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Big 5’s battle continue out West

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EL SEGUNDO, Calif. — Things are tough out West. Just ask Big 5 Sporting Goods, which reported another quarter of disappointing results as it continues to buck strong headwinds in the 12 Western states where its 395 stores are located.

During the company’s second quarter ended July 3, sales declined to $219.6 million from $219.8 million and same-store sales declined 1.7%. As tends to be the case when sales decline, the company lost leverage and its gross margin rate slipped to 32.7% from 33.2%, while its rate of selling and administrative expenses increased to 30.5% from 29.6%. Overall profitability for the second quarter was $3.1 million or 14 cents a share compared with the prior year’s second quarter profit of $4.8 million or 22 cents a share.

“During the second quarter, we continued to battle very challenging economic headwinds in the majority of our markets, which remain among the areas most adversely impacted by unemployment and foreclosures in the nation,” said Steven G. Miller, company chairman, president and CEO. “We experienced a decline in customer traffic, as we believe our consumer again reduced purchases of discretionary items in response to the difficult environment. Sales softened further during most of May and early June, as unseasonably cool weather in many of our markets impacted sales of summer related products.”

If there were any positives one would be that sales appeared worse than they actually were because Easter fell during the second quarter this year and Big 5 stores were closed for the holiday so the company had one less selling day versus the prior year period. Another positive involved the weather. When warm summer weather arrived late in the quarter in the company’s key markets it enabled the company to produce positive comps for June. Despite this glimmer of positive light, the company expects to encounter further difficulty during the second half of the year and is planning accordingly.

“We continue to take steps to enhance our merchandise, pricing and promotional strategies,” Miller said. “We believe these efforts will allow us to more effectively work through these challenging times and position us well when the economic environment improves.”

During the third quarter, the range of possibilities the company envisioned for same-store sales extend from a low single-digit decline to a low single-digit increase. However, profitability will remain challenging with earnings per share forecast to decline to a range of 12 cents a share to 20 cents a share from earnings per share of 31 cents the prior year.

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