Steve Miller - President and Chief Executive Officer Barry Emerson - Chief Financial Officer.

Aaron Steele - Feltl and Company David Magee - SunTrust Robinson Humphrey Kieran McGrath - Credit Suisse Michael Baker - Deutsche Bank.

Good day, ladies and gentlemen. Welcome to the Big 5 Sporting Goods First Quarter 2016 Results Conference Call. Today’s call is being recorded. With us today are Mr. Steve Miller, President and CEO; and Mr. Barry Emerson, CFO 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..

Thank you, operator. Good afternoon, everyone. Welcome to our 2016 first quarter conference call. Today, we will review our financial results for the first quarter of fiscal 2016 and provide general updates on our business, as well as provide guidance for the second quarter. At the end of our remarks, we will open the call for questions.

I will now turn the call over to Barry to read our Safe Harbor statement..

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-K, 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..

Thank you, Barry. Our first quarter got off to a very strong start as we benefited from extremely favorable winter weather conditions. However, sales off in significantly mid-quarter when the weather turned warm and we do not receive the lift in our non-winter product categories that we might have anticipated.

We believe that our performance for the quarter reflects the challenging retail environment and in particular the increased promotional activity in the sporting goods sector in connection with the liquidation, sales and promotional efforts associated with two of our major competitors, Sports Authority and Sport Chalet either commencing or preparing to commence bankruptcy proceedings.

Despite these challenging conditions, we continued to manage a very healthy balance sheet and our overall financial condition which we believe position us very positively for the future. Now, I’ll comment on sales for the first quarter. First quarter net sales were $234.5 million down 3.7% from $243.6 million for the first quarter of fiscal 2015.

As anticipated, net sales comparisons for the fiscal quarter were meaningfully impacted by the calendar shift that cause fiscal 2016 to begin one week later than fiscal 2015, as well as calendar shift of the Easter holiday during which our stores were closed from the second quarter last year to the first quarter this year.

These calendar shifts negatively impacted net sales comparisons for the first quarter of fiscal 2015 by approximately $3.9 million. Same store sales decreased to 1.9% during the first quarter of 2016 versus the comparable 13 week period in the prior year.

Same store sales comparisons were not meaningfully impacted by the calendar shifts I mentioned because same store sales comparisons were made on the true comparable week basis. We experienced a low single digit decrease in customer transaction and a low single digit increase in average sale during the first quarter versus the prior year period.

In terms of how sales trended over the quarter, January was our strongest month comping up in high single-digit range on the strength of outstanding winter weather conditions in our Western markets. Same store sales for February and March were down mid single-digits.

We largely lost the benefit of winter product sales by mid-February as the weather turned warm in our markets and as I mentioned we did not receive the lift in our non-winter product categories that we would have anticipated.

In addition to a generally challenging retail environment, we believe the extraordinary levels of promotional activity in our sector as a result of the Sports Authority and Sport Chalet situations had and continue to have an impact on our sales.

From a product category standpoint, our apparel category comped positively in the high single-digit range for the period largely in the strength of winter apparel sales in the first half of the quarter. Footwear sales comped up in the low single digit range and hard goods comped down in the high single-digit range for the period.

Merchandize margins decreased by 86 basis points for the fiscal period compared to the first fiscal quarter of last year, due to the impact of the calendar shift as well as our increased promotional and clearance activity in an effort to drive traffic and sales in the challenging environment. Now commencing on store activity.

During the first quarter, we closed four stores, one is part of or prior relocation and three as a result of lease expirations. We ended the quarter with 434 stores in operation. During the second quarter, we plan to open two new stores and to close one store.

For the 2016 full year, we currently expect to open approximately five to eight stores and close approximately ten stores. We are closely watching the ongoing developments in our sector, as expected the rationalization of it is taking place could create additional opportunities for us. Now turning to current trends.

Sales in the second quarter have remained soft as we have faced increased promotional activity associated with the ongoing competitor liquidation sales. We are currently comping down in the low mid single-digit range for the second quarter to date.

April is a relatively for low volume period for us and the key to the quarter will be how we perform over the back half of the period which includes Memorial Day, Father’s Day and lead up to the Fourth of July.

With respect to this Sports Authority and Sport Chalet bankruptcies, we want to provide some color on the competitive overlap which may give you a sense of both the near term pressures that we are experiencing and the potential opportunity for our business once the liquidation process is run its course.

Currently, there are roughly 210 Sports Authority and Sport Chalet stores within the general trading area of a Big 5 store. These 210 stores impact approximately 250 of our Big 5 stores for nearly 60% of our chain.

Although it certainly do not know at this time what the ultimate outcome will be all of the Sports Authority and Sport Chalet store locations, we believe that our stores stands a benefit once the competitive landscape rationalizes. Fortunately, our healthy financial condition offers us the flexibility to take advantage of this opportunity.

We are actively working with the vendor community on opportunistic buys as well as preparing for potentially increased consumer demand. We are also developing market initiatives aimed at introducing Big 5 to consumers who may soon need a new place to shop his sporting goods.

While our results may be challenged in the near term, we believe that its conditions in the sporting goods space normalize. Our proven business model which focused us on providing customers with the optimal mix of value, selection, service and convenience, will enables to resume positive sales growth and create value for our shareholders.

Now, I’ll turn to call over to Barry, who will provide more information about the quarter as well as speak to our balance sheet, cash flow and provide second quarter guidance..

Thanks Steve. Our gross profit margin for the fiscal 2016 first quarter was 30.3% of sales versus 31.5% of sales for the first quarter of fiscal 2015. The decrease in gross margin for the period reflects to 86 basis point decline in merchandize margins that Steve mentioned along with deleveraging of occupancy costs.

Our selling and administrative expense as a percentage of sales was 30.4% in the first quarter, up from 29.8% in the first quarter of fiscal 2015 as a result of lower sales. On an absolute basis, SG&A expense decreased 1.3 million year-over-year primarily reflecting legal settlement and proxy contest costs in 2015.

Now looking at our bottom line, we’ve reported a net loss for the first quarter of 1.1 million or $0.05 per share including $0.03 for the write-off of differed tax assets related to share based compensation.

This compares to net income in the first quarter of fiscal 2015 of 2.3 million or $0.11 per dilute share including $0.03 per cost associated with the legal settlement in the company’s proxy contest. Turning to our balance sheet, our inventory was 286.4 million at the end of the first quarter, down 6.1% from the prior year.

On a per store basis, merchandize inventory was down 4.3% versus last year and we feel good about our inventory as we move through the spring and summer selling season.

Looking at our capital spending, our CapEx excluding non-cash acquisitions totaled 3.2 million for the first quarter of fiscal 2016, primarily reflecting existing store maintenance enhancements, investment in our distribution center and computer and hardware and software purchases, including investments related to the development of a new point of sales system.

We currently expect capital expenditures for fiscal 2016 excluding non-cash acquisition of approximately 15 million to 19 million. From a cash flow perspective, our operating cash flow was 9.6 million for the first quarter of fiscal 2016 compared to 19.5 million last year, largely due to changes in working capital and lower earnings.

For the first quarter, we paid our quarterly cash dividend which we previously announced was increased to $0.125 per share. Our long term debt at the end of the first quarter was 56.6 million which was up slightly from 55.4 million at the end of the first quarter last year and from 54.8 million at the end of fiscal 2015.

Now I’ll spend a minute on our guidance. For the fiscal 2016 second quarter, we expect same store sales to be in the negative low single-digit to flat range and earnings to be in the range of $0.00 to $0.06 per share.

We expect second quarter net sales comparisons to the prior year to benefit by approximately 7 million as a result of the calendar shift from a 53 week fiscal year in fiscal 2015 which will result in pre-Fourth of July holiday sales moving from the third quarter in fiscal 2015 to the second quarter in fiscal 2016 as well as by the calendar shift to the Easter holiday during which our stores were closed from the second quarter in fiscal 2015 to the first quarter in fiscal 2016.

This anticipated benefit is reflected in our earnings guidance for the fiscal 2016 second quarter but does not affect our same store sales guidance for the second quarter, because we report same store sales on a comparable week basis as opposed to a fiscal period basis.

Our earnings guidance for the second quarter also reflects a charge of approximately $0.01 per diluted share for the write-off of differed tax assets related to share based compensation.

For comparative purposes, in the second quarter of fiscal 2015, same store increased 1.7% and earnings per diluted share were $0.12 including $0.03 per diluted share of charges associated with the proxy contest.

As Steve indicated, although our operating results are currently being impacted by competitor liquidations sales, once these promotional activities conclude, we believe we will be positioned well for the future. Operator, we are now ready to turn the call back to you for questions and answers..

Thank you. [Operator Instructions] And we’ll now take our first question from Mark Smith with Feltl and Company..

Hi. This is Aaron Steele on Mark Smith. I was just wondering if you guys saw any opportunity and maybe buying some real estate from either Sports Authority or Sport Chalet..

Yeah, the difference is in box size, you know Sport Chalet Sports Authority stores are typically 40,000 square feet up, our box average is around 11,000 square feet. We don’t think there is a great opportunity from there specifically real estate situation.

We do think that the closing of a number of those stores may create some advantages opportunities to fill in with our own box..

Great, thank you..

[Operator Instructions] We’ll now take our next question from David Magee with SunTrust..

Hi, good afternoon, guys..

Hi Dave..

The fact that business don’t really pickup when the weather turn warn the way you thought, do you think that’s entirely because of the promotions from these competitors or you feel like that you’re in think from a stall perspective, can you give some color or thought, that would be nice..

Yeah, well, I think we were in sink from a style perspective.

I think main factor was one, a general softness and the overall consumer environment that certainly the impact of the promotional environment with the beginning of liquidation sales, the preparation for commencing bankruptcy proceeding, the other competitors ramping up their promotional efforts in response to the TSA and Sport Chalet liquidation sales.

I think it just got to be a very competitive market impacted certainly a number of our categories..

Are you still saying the category - the department perform about the same in terms of apparel being the best hard goods not so much?.

No, it’s - there’s certainly been some shift. I mean the apparel, the impact - the positive impact to apparel was primarily driven by the start of the winter that really grows some sensational winter sales.

I think we’re staying - our footwear of our category perform positively quarter-to-date I think apparel and the number of the hard good categories are those that are most impacted by some of the competitive activity..

Now this is the part answer but any idea how long this might last, there is something that might be done by back-to-school or do you think it’s into you know more the fall?.

Well, I think its relative interesting phenomenon and relatively unprecedented. I mean as we figure today, we are currently facing approximately 80 competitive liquidations you know we it began with Sport Authority stores, about 35 of them in our market and the entire Sport Chalet chain went into liquidation mode.

So now we have for overlapping liquidation sales, some of those are going to I suspect come to an end and we face the I suspect now the likelihood based on certainly what we - I am sure we all read additional liquidation sales commencing are potentially within the next several weeks.

But at point in time with some commence, we are going to have a number of stores closing.

And it’s kind of difficult to figure out exactly how the - what the timing of the overall impact would be, but we do suspect that certainly as you saw by the time we get back to the back-to-school period by, it tells me that mostly liquidation activity will be certainly down or strongly subsiding.

And we certainly stand to benefit from a way more rationalized plain field..

Thank you, Steve.

And last question is, how do you compare that you turn that promotions out there or do you just sort of sit tight, suffer the traffic?.

I would maintain the view truly can’t compare a peer going out of business sale.

But [Technical Difficulty] you know understand as these businesses are going out of business and sometime, they are running out - they are running out of the certain basic products in the case of one of maybe both of these competitors they haven’t receiving fresh inventory.

So I do think we have a positive, we are going to compare it by being certainly staying focused on our strategy.

We step up our promotional activity, but we’re certainly going to operate rationally looking at balanced sales and margin, expense being fall on inventory management really ensure that we’re best positioned to benefit from a - at a rationalization once it’s effectively done and over.

We are going to be proactive in messaging to the consumer base to hopefully - well now there is another player opportunity to shop sporting goods, as they are previously warned a Big 5 customer. We think that the convenience and a value proposition and product selection that we offer will certainly which our advantage..

Great, thanks Steve and good luck..

Thank you, David..

[Operator Instructions] And we’ll now take our next question from Kieran McGrath with Credit Suisse..

Hi, guys, good afternoon. Just two questions from me.

Firstly, are you able to quantify the impact on your Q1 comp from these closures and what are the impacts you are betting for Q2?.

You know we - I mean there is so many moving pieces to all that I don’t know that we can precisely quantify. We can say that we clearly see that the - our stores operated areas without the competitive - the competitive impact are performing better. I think it’s externally could be a 200 or 300 basis points impact perhaps more.

We’re certainly seeing in some instances, where competitors have already vacated a space that we’ve seen a meaningful lift of sales in the neighboring source..

Thank you, very clear. Next a follow-up question. I mean in the past, you have been from areas from carriers of elevated firearm demand, so I am just curious, could you discuss what are you seeing today and is it any different from what you saw prior carriers of this elevated firearm demand? Thank you..

You know I think things are more normal in terms of the firearm business and we’re not going to - we spoke quite a bit of firearms during the surge of activity. I think this category become less significant to driving the overall directing of our comps. It’s not really meaningful to break it out. I think the category is pretty normal to us right now.

There is still probably some catch up being - to occur in terms of the flow of 22 ammunition, some are our results are a little inconsistent based on the flow of 22 ammunition that of a year ago. But all in all this category is pretty normal to us.

We’ll see how it placed out over the course of this Presidential Election here which is the past the way of category..

Perfect. Thank you..

And we’ll now take our next question from Mike Baker with Deutsche Bank..

Thanks, guys. Just a follow-up on a couple of questions, today’s question.

So how on the liquidation sales might I understand you don’t know exactly why on the stores - the competitive stores liquidate but from the day, how long is the liquidations take per store so for incidence one, the Sport Chalet liquidating the 35 stores, how long it typically takes for them to get through that sort of per store basis, how many weeks or months should we expect there will be pressure?.

Well I can give you precised answer because there are not done and I am not aware of any of their stores that have started a liquidation sale that have concluded that liquidation process. I am think that they probably been added for maybe about five weeks now, four, five or six weeks.

I think they’ve moved through a lot of their inventory but I’d be guessing if I’d try to value whether it’s another two or three or four weeks. I would suspect that in general, it’s a two to three months process in round figures..

Okay, that’s helpful. But just a follow to that, my follow-up question is going to be - that’s related to that, I thought you said that in stores with the liquidations of fully complete, you are seeing a lift in store.

So I guess squared out with the comments you just said that not a complete, you’re referring to purchase stores perhaps and then purchase that?.

I understand the question. The handful of stores that were closed by competitors that they did, they did not choose to go through the liquidation process in that store. I could guess that maybe that has to do with the leave situation that was particular to that store.

But the handful of stores have flows and when that’s occurred as we would expect, we see a positive benefit..

Understood and so that my question was got to be that will take that clarification, what kind of lift do you see and then typically what would you expect your share of the sales of this quarter sales if you will, what would you expect to pick up in the market?.

The impact that we see when a competitor closes and some of his historical that be this is the first time that we’ve competitors closed but it truly various market by market, it lot has to do with what the overall competitive landscape is for that marketplace that’s one would have recently launch in markets that are highly competitors, lots of establishments to buy similar product, the pickup is less than in a marketplace where there is less competition.

So there is a really a wide variance that can occur with competitive closings, but in all cases, it’s positive..

Okay and if I could ask one more, you’d said in your prepared remarks that you are getting some support from vendors as you competitors liquidate, so what exactly does that mean, are they giving you better product, better pricing, more product as you become more important to those vendors?.

Well I think it’s - if you think about the vendor community, you need to replace - they need to replace a loss business that promotes a positive conversation.

In some cases, it’s looking at opportunistic situations where they have products in their pipeline that may have been built and tended to go one of the competitors that are in the process of liquidation and that can create and is creating opportunities and as expected there will be more of those that as time marches on.

We’re also working with them to try and especially can determine potential product demand. You know we have consumers that are looking for product and maybe we are custom to buy in the stores that are no longer going to exit then we need to try to work carefully with them to best estimate what that might mean for our stores.

So we’re pretty excited about working with the vendors to drive this process..

Great, thank you. Understood. I appreciate the color..

You’re welcome..

And we’ll now take our next question from David Magee with SunTrust..

Yeah, hi guys, just one follow-up question. I was curious how the labor cost sort of thing where planned out this year relative to expectations. You guys did a good job of cost control in the first quarter..

Yeah, David, obviously one of the dynamics in California here, so just a kind of levels that California had previously approved a $2 increase in the state’s minimum wage from $8 to $10.

The increase was rolled out in two separate increments with the first dollar increase effecting back in July 1st, 2014 and then the second tranche here at second dollar in January 2016, so impacting us here for the first quarter.

The overall impact of the first phase of a minimum wage increased on our store employee wages was about $400,000 to $500,000 a quarter that is very similar to what we’re seeing here now with the second increase of a dollar about $400,000 to $500,000 a quarter.

And then California recently approved another $5 increase in the state’s minimum wage from $10 to $10, of course that’s not impacting us yet, but this increase is going to be rolled out in separate increments through 2022.

2017 and 2018 $0.50 each per year and then in 2019 through 2022 a $1 each per year, but there is other - and we are also seeing other cities consider minimum wage adjustments and we’re analyzing the impact of these anticipated changes.

And we will continue to value what our stores - evaluate of course of store staffing model as we consider how to best adjust through these increases and what we can do to kind of mitigate the impact..

And how you so far, you must be doing something to save money to offset that increase?.

Well, what we do, we can do is I mean our largest expense is our store labor and a significant portion of this is part time labor.

And why we certainly have been impacted by the minimum wage increases, we have systems in place that allow us to effectively adjust our part time staffing to current business levels and we’ll continue to evaluate that store staffing model and try and making adjustments as we can.

But there is only so many in a store and you’re going to make sure you are running the cash register and so there is an impact to the business for sure..

Thank you, Barry.

Sure..

And there are no further questions in the queue at this time. Mr. Miller, I would like to turn the call back over to you for any closing or additional remarks..

Thank you, operator. We appreciate everybody’s interest in today’s call and look forward to speaking with you at our next earnings call. Have a great afternoon..

And ladies and gentlemen that concludes today’s conference call. We thank you for your participation..