Big 5 Sporting Goods (BGFV)
Sporting goods retailers compete in a saturated market. If you are specializing in retail of any kind through physical store outlets, then it can be incredibly difficult to keep customers happy and coming back. Big 5 Sporting Goods is one such company compacted into a space with fierce competition and little room for error.
On a personal note, my first and lasting impression of Big 5 is an unpleasant one, which came 11 years ago while visiting Phoenix, AZ. I wanted sweat pants for the cold December mornings during my stay and found a store nearby. I would characterize my customer experience as a visit to a thrift store, but with new merchandise. From what I could tell, employees were only at the cash register, with clothes racks unkempt and apparel scattered on the floor everywhere. In retrospect, it was during the holiday rush, so maybe my experience wasn’t the norm.
The stock has under-performed the market miserably over the past year with a 52-week high of just under $19.00 (low $5.88).
Analyzing key financial ratio trends for Big 5, nothing really stands out as wildly abnormal.
Price to book is currently .76, ROE 5%, ROA 11% and Debt/Equity is .24, which are fairly health signs.
3-Yr Revenue Growth .93%, NI Growth (15%) and Operating Margin 4% are not so healthy signs, given the overall economic picture.
However, short interest as a % of float is astronomically high. There are currently 23.4M shares outstanding, with a float of 16.5. As of November 15, 2017, 11.7 shares were short, creating a 68.7% short % of float and a short ratio of 10.
In late November, I posted a blog on Natural Grocers (NGVC), which also had very high short interest, which still appears to be experiencing a short-squeeze.
For Big 5, the stakes are high. Shareholders have suffered through dismal stock performance and the shorts have piled on. I get the sense that any positive surprise could send the stock up 20% up or down 20% on further sign of operational attrition.
The preceding commentary is not a recommendation to buy or sell. At some point though, perhaps soon, if the stock continues to drop further without a correlating decline in underlying business fundamentals, Big 5 would be worth an investment. Keep in mind the ISS corporate governance score as of December 1, 2017 is 5, which gives me a lesser degree of comfort, but if an important factor for you it may be worth noting. Always perform your own due diligence before making an investment decision.
About Big 5 Sports:
Employees: 9,500 est.
Big 5 started as an Army-Navy surplus outlet in 1955 and now operates as a sporting goods retailer in the western United States. The company offers athletic shoes, apparel, and accessories, as well as a selection of outdoor and athletic equipment for team sports, fitness, camping, hunting, fishing, tennis, golf, winter and summer recreation, and roller sports. It also provides private label items, such as shoes, apparel, camping equipment, fishing supplies, and snow sport equipment. The company sells private label merchandise under its own trademarks comprising Golden Bear, Harsh, Pacifica, and Rugged Exposure; and licensed trademarks, including Beach Feet, Bearpaw, Body Glove, Morrow, and The Realm. As of August 1, 2017, it operated 433 stores and an e-commerce platform under the Big 5 Sporting Goods name. Big 5 Sporting Goods Corporation is headquartered in El Segundo, California.