Wachovia downgraded Big 5 Sporting Goods (BGFV) to underperform from outperform, citing the company's recently announced quarterly results.
Analyst Ralph Jean says fourth quarter operating earnings per share (EPS) totaled 41 cents, up a penny from his estimates. Jean notes that the results were pressured by costs tied to the company's transition to a new distribution center (DC) and higher inventory reserves for returned merchandise. While sales trends remain positive, he has very low near term visibility into expense trends tied to the completion of the distribution center transition and impact of related accounting changes. He cut his 34 cents first quarter earnings per share (EPS) estimate to 22 cents and his $1.60 2006 estimate to $1.25, including stock-based compensation expense.