Edit Metric
|
||||||||||||||||||||
Details
|
||||||||||||||
Big 5 Sporting Goods (BGFV)Stock (Consumer Products Industry, Sports Goods Manufacturers Industry, Sporting Goods Industry, Retail Industry, Sporting Goods Stores Industry, Sports Goods Stores Industry)
 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. In 2007, the company sold over $898 million in products, for a gross margin of $309 million. This margin is about 5% higher than other sporting goods retailers that rely more heavily on brand name products. [1] In 2007, Big 5 opened 23 new stores to increase its total store count to 363. Although predominately a western U.S. chain, the company has slowly begun to expand eastwards, while its top competitor Dick's, focused on the East Coast, looks to expand westward (evidenced by its acquisition of the Chick's Sporting Goods chain in Southern California). Dick's dominates the East Coast sporting goods market, posting net sales of $3.89 billion and gross margin of 29.8% in 2007.[2] Big 5 tries to gain an advantage over Dick's 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 income to build its sales - its products are not necessary commodities. 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. [edit] Business OverviewBig 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.[3] The company sold $898 million in products in 2007, for a gross profit of $309 million.[5] Big 5's high gross margin (34.4%) surpasses all other sporting goods companies: BGFV's net sales include a mix of athletic and sport apparel, athletic and sport footwear, and hard goods. The contributions that these three categories make towards sales have been relatively steady from 2003 to 2007:
[edit] Key Trends and Forces[edit] New store openings drive Big 5's revenueSince 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. Prior to the second quarter of 2007, Big 5 also had 45 consecutive quarters of same-store sales increase, creating more incentive to open new locations.[9] Big 5's business has steadily expanded, by an average of 19 stores annually for the past five years. The company plans to open approximately 20 stores in 2008.[10]
[edit] Newspaper advertisements drive BGFV's sales and strengthens its brand awareness, but newspapers have declining audiencesThe company estimates that half its customers come from four-page sunday newspaper inserts and mailers that reach 20 million people every week.[13] 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[14] : [edit] The declining economy is hurting the disposable income of BGFV's core customersAs 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. In the fourth quarter of 2007, same-store sales fell 4.7%, the company's worst quarterly sales in over a decade.[16] [edit] Strong vendor relationships boost Big 5's earningsBig 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.[17] [edit] Seasonal fluctuations impact Big 5's salesSeasonality affects Big 5 in two ways:
[edit] CompetitionBig 5 is part of an industry where 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:
In terms of market share, Big 5 lags behind four sporting goods businesses:
Note: Market shares calculated with estimated $53.7 billion sporting goods retail market size.[32]
 Big 5 Sporting Goods2004 Data 2005 Data 2006 Data 2007 Data 2008 Data Most Recent Data Available [edit] Notes
|
The Shelf
|
Edit
History
Bookmark
