Alliance Resource Partners Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 27, 2024

There are 3 speakers on the call.

Operator

Good day, ladies and gentlemen. Welcome to the Big 5 Sporting Goods 4th Quarter 2023 Earnings Results Conference Call. Today's call is being recorded. With us today are Mr. Steve Miller, President and Chief Executive Officer and Mr.

Operator

Barry Emerson, Chief Financial Officer of Big 5 Sporting Goods. At this time, for opening remarks and introductions, I would like to turn the conference over to Mr. Miller. Please go ahead, sir.

Speaker 1

Thank you, operator. Good afternoon, everyone. Welcome to our 2023 Q4 conference call. Today, we will review our financial results for the Q4 of fiscal 2023 as well as provide an outlook for the Q1 of fiscal 2024. I will now turn the call over to Barry to read our Safe Harbor statement.

Speaker 2

Thanks, Steve. Except for statements of historical fact, any remarks that we may make about our future expectations, plans and prospects constitute forward looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward looking statements involve known and unknown risks and uncertainties that may cause our actual results in current and future periods to differ materially from forecasted results. These risks and uncertainties include those more fully described in our annual reports on Form 10 ks, our quarterly reports on Form 10 Q and our other filings with the Securities and Exchange Commission. We undertake no obligation to revise or update any forward looking statements that may be made from time to time by us or on our behalf.

Speaker 1

Thank you, Barry. Our 4th quarter results were disappointing as our top line was impacted by ongoing macroeconomic challenges pressuring consumer discretionary spending coupled with extraordinarily unfavorable winter weather conditions across our Western footprint. Net sales for the Q4 were $196,300,000 compared to $238,300,000 in the prior year, reflecting a 17.7 percent decrease in same store sales. Winter related products are typically an important seasonal driver of our Q4 business. But this year's warm weather and lack of snow weighed heavily on the category's performance, which was down nearly 40% versus the prior year.

Speaker 1

Sales of non winter products were down approximately 10% consistent with the guidance that we provided at the beginning of the quarter. The unfavorable winter weather impacted each of our major merchandise categories, but certainly the greatest impact was to our apparel category, which is heavily correlated to winter weather. That category was down approximately 30%. Our footwear category was down approximately 17% and our hard goods category was down approximately 11%. Transactions for the quarter were down mid teens and the average ticket was down low single digits.

Speaker 1

In the face of the challenging sales environment, we have continued to focus on the aspects of the business that we have more control over, such as merchandise margins, inventory levels and expense management. Our 4th quarter merchandise margins were down 43 basis points, which primarily reflected the year over year product mix shift away from higher margin winter related sales. Although our Q4 margins were down, for the full year we maintained very healthy merchandise margins that were flat with the prior that were flat with the prior year and substantially higher than pre pandemic levels. Our margins continue to benefit from the steps we have taken to manage our inventory as efficiently as possible to align with the challenging sales environment. At the end of Q4, despite the challenges to our top line, our inventory was down 9.1% from last year.

Speaker 1

And for the most part, we have not needed to be overly promotional for the sake of clearing merchandise, which has helped us maintain very healthy merchandise margins. Another area of focus has been managing our operating costs. Despite facing significant wage inflation, we were able to reduce our company wide store labor expense by $2,700,000 in the 4th quarter on a year over year basis. This was accomplished primarily by our diligent management of store labor usage. In addition, our operating expense continued to benefit from reduced levels of marketing spend versus pre pandemic.

Speaker 1

Expense management has always been one of our strengths and this focus is particularly important today given the inflationary pressures in a challenging sales environment. Turning to current sales trend. Our sales in the Q1 to date continue to be influenced by ongoing macroeconomic pressures, which are disproportionately impacting our core value oriented consumer. Further, weather volatility continues to play a role in our sales results. Our first quarter to date sales are running down in the low teens.

Speaker 1

In January, the quarter got off to a difficult start with a lack of winter weather, while comping against very strong winter business in the prior year. In February, our winter seasonal categories have picked up with the arrival of winter weather brought significant snowfall to many of our markets. Unfortunately, the snowfall in the mountains was accompanied by historic rainfall at lower elevations that has clearly impacted sales of and participation in team sports and other outdoor recreational activity. This has been particularly evident in our baseball category, which becomes increasingly important to our business over the course of the Q1. We are optimistic that we have the potential to capture some sales upside from pent up demand as the baseball fields dry out.

Speaker 1

We believe our overall product assortment is well positioned to resonate with our customers and reinforce our reputation for value. That said, the macro uncertainty persists and we anticipate that many of our customers will continue to feel the squeeze in their wallets and be cautious with their discretionary spend. As we navigate this uncertainty and look for ways to energize our sales, we remain committed in our efforts to maximize our gross profit dollars through optimizing merchandise margins, while efficiently managing our inventory and rigorously controlling expenses. These measures will not only fortify our resilience in this challenging environment, but also position to seize opportunities as the macroeconomic landscape improves. As part of our efforts to navigate this economic cycle, we have continued to evaluate our capital allocation strategy in an effort to maintain ample financial flexibility given the uncertainty of the duration of the macroeconomic headwinds our customers are facing.

Speaker 1

As part of that evaluation, concurrent with today's earnings release, we announced a decrease in our quarterly dividend from $0.125 per share to $0.05 per share. Our dividend has long been central to our capital allocation strategy and over the years we have adjusted it periodically both up and down to reflect changing business circumstances. As the current environment stabilizes, we will continue to evaluate our use of cash with the goal of maintaining a healthy balance sheet while also providing shareholders a meaningful return. With that, I'll now turn it over to Barry to provide additional details regarding our Q4 performance and Q1 fiscal 2024 outlook. Barry?

Speaker 1

Thanks, Steve. Gross profit

Speaker 2

for the fiscal 2023 Q4 was $59,200,000 compared to gross profit of $79,800,000 in the Q4 of the prior year. Our gross profit margin of 30.2% in the fiscal 2023 Q4 compared to 33.5% in the Q4 of last year. The decrease in gross profit margin compared with the prior year primarily reflected higher store occupancy and distribution expense, including cost capitalized in inventory as a percentage of net sales, which was partially offset by the extinguishment of certain real estate related liabilities. Merchandise margins for the Q4 of fiscal 2023 decreased 43 basis points versus the prior year period. Overall selling and administrative expense for the fiscal 2023 Q4 decreased $5,100,000 versus the prior year.

Speaker 2

The year over year reduction primarily reflected lower employee labor and benefit related expense, partially offset by a $600,000 store asset impairment charge. As a percent of net sales, selling and administrative expense was 36.9% in the fiscal 2023 Q4 versus 32.5% in the 2022 Q4 reflecting the lower sales base. Looking at our bottom line, net loss for the Q4 of fiscal 2023 was $8,900,000 or $0.41 per basic share, including a $0.02 per share impact from the store asset impairment charge I just mentioned, which was not reflected in our prior guidance for the quarter. This compares to net income of $1,700,000 or $0.08 per diluted share in the Q4 of fiscal 2022. Adjusted EBITDA was negative $8,700,000 for the Q4 of fiscal 2023 compared to EBITDA of a positive $6,900,000 in the Q4 last year.

Speaker 2

Briefly reviewing our full year results for fiscal 2023, net sales were $884,700,000 compared to net sales of $995,500,000 in the prior year. Same store sales decreased 11.2% for fiscal 2023 versus the prior year. Our merchandise margins were essentially flat for the fiscal 2023 full year compared to fiscal 2022. Net loss for fiscal 2023 was $7,100,000 or $0.33 per basic share. This compares to net income for fiscal 2022 of $26,100,000 or $1.18 per diluted share.

Speaker 2

Adjusted EBITDA was $7,300,000 for the 2023 full year compared to $52,600,000 in the prior year. Turning to the balance sheet. Our merchandise inventory at the end of fiscal 2023 decreased 9.1% year over year. This reduction reflects our efforts to manage inventory levels considering the soft sales environment and we feel good about our position as we move into the spring season. Reviewing our capital spending, our CapEx excluding non cash acquisitions totaled $11,000,000 for fiscal 2023, primarily representing investments in store related remodeling, distribution center equipment and computer hardware and software purchases.

Speaker 2

For the fiscal 2024 full year, we expect CapEx in the range of $13,000,000 to $18,000,000 We anticipate opening approximately 5 new stores and closing approximately 10 stores, including 6 stores already closed in the Q1 as part of our ongoing efforts to optimize our store base, resulting in approximately 425 stores in operation at the end of the year. Now looking at our cash flow, net cash provided by operating activities was $18,500,000 in fiscal 2023. This compares to net cash used in operating activities of $28,400,000 in the prior year. The year over year improvement in our operating cash flow primarily reflected reduced funding of merchandise inventory, partially offset by lower net income this year. Our balance sheet at the end of fiscal 2023 remains healthy.

Speaker 2

We had 0 borrowings under our credit facility and a cash balance of $9,200,000 As Steve mentioned, the decision to reduce the quarterly dividend reflects our capital management objective of maintaining a healthy financial condition amid the challenged macroeconomic backdrop. Now I'll spend a moment on guidance. For the fiscal 2024 Q1, we expect same store sales to decrease in the low double digit range compared to the fiscal 2023 Q1. Our same store sales guidance reflects an expectation macroeconomic headwinds will continue to impact consumer discretionary spending over the balance of the quarter. Fiscal 2024 Q1 net loss per basic share is expected in the range of $0.30 to $0.40 which compares to fiscal 2023 Q1 earnings per diluted share of 0 point 0 $1 That concludes our prepared remarks.

Speaker 2

I will now turn the call back to Steve for any closing comments.

Speaker 1

Thank you, Barry. Clearly, we are operating in a difficult economic environment. Over our long history, we have successfully navigated through a number of challenging periods and we are confident that the steps we are taking will leave us well positioned as the environment improves. Thank you all for joining us on today's call. We appreciate your interest in Big 5 Sporting Goods and look forward to speaking with you again after the conclusion of our Q1.

Operator

Okay. This is Antoinette. This does conclude today's teleconference. Thank you for your participation. You may now disconnect your lines.

Remove Ads
Powered by Quartr
Earnings Conference Call
Alliance Resource Partners Q4 2023
00:00 / 00:00
Remove Ads