Tuesday was a pretty good day for a couple of sporting goods retailers, both of which have had some struggles in recent years to varying degrees. Big 5 Sporting Goods (BGFV) , which operates 433 stores, primarily in California, Washington, Arizona, Oregon, Colorado, New Mexico, Utah and Idaho, rose 22% on more than five times normal average volume on no news.
Such a jump for a struggling company, especially with no news, certainly raises an eyebrow. However, considering the fact that there were more than 5.8 million BGFV shares sold short at the end of April, or more than 27% of shares outstanding, it certainly raises the possibility that yesterday's jump was due to short covering. BGFV has fallen about 60% over the past year as results have been lackluster to say the least.
The company cut its quarterly dividend from 15 cents to 5 cents in the fall, yet that still equates to a 7.2% yield, which means that the market may be expecting another cut, unless this company can get back on track. BGFV is expected to be profitable this year and next - next year's consensus estimates put the forward price earnings ratio at 23. If you've been following BGFV and noticed a $205 million jump in long-term liabilities, it is due to a FASB accounting standard change which essentially requires companies with operating leases to recognize them on the balance sheet.
Elsewhere, 1163 store chain Hibbett Sports (HIBB) rose about 4%, also on no news, but just average volume. The stock, which trades in the high $60's in early 2014, cratered all the way to the $10 range during the summer of 2017's "retail Armageddon". It then proceeded to nearly triple over the next eight months before falling to the low teens this past December. Since then, in true roller coaster fashion, HIBB is up 70%. This has certainly been one to trade, if that's your game.
While HIBB has been profitable all along, net profit margins have fallen from nearly 9% in fiscal 2013, to 2.8% in fiscal 2019. Interestingly, over the past six years the company has aggressively bought back stock, reducing shares outstanding by more than 28%.
Like BGFV there is also significant short interest in HIBB, with 5.76 million shares sold short at the end of last month, or more than 31% of shares outstanding, which also suggests short-covering possibilities. HIBB currently trades at just under 11x next year's consensus estimates.
