Big 5 Sporting Goods Corporation (NASDAQ: BGFV) sells sporting goods through its network of 363 stores in 11 states in the western U.S.A. On average, each store covers approximately 11,000 square feet, which is smaller than other superstores (such as Dick's Sporting Goods that average over 35,000 square feet). This lets Big Five open stores in relatively small metropolitan and suburban areas, especially important in the sparsely populated western states that are Big 5's focus.
Big 5 carries the standard sporting goods brand names (Nike, Adidas, Under Armour), but it earns the highest margins from branded sporting goods made exclusively for its stores and sold at a discount, and by selling private label, closeout, and discontinued products.
Big 5 tries to gain an competitive advantage over Dick's Sporting Goods (DKS) and other competitors by strategically advertising its exclusive and discounted products in newspapers and by building vendor relationships that give Big 5 consistent flow of discontinued and closeout products. Although it focuses on providing cheap options for its customers, Big 5 depends on discretionary spending to build its sales - its products are not necessities. As such, the company is exposed to a hurting U.S. economy, the credit crunch, and seasonal fluctuations. In addition, a declining trend in newspaper readership impedes Big 5's sales and undermines its traditional method of advertising.
Big 5 Sporting Goods sells soft goods (athletic and sport apparel/footwear) and hard goods (durable items such as fishing rods, golf clubs, snowboarding equipment, etc.) through its physical stores and its website, big5sportinggoods.com. With an average store space of 11,000 square feet, Big 5 is smaller than superstores that typically average over 35,000 square feet, and consequently has more flexibility regarding new store locations. For example, the company can target small metropolitan areas with as few as 50,000 people--something its larger competitors cannot do.
Since Big 5's stores are smaller than its competitors, new store openings require relatively low investment and typically a short amount of time before generating profits. A newly opened Big 5 store typically garners store-level return on investment of about 35% and sales of $1.9 million in its first full fiscal year. 
Big 5's business has steadily expanded, by an average of 19 stores annually for the past five years. 
The company estimates that half its customers come from four-page sunday newspaper inserts and mailers that reach 20 million people every week. Big 5 relies on professional in-house advertising, rather than an outside advertising agency, to reach its customers.
Declining newspaper circulation hurts Big 5's brand awareness and hinders its sales. Additionally, any change in the cost of print advertising impacts Big 5's operating costs
As a retailer of non-necessary goods, BGFV is one of the first to get hit by a declining economy because consumers lack the disposable income to purchase its products as before (department stores like Target and Wal-Mart, who offer goods such as food and household necessities, are not as threatened in such a situation). Not only does the poor economy force BGFV's core customers to spend more money for gasoline and heating costs, but the subprime mortgage fallout and resulting credit crunch contracts their consumer spending even further, weakening Big 5's sales.
Big 5's relationships with vendors - which give it exclusive branded apparel, closeout and discontinued lines - are the source of Big 5's higher margin percentage. Vendor-related products represent approximately 45% of Big 5's sales.
Seasonality affects Big 5 in two ways:
Sporting goods retail is quite fragmented. The top six sporting goods retailers comprise only 20.6% of the $53.7 billion market. The company directly or indirectly competes with:
Presently, there are only four major, publicly traded sporting goods retailers: Dick's Sporting Goods, Hibbett Sports, Sport Chalet, and Big 5. Big 5's main competitors in the sporting goods market are: