Big 5 Sporting Goods (BGFV) operates more than 400 sporting goods stores in the Western U.S. selling value-priced merchandise, observes Harry Domash, growth and income expert and editor of Dividend Detective.
Slow to respond to online competition, sporting goods stores, including Big Five, underperformed the overall market in recent years.
But last year, Big Five’s management, spurred by activist investors, embarked on a program to aggressively manage expenses, while improving merchandise selection as well as pricing and promotional strategies. It’s working.
Despite the coronavirus inspired shutdown of last summer’s team sports and back to school markets, Big 5’s September quarter revenues soared 15%.
That wasn’t all. Earnings came in at $1.31 per share, $0.21 above forecasts and up from year-ago $0.30. If fact, it was Big 5’s all-time strongest quarter, in terms of sales, earnings, and of most importance to dividend investors, operating cash flow, which totaled $3.84 per share.
Those strong results enabled Big 5 to completely pay off its long-term debt. In fact, it ended the quarter with a cash balance of $55 million. Those strong balance sheet numbers encouraged Big 5 to double its quarterly dividend to $0.10 per share, bringing yield up to 5.1%.
What’s next for Big 5? October same store sales rose 15%. Thus, so far, there has been no slowdown from the September quarter’s growth rate.
Even before the pandemic, analysts were noting increasing interest in fitness and recreational sports amongst the general population, which bodes well for Big 5’s longer-term outlook.
One final note: currently, only one analyst is following Big 5. So, there’s upside potential should additional analysts discover the stock.