Big Five Guides Lower, But Have They Increased Accuracy?

Small Cap Watch List member Big 5 Sporting Goods (BGFV) reported financial results for the fiscal 2007 second quarter ended July 1, 2007. Net sales increased $6.0 million, or 2.9%, to $217.8 million and were in line with expectations. Same store sales declined 0.2% for the second quarter, representing the Company’s first quarterly decrease in same store sales in over eleven years. Net income for the second quarter of fiscal 2007 was $5.9 million, or $0.26 per diluted share, below the $0.33 per diluted share for the second quarter of fiscal 2006 but above consensus estimates of $0.25 per share.

Of course, that is according to the report prepared by management, who “lacked the necessary depth of personnel with adequate technical accounting expertise to ensure the preparation of interim and annual financial statements in accordance with GAAP,” according to the company’s former auditors. So I’ll take it with a grain of salt. Meanwhile, the company is working on the issue but warns it will cost:

For the third quarter of fiscal 2007, the Company expects to realize same store sales growth in the low single-digit negative to low single-digit positive range and earnings per diluted share in the range of$0.27 to $0.35. Third quarter guidance assumes that sales will continue to be challenged by macro-economic issues affecting the consumer environment and, compared to the prior year, reflects higher administrative expenses to support the Company’s overall growth and financial reporting initiatives. For the fiscal 2007 full year, the Company expects to realize same store sales growth in the low single-digit negative to low single-digit positive range and earnings per diluted share in the range of $1.22 to $1.42.

Analysts were expecting $0.36 next quarter and $1.41 for the year. Of course, it may be worth it to have a lower but more reliable earnings number.