New Trade for March 16th, 2021

Stocks were flat in early trading this morning after the Dow and the S&P 500 both hit new record highs in the previous session.  The pandemic in the U.S. has eased, which is positive for the economy and stock prices. The 7-day average of new U.S. Covid infections fell to 51,820 on Sunday, the lowest in 5 months.

Physical retail shopping outlets are regaining their luster as people begin revisiting them after nearly a year of avoiding them.  With a global vaccination drive now in full swing and consumer spending ticking up, some retail stocks are likely to see high demand in the coming months as the companies expand their global supply chains. 

Diminishing social distancing requirements are expected to allow retail chains to regain their business momentum in the near term.  And, following months of remote lifestyles, consumers are expected to splurge on outdoor products driven by pent up demand built over the past year.  Also, the U.S. House of Representatives just passed a $1.9 trillion COVID-19 recovery package (which is expected to be passed by the U.S. Senate soon) that provides up to $1400 direct stimulus checks to eligible citizens.  This should increase consumer spending soon, driving aggregate demand even more.

Read on for some details on one of the retail names that is a stand out among its peers.

Headquartered in El Segundo, California, (Big 5 Sporting) BGFV is a sporting goods retailer.  The company’s products include athletic shoes, apparel and accessories, a range of outdoor and athletic equipment for team sports, fitness, camping equipment and snow sport equipment.  The company purchases merchandise from sporting goods equipment, athletic footwear and apparel manufacturers and sells private label merchandise under its own trademarks, including Golden Bear, Harsh, Pacifica, and Rugged Exposure.  BGFV also operates through its e-commerce platform.

In  February, BGFV entered a new loan agreement with Bank of America Corporation (BAC) as an administrative agent and lender.  The agreement has a five-year term.  It provides  a secured revolving credit facility of up to $150 million.

The company’s net sales for the fiscal 2020 fourth quarter ended January 3, 2021 were  $290.58 million, which represents 19% improvement year-over-year.  Its gross profit increased nearly 33% year-over-year to $102.39 million.  BGFV’s net income came in at $21.02 million for the quarter, up more than 5805% year-over-year.  Its EPS increased 4650% year-over-year to $0.95.

A consensus EPS estimate of $0.38 for the quarter ending June 30, 2021 represents an improvement of 1166.7% year-over-year.  The consensus revenue estimate of $260.18 million for the quarter ending March 31, 2021 represents a 19.5% gain on a year-over-year basis.

The analysts are bullish on BGFV, setting a price target of $16, indicating it has nearly 9% upside potential.  This upside potential is higher than nearly 60% of all stocks categorized as consumer cyclicals.  If you still aren’t convinced BGFV is worthy of your investing dollars, look no further than its dividend of nearly 3%.

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