Big 5 Sporting Goods Corp (BGFV) 2007 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Big 5 Sporting Goods fourth-quarter 2007 earnings results conference call. At this time, all participants are in a listen-only mode. Following today's presentation, instructions will be given for the question-and-answer session. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded today, February 28, 2008.

On the call today is Mr. Steve Miller, President and Chief Executive Officer, and Mr. Barry Emerson, Chief Financial Officer. I would like to turn the conference over to Mr. Steve Miller. Please go ahead, sir.

Good afternoon, everyone, and welcome to our fiscal 2007 fourth-quarter conference call. Today, we will review our financial results for the fourth quarter and full year of 2007 and provide general updates on our business, as well as provide guidance. 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 Report on Form 10-K for fiscal 2006, our Quarterly Reports on Form 10-Q for the first, second and third quarters of fiscal 2007, and other filings with the Securities and Exchange Commission. We undertake no obligation to revise or update any forward-looking statement that may be made from time to time by us or on our behalf.

Thank you, Barry. Today, we reported fourth-quarter and full-year results which we believe very much reflect the challenging macroeconomic environment facing many retailers. As we previously reported our fourth-quarter sales in detail, I will now provide a brief recap.

In the fourth quarter, our same-store sales declined 4.7%, which was by far our weakest quarterly comp store sales performance since 1995. We believe that the primary factor affecting sales was the soft consumer environment that has impacted our markets for nearly a year.

Sales and product margins were also negatively impacted in a material manner by the significant drop-off in roller shoe sales. This one category accounted for 45% of the decline in same-store sales and nearly all of the 35 basis point decrease in product margins for the quarter. Sales of winter-related products were slower than the prior year due to unfavorable weather conditions in our markets up until the last week of the quarter.

As a result of our soft sales, we generated earnings of $0.28 per diluted share in the fourth quarter versus $0.42 per diluted share for the prior-year period. This was a disappointing finish to the year as we have been able to manage through increasingly challenging retail conditions for most of the first three quarters and had posted a slight gain in net income for the nine-month period. Our fourth-quarter result led to full-year earnings per diluted share of $1.25 versus $1.35 per diluted share for the prior year.

Turning now to current trends, it is no secret that the softness in the retail environment has continued into the first quarter. Although in mid-January weather conditions turned favorable for our sales of winter-related products, we have not experienced strength in many of our other product categories. We continue to be particularly impacted by the roller shoe category, both in terms of sales and product margins.

Our margins have also been pressured by the fact that more of our winter business occurred later in the season at reduced prices this year than the prior year. Additionally, margins are being impacted by inflationary factors which have become much more significant over the past few months and by our own promotional activity. We have been slightly more aggressive with our promotional pricing in order to drive sales and reduce inventories in this difficult environment.

Our team has made tremendous progress toward bringing our inventories back in line, and we expect that by the end of the first quarter, our inventories should actually be down year over year on a per-store basis. Barry will provide more details on inventories in a few minutes.

The data points that we have seen suggest that these difficult retail conditions are being driven by the challenging macroeconomic environment and factors that are external to our business, including the housing market, job market, credit issues, gas prices and general inflationary pressures. These are just difficult economic times for a lot of people within our Western markets and customer demographic.

Despite these macro issues, we remain confident in the effectiveness of our overall business model. As a reminder, we have a very strong historical track record of positively driving sales even in difficult times. We had achieved 45 consecutive quarters of comp store sales growth until our narrow miss in the second quarter of 2007.

We believe that what is affecting us now is arguably the most difficult retail environment we have encountered in many, many years. While we can't control the economy, we can and will continue to focus on areas within our influence, including strengthening our market position through enhancing our merchandise mix and promotional plan; securing quality new store locations; and controlling expenses. We believe that these long-term strategies will prepare us for strong earnings growth when the consumer spending environment improves.

Before I turn the call over to Barry, I will bring you up to date on store openings. We previously reported on our 10 store openings for the fourth quarter, which concluded our 2007 store growth of 20 net new stores for a total of 363 stores at year end. We expect to open approximately 20 net new stores during 2008, with one opening slated for the first quarter in Red Bluff, California. We believe we have a very strong group of stores positioned to come on board during 2008 and to maintain our positive but controlled growth will allow us to further secured our market position and benefit us when the consumer climate improves.

At this time, I will turn the call over to Barry, who will provide more information about the quarter and full year, as well as speak to our balance sheet, our capital expenditures, our cash flows, and provide guidance.

Thanks, Steve. Our gross profit margin for the fourth quarter was 34.1% of sales compared to 34.3% of sales for the fourth quarter of 2006. This slight decline was primarily due to the decrease in product selling margins that Steve discussed and higher store occupancy costs. These items were partially offset by a decrease in distribution center expenses resulting from operational efficiencies realized in our new facility.

Our selling and administrative expense as a percentage of net sales was 28.8% in the fourth quarter of 2007 versus 26.6% in the fourth quarter of the prior year. The higher rate year over year was due primarily to lower than anticipated sales, higher store-related expenses reflecting an increased store count, and higher advertising expenses resulting in part from the timing of co-op advertising programs.

As mentioned in the footnote to our press release financials, the Company has historically presented total depreciation and amortization expense separately on the face of its consolidated statement of operations, and corporate headquarters occupancy costs within cost of sales. In the fourth quarter of fiscal 2007, the Company changed its classification of distribution center and store occupancy depreciation and amortization expense to cost of sales and changed its classification of store equipment and corporate headquarters depreciation and amortization expense to selling and administrative expense.

As a result of this reclassification, depreciation and amortization expense is no longer presented separately in our consolidated statement of operations. Our corporate headquarters occupancy costs are now included in selling and administrative expense. This reclassification had no effect on the Company's previously reported operating or net income. This reclassification was done in order to conform our financial statement presentation to what is becoming a more standard presentation of these items in the retail industry.

To assist with any modeling of historical gross profit and selling and administrative expense, the reclassified cost of sales figures for the first three quarters of fiscal 2007 were $141.3 million for the first quarter, $143.1 million for the second quarter, and $151.9 million for the third quarter. The reclassified figures for selling and administrative expense for the first three quarters of fiscal 2007 were $61.8 million for the first quarter, $63.5 million for the second quarter, and $64.0 million for the third quarter.

Now moving on and looking at our bottom line, net income for the fourth quarter was $6.2 million or $0.28 per diluted share compared to net income in the fourth quarter of 2006 of $9.6 million or $0.42 per diluted share. Briefly reviewing our full-year results, sales increased 2.5% during fiscal 2007 to $898.3 million from $876.8 million in fiscal 2006. Same-store sales decreased 1.0% in fiscal 2007 versus the prior year. Net income for fiscal 2007 was $28.1 million or $1.25 per diluted share compared to net income of $30.8 million or $1.35 per diluted share in fiscal 2006.

Now turning to our balance sheet, total chain inventories amounted to $252.6 million at the end of fiscal 2007, up $23.9 million from $228.7 million at the end of fiscal 2006. On a per store basis, year-end inventories were up approximately 6.0% from last year. The increase was primarily attributable to lower than anticipated sales levels during the holiday season. However, as Steve mentioned, our team has worked hard toward bringing inventories back in line with sales conditions.

As of this week, our overall inventories are up approximately 1.5% on a per store basis. We are very comfortable with where our inventories are headed, and we believe that by the end of the first quarter, inventories will be down year over year on a per store basis.

Looking at our capital spending, CapEx, excluding noncash acquisitions, totaled $21.8 million for fiscal 2007. CapEx for 2007 was used to fund 20 net new store openings; store-related remodeling and security; distribution center enhancements; and computer hardware and software purchases. We expect capital expenditures for 2008, excluding noncash acquisitions, of approximately $23 million to $24 million, primarily to fund the opening of approximately 20 net new stores; store-related remodeling; corporate office and distribution center improvements; and computer hardware and software purchases. The higher CapEx for 2008 also reflects the first half of a two-year initiative to replace the point-of-sale terminals in our stores.

We generated cash flow from operations of $25.7 million for fiscal 2007 compared to $45.4 million for fiscal 2006. For fiscal 2007, we purchased larger quantities of inventory earlier in the year to ensure adequate product availability for the holiday and winter selling season. Accounts payable associated with these inventory purchases were paid by fiscal 2007 year end, resulting in substantially lower accounts payable leverage compared to the prior year.

The higher inventory levels and related timing of purchases, combined with lower than anticipated sales in the fourth quarter of fiscal 2007, resulted in reduced operating cash flow for the year. We expect our operating cash flow to improve in fiscal 2008 as we right-size our inventories, and we will continue to evaluate the best use of cash, including paying shareholder dividends, reducing debt or repurchasing the Company's common stock.

Our long-term debt at the end of fiscal 2007 was $103.4 million versus $77.1 million as of the end of fiscal 2006. Contributing to the higher debt levels for fiscal 2007 were lower operating cash flow for the year, amounts paid to repurchase our stock, and higher capital expenditures.

To update activity under our share repurchase program, in the fourth quarter and through February 27, 2008, we repurchased 216,551 shares of our stock for a total of $3.3 million. In making these repurchases, we utilized the remaining availability under our initial $15 million share repurchase program authorized in the second quarter of fiscal 2006 and approximately $1.7 million of the $20 million available under the share repurchase program authorized in the fiscal 2007 fourth quarter. Since the inception of our initial share repurchase program, we have repurchased a total of 858,086 shares for a total expenditure of $16.7 million.

Now I will turn to guidance. As Steve mentioned, despite strong sales of winter products in the first quarter, our top line continues to be impacted by the overall soft retail environment and weakness in the roller shoe product category. Product margins also continue to be unfavorably affected by roller shoes, late-season sales of winter products, inflationary pressures and promotional pricing activity on our part.

Additionally, we expect first-quarter same-store sales to be impacted by approximately 100 basis points as a result of the loss of a business day during the quarter due to the shift of the Easter holiday, when our stores are closed, out of the second quarter last year and into the first quarter this year.

Our fiscal 2008 first-quarter and full-year guidance assumes that the consumer environment will remain challenging throughout the year. Based on that assumption, we are providing the following guidance -- for fiscal 2008 first quarter, a decline in same-store sales in the low- to mid-single-digit range and earnings per diluted share in the range of $0.17 to $0.23, and for the fiscal 2008 full year, a decline in same-store sales in the low- to mid-single-digit range and earnings per diluted share in the range of $0.75 to $1.

While we are hopeful that the environment will improved with projected lower interest rates and the federal economic stimulus plan on the horizon, we cannot at this time predict the magnitude or timing of the improvement. Due to that uncertainty, and given our current trends, we are maintaining a cautious outlook. A material improvement or decline in the overall consumer environment during the year could materially impact our performance relative to this guidance.

To give you some perspective on how EPS guidance might be affected by a change in sales, either positive or negative, assuming all other items remain constant, we would expect each 1 percentage point change in the Company's same-store sales to impact our annual earnings per diluted share by approximately $0.10. We remain confident in the effectiveness of our proven business model. We believe we will strengthen our market position in 2008 and expect to achieve higher levels of earnings when the consumer spending environment improves.

Operator, I think we are now ready to turn it back to you for questions and answers.

(OPERATOR INSTRUCTIONS). Brian Nagel, UBS.

A couple of questions. The first, for Steve -- you guys have now been suffering in a weaker environment for a while. As you look out into 2008, are there areas that you could potentially get more aggressive with respect to cost controls or maybe some other levers that you could pull to somewhat offset what's likely to be a continued weak top line for Big 5?

Clearly, this is a more difficult environment than we have seen in many years. One, we operate as a reasonably lean business and have for many years. We think from a -- we're certainly evaluating our advertising. Our decision at this point in time is to remain reasonably consistent in terms of our advertising cadence. We are obviously managing our store payroll on a week-to-week basis. And we will adjust accordingly moving forward, consistently with our new store growth program.

We have had good luck in reducing our distribution center salaries and improved efficiency out of the distribution centers. So salaries have certainly come down at the distribution center. We are looking for additional improvement there for 2008. Some of that is going to be -- well, I guess all of that is going to be offset, really, by higher distribution and trucking expenses. But from a labor standpoint, certainly we are seeing efficiencies there.

