Form 10-Q for the Quarterly Period Ended March 30, 2025
Big 5 Sporting Goods Corporation reported its unaudited condensed consolidated financial statements for the 13-week period ended March 30, 2025. The company’s total revenue increased by 4.5% to $243.1 million compared to the same period last year. Net income decreased by 12.1% to $4.3 million, or $0.19 per diluted share, compared to $4.9 million, or $0.21 per diluted share, in the same period last year. The company’s gross profit margin decreased by 130 basis points to 31.3% due to increased costs and lower margins in certain product categories. The company’s cash and cash equivalents decreased by $14.1 million to $23.4 million, and its long-term debt increased by $10.5 million to $55.5 million. The company’s management’s discussion and analysis of financial condition and results of operations is included in the report.
Overview of Financial Performance
The company reported a net loss of $17.3 million for the first quarter of fiscal 2025, compared to a net loss of $8.3 million in the same period last year. This increased net loss was primarily due to reduced net sales, lower merchandise margins, and a reduced tax benefit, partially offset by lower distribution and store occupancy expenses.
Operating cash flow for the first quarter of fiscal 2025 was a negative $15.3 million, compared to a positive $8.2 million in the prior year period. This decrease was driven by higher funding of merchandise inventory and the increase in net loss.
Capital expenditures for the quarter were $1.7 million, down slightly from $1.8 million in the same period last year. The company does not plan to open any new stores in fiscal 2025, after opening 3 new stores the prior year.
As of March 30, 2025, the company had $3.9 million in cash and $30.9 million in borrowings under its credit facility, compared to $12.6 million in cash and no borrowings a year earlier.
Revenue and Profit Trends
Net sales decreased by 9.2% to $175.6 million in the first quarter of fiscal 2025, compared to $193.4 million in the same period last year. This was primarily due to a 7.8% decline in same-store sales, reflecting continued inflationary pressures that dampened consumer demand, as well as fewer stores in operation.
The company experienced decreases in customer transactions of 5.3% and a lower average sale per transaction of 2.5% compared to the prior year period.
Gross profit decreased by $6.1 million to $54.3 million, or 30.9% of net sales, compared to $60.4 million, or 31.2% of net sales, in the prior year. This was driven by the lower net sales, a 78 basis point decrease in merchandise margins, and a 90 basis point increase in store occupancy expense as a percentage of sales, partially offset by a 119 basis point decrease in distribution expense.
Selling and administrative expense decreased by $0.6 million to $70.8 million, or 40.3% of net sales, compared to $71.4 million, or 36.9% of net sales, in the first quarter of last year. This was primarily due to reductions in store-related expenses and administrative costs, partially offset by a slight increase in advertising expense.
Interest expense increased by $0.7 million in the quarter due to borrowings under the credit facility and lower interest income.
The company recorded no income tax benefit in the first quarter of fiscal 2025, compared to a $2.8 million benefit in the prior year period, due to the establishment of a valuation allowance on deferred tax assets in fiscal 2024.
Strengths and Weaknesses
Key strengths of the company include:
- Diversified product offerings across hardgoods, apparel, and footwear categories
- Established store footprint with 414 locations as of the end of the quarter
- Ability to adjust merchandise margins and pricing in response to cost inflation
Weaknesses include:
- Declining same-store sales and customer traffic due to macroeconomic pressures
- Increasing reliance on borrowings under the credit facility to fund operations
- Establishment of a valuation allowance on deferred tax assets, reducing tax benefits
Outlook and Future Considerations
Looking ahead, the company expects continued macroeconomic challenges, including persistent inflation, to weigh on consumer demand and financial performance in fiscal 2025. The company does not plan to open any new stores this year and anticipates closing approximately 15 stores.
Capital expenditures for the year are expected to range from $4.0 million to $7.0 million, primarily for store remodeling, distribution center investments, and technology upgrades.
The company believes it will be able to fund its cash requirements from existing cash, operating cash flows, and borrowings under its $150 million credit facility for at least the next 12 months. However, the credit facility includes covenants that restrict the company’s ability to pay dividends or repurchase stock until certain financial targets are met.
Key risks facing the company include further declines in consumer spending, supply chain disruptions, increased competition from e-commerce, and the potential impact of changes in U.S. tariff policies. Mitigating these risks and returning to profitability will be critical for the company’s long-term success.
