipped we feel we both our the and Although, well facing to line certainly our are tackle pressures challenges. to expenses,

over experience through the economic of a range cycles decades. managing of many We wide have

are of managing pressures. effort steps expense on an focused mitigate to in business aspects taking the are within our control, operating reduce inflationary all We costs intently to they

overall growth provides flexibility navigate We economy us as the which current position have the we healthy balance as for environment and a plenty sheet, improves. the of company solid

regarding over XXXX details fiscal outlook. it fourth quarter turn (ph) first provide and additional quarter to performance now our to I'll Barry

Barry Emerson

record of fiscal fourth compared profit $XX.X the XXXX quarter was million fourth Gross for gross Dave. $XXX Thanks, in to the of million year. profit the prior quarter

quarter margin prior in fourth XX.X% recorded year. the of of from Our quarter fiscal the the fourth gross XX.X% in profit XXXX declined the

XXX margins The to basis decrease points, of including net into merchandise coupled percentage primarily in sales. capitalized a gross and inventory, reflected as cost occupancy of store in profit with a margin higher distribution expense, year-over-year decrease

XXXX, Steve the compared points, when pricing inventories our quarter of the fourth although, XXXX As strategy. the quarter, of reflecting basis evolution mentioned, pre-pandemic and versus margins quarter to year XXX merchandise decreased merchandise promotional fiscal the for increased this fourth fourth

Overall, fourth administrative labor selling other and fiscal performance incentive offset the year XXXX continued quarter and versus costs on accruals. the $X.X inflationary period, partially in impacts, million based pressure prior increased expense by lower primarily reflecting upward broad-based

fiscal of As lower on reflecting XXXX sales XX.X% expense net the a in in quarter deleveraging increased a percent XXXX fourth fourth expense the the SG&A base. XX.X% versus effect of sales, was quarter,

fiscal bottom million in share to $X.XX for per fiscal fourth or income fiscal fourth share. XXXX. diluted XXXX. XXXX $X.X compared totaled of million the at quarter EBITDA Now of quarter million million $X.XX per $X.X quarter $XX.X fiscal or looking This in our the XXXX the was line. income of the Net fourth to of diluted net compares for $XX.X quarter of fourth

income reported per Briefly including in year quarter XXXX. decreased XXXX record diluted prior for reviewing the to million Net the $X.XX year. $X.XX versus second net for million prior in of Net previously charge share. comparable or fiscal year Same-store our $X.XX fiscal per of results full XXXX the a diluted share, sales $XXX.X $XX.X was billion period. for sales sales were compared XX.X% fiscal

diluted net $X.XX a Adjusted net $X.XX to per for benefit including $XXX share, This full compares XXXX year. was a previously year XXXX compared of solid EBITDA of record to million a the in fiscal $XXX.X share. diluted for prior income reported million the per record $XX.X or million

Turning to the balance sheet.

prior normalized reflecting inventory more fiscal year. at end XXXX year-over-year, Our increased levels chain of merchandise significant the primarily X.X% the supply in inventory the sell-through and challenges following

inventory us with with fiscal model mentioned. inventory to reflecting XXXX now operate ‘XX, at the less quarter as merchandise end Our allows Steve was the X.X% down of the of fourth that fiscal of our evolution compared

Reviewing remodeling, representing spending, fiscal million non-cash and our totaled acquisitions stores, new store purchases. equipment center our CapEx capital computer investments hardware distribution software primarily $XX.X related in for and XXXX, excluding

For year, approximately including $XX and range the expect new anticipate fiscal million relocation. in XXXX six $XX the opening to full one we stores million of CapEx

compared fiscal in in $XX.X operating million full to This for XXXX. Net cash the $XXX.X decrease operating Now depleted challenges at in chain primarily and in merchandise fiscal lower cash inventory cash to in used our our reflected positive cash year. increased of and activities earnings of XXXX XXXX. inventory looking to year, levels replenish resulting flow supply the flow. XXXX demand prior million flow fiscal The fiscal from was efforts funding for operating consumer compares strong

million inventory in purchases at $XX.X from timing cash. end had cash balance year-over-year $XX.X Our XXXX million fiscal the on the XXXX was a of the at of end meaningful The our sheet impact change of down fiscal $XX.X of million

part in from while season inventory XXXX, were to as Our winter supply warm XXXX of lower in carryover our of chain were eased, the purchases purchases weather. QX due in higher issues the prior because inventory product, QX

declined As a accounts trade our $XX result, year-over-year. payable million

inventory as by improved and in expenditures. during year capital we $XX We million over $XX also the grew our million inventory merchandise invested availability

during we returned through Additionally, share of $XX over dividends shareholders to capital repurchases. cash XXXX, million and fiscal

the reserves. under available was of cash facility XXXX with sheet end at our fiscal credit healthy Our balance borrowings very zero and

further As help liquidity. to we capital overall which our look ahead, we working decline in XXXX, anticipate our should

strengthened $X.XX declared that announced has Board over per three quarterly of our considerably financial Our cash share. past Directors condition we dividend and the today of a years

moment I'll a Now spend on guidance. our

XXXX the consumer the quarter, to first range to mid-single quarter. fiscal discretionary guidance in to company compared impact continue fiscal over of the company's will an XXXX first balance first headwinds quarter. sales that macroeconomic The the expectation For same-store sales same-store expects spending reflects the the digit decrease

of earnings earnings XXXX share to quarter of first XXXX diluted positive negative first $X.XX, Fiscal share to is compares range $X.XX. in expected per $X.XX the per which quarter fiscal

remarks. now any prepared Operator, are for questions. our concludes ready we That

Operator

will gentlemen, be Smith question Our of time, a at Thank ahead. line go Markets. comes session. this Ladies Please Instructions] from from you. first the Lake [Operator Street we Capital Mark question-and-answer and conducting

Mark Smith

guys. Hey,

more guess to me, that the revenue that of we've the in a as for you last maybe January demand maybe hit surprised key bumps bit. the one in and of some of guys weeks? here trends you Do a have to weather First markets. seen feel weather you're little here given like just inventory some getting little seen in we've you some I your that the look not QX want here at especially positive needed couple

Steve Miller

capitalize a so people on startup season the to of would historical in rate We've to be winter that No, had it falls delayed. I recreate record our of by -- California much other weather the offset opportunity. that been do large, pretty I think very western been new had near significant baseball has think and markets. record the outdoors, do We've the -- filled much that products have we has Mark feel inventory we

spending discretionary market. of dampened mention to the So the just of not that's the And think, some business. from, softness benefits winter I

Mark Smith

know Any year? not held hold I due that much Do you kind and feel into over to in next are you negative have last year cleaned inventory, weather. spot like inventory you of a over up to to winter good

Steve Miller

We clean we We Yeah, buy to we're do. and next around up the that season. do. reasonably the for to be able season think wind going

Mark Smith

know are at said kind looking just of your pleased then, and that And inventory, is. Okay. with comfortable I you inventory you guys where

to hurting especially at you still peers, sales of box that continue stores? getting and your is is hear inventory heavy your and, seeing pretty may As big that promotional. be Are kind you guys a little you look at retail, maybe we

Barry Emerson

that I that and sure I not I'm sales. that's that impacting see say can

are think it's I think in saw been try competitive. apparel can buy a lot recently and to general haven't situations mean, from that's of clean footwear just inventory I other you is of direct but stores impacting have difficult retailers sales can and not I I competitors, and some and places. department directly, up to it but pretty And marketplace help. we that, the assert in think and promotional, that we but heftier that our discounting companies the terms

Mark Smith

you're you color that through control pressures And it that gross us then of us what gave guys there amount profit of and and walk through, steps profit gross there. some maintain could decent control out as you to maybe what's on puts is a and Maybe here margin takes to to of XXXX. your kind walk and you try fair look taking at on hold we can and and margin the

Steve Miller

the Are speaking Mark? looking margin, you you Yeah. at Are merchandise the to merch?

Mark Smith

out freight, well. that. know shipping maybe you guys There's some occupancy Merchandise called pressure been as there, things like margins, I

to try through the Just can of walk us maintain to and you what control kind taking margin. hold and steps

Barry Emerson

three, manage Yeah, of but can is you're merchandise and as Mark. costs. made of up up of we all made best Yeah. up try it's and course, margin, The gross We distribution made right. of margin, occupancy it's costs

and Some and in on. all lot there's distribution are because costs, an freight transportation challenges just Resources easier than others. all combated talking the about now pressure the I been we've the and a of distribution issue us mean of have been for that. so

fortunately, now, available, labor is there's but so cost And the pressure resources pretty more significant.

some seeing significant well pretty overall in also an our deleveraging that many, for maintain We're to quite every our leases of our focused in we've and in where so deleveraging area remember been occupancy, up we're years seeing or occupancy. our trying XX% So done occupancy renewal distribution Occupancy year. costs. for have expense is come many

about so with that options minus or landlords. XX or And so we plus we negotiate have

cases, if deleveraging that, got able we're kind first in necessarily been I to occupancy. a be of years, cost. had -- or Maine, And experience on occupancy over been rent the to you've we're to two pressure we've laser-focused with job, Merchandise the we maintain a to But has of of more the something back well. a last more on never either things sales, on as pendulum trying three market. you're think swung a favorable going margins? reduce have managing some good landlord and lot There's probably that Prior the difficult. three in But significant to overall to years, in more done levels

Steve Miller

about that margins good quarter. the did merchandise efforts we We maintain the feel as pre-pandemic very levels, for significantly to healthy fourth above we reported

continue. our look benefiting margins, we the to As that advertising for some that's mentioned, changes we of and model to our

Barry Emerson

on see And focused of dollars we're gross really that and the environment we out promotional there. profit not kind feeding also

And inventory clean. so very our is

is it's -- incredibly clearance product low well is Our our inventory aged and managed.

driving the So clearance and dollars we and feel gross product good is again, I about inventory think, key. profit our

to We of past. have help balance our model, just us the feel the as a of able we of operate this some in help gives flexibility sheet levels good mean being able the stores, an buy we of the than -- changes allocate lot us lot buy of product should overall standpoint, to flexibility to flexibility with of in us strength to that's those which in much lower in with move about things, environment. -- opportunistic inventory I different be to kinds to smaller from business going to it gives sizes because our forward

Mark Smith

Okay.

one last for I think the me.

Does up here is in that see working take bit operating value to walk year during talked of little But CapEx QX? As capital will through and this bit the next of cash we or improvements the a and evident that little in you you about kind some us expect some build here year. in flow unlocking that XXXX. going come the of to time a some more

Barry Emerson

much, bought prior because around we carried in because the I Well, end higher -- much over end the mentioned lower being our of the on much, the and payables year. the winter at the in on from the impact we the change -- I it call of XXXX XXXX at of dynamics much cash timing of purchases that of kind then with think our XXXX product

we're lower much end of the from XXXX. base payables So starting trade a at

ability it that, we feeds And so the primary do mean Having lower. expect we're our to to said that's I obviously, area lower on. move And of the goal. payables that, again, follow. And the to inventory. operate anyway, previously, over able focused inventories then what will year that commensurate said that's levels with our with I from be

Mark Smith

I'll Maybe more. one squeeze Great. Okay.

all that or any we needed QX their couple of year. as through a sounds the here, were stores about you close? the Are at leases and these have saw like rest closures talking here, you in it to end were of more lease and did here the that the terms Just that you troubled occupancy expect stores

Steve Miller

term, at to was its One extended renegotiate there. were lease the end term unsuccessful we of and for

was it. we be The a expose underperforming, other store to that we store and deemed

Mark Smith

you. Thank Great. Okay.

Steve Miller

Mark. you, Thank

Barry Emerson

Mark. Thanks,

Operator

concludes call that I'll Ladies for Mr. to Miller our turn remarks. Thank now you. closing gentlemen, question-and-answer and any back session. the

Steve Miller

and today's forward in quarter look operator. when great afternoon. speaking appreciate Sporting our interest a you Big we report we to Goods, results. We to us you, Thank X Have your call first joining on and you

Operator

Goods Thank The concluded. sir. of conference now participation. Sporting you you, has for Thank Big your X

You disconnect lines. may your now

Big 5 Sporting Goods (BGFV) 28 Feb 232022 Q4 Earnings call transcript