We have been able to do, I think, a reasonable job bringing down our audits and SOx consulting fees. As Steve mentioned, we are focused very weakly on store labor and trying to do the right thing there. Interest expense is expected to be coming down. And we have had some pretty reasonable savings in our overall insurance program as well.

Then along those same lines, the weaker environment and the outlook for a continued weak environment caused you to think differently about maybe the way you use your hare capital as you decide between store opening plans, share repurchases, debt repurchase, that type of thing?

We certainly evaluate the best use of our cash, clearly. And looking at store growth, we have evaluated the stores that we have as prospects for 2008. And we are very excited about those stores and the opportunities that they provide. We're really in this for the long term and want to make sure that we're -- frankly, I think we are expecting some pretty decent potential real estate opportunities, given the current environment.

I think the key is that we are managing this business for the long term. And we are certainly monitoring conditions, but as we see it, right now we are being impacted by a soft consumer environment. We think continuing to execute our business model, certainly watching expenses carefully, will just further strengthen us and position ourselves for good, solid growth as the environment improves.

One final quick one. Barry, I don't think I heard you mention inventory cost cap in your prepared remarks. If you did, are we past that callout now on the income statement?

Yes, certainly for the full year, we do don't expect -- for the full year of 2008, we don't expect a big impact. There will be a little bit of impact -- there will be an impact intra-quarter as we move through the year a little bit, most significantly because of the change in our inventory values. So our inventories went up last year pretty significantly, and now they're going to come down pretty significantly in 2008. So there will be somewhat of an impact on a quarterly basis. But for the full year, the impact should be negligible.

Very good, and good luck with the next few quarters.

Ralph Jean, Wachovia.

Just a couple quick ones. Steve, are there any categories that are showing strength right now? And baseball typically might be getting started around this time. Do you have an early read on that?

Sure. As I mentioned, our winter business has been strong. We have had favorable weather comparisons for the most part over the first quarter. Our fitness business, which was strong in the fourth quarter, has remained strong. We have other isolated categories within our markets that are performing very, very positively.

Baseball has generally been soft first quarter to date. This softness is not surprising us, given the fact that many of our markets have experienced significantly more rain. There has been about eight times the rainfall in Los Angeles, for example, this year quarter to date than last year. There has been a lot of soggy fields, and I think some leagues are a little bit behind schedule in terms of getting going. We expect to get some of this business back certainly as those fields dry out and leagues kick in. However, it's just really hard at this point in time to evaluate how the baseball season will turn out.

And then, Barry, even though you're not going to continue to show depreciation and amortization on the income statement, you will still be showing it, I'm sure, in the statement of cash flows. What was that for the full year 2007?

It was about 17 points -- let me give you the exact numbers. It was about 17.7, but let me give you the exact figure. And for next year, just because of some of the increased CapEx for the year, we are anticipating that the D&A for next year is going to be closer to -- it is going to be up about 5% or so.

Do you have that exact number?

For the full year, $17.7 million.

John Shanley, Susquehanna.

Barry, I wonder if you could drill down a little bit more on this inventory issue. With total inventory up 10% on a 1% decline in sales, what constitutes the majority of that inventory build? And how much of it is dated goods, either fall or winter '07 or earlier products? Can you give us an insight in terms of what constitutes the inventory?

This is Steve. Let me take that question. The buildup really was the fact that we positioned ourselves for a successful holiday season. Unfortunately, it didn't play out. So fundamentally, the lower sales volume caused the year-end buildup. We feel good about the inventory. And in fact, as we mentioned, our team has done a great job of bringing the inventory levels down. It wasn't dated product, it was just a case of, for the most part, just too much inventories needed to support the sales level of the fourth quarter.

At year end, our inventories were up roughly 6%, as I think Barry mentioned in the scripted remarks. On a per store basis from last year, as we speak, our inventories are up 1.5% on a per store basis. By the end of the first quarter, we believe we will be comfortably down in terms of inventory. So it is just the buildup of product. We have done a good job of bringing it in line. And I think we are really positioning ourselves to be very healthy in terms of inventory and really be -- have a great flexibility in terms of being able to take advantage of opportunistic buys that may come our way.

That sounds great. Can you give us an indication -- it seems a little odd that you are forecasting negative low- to mid-single-digit comps all the way out for the entire fiscal year. Is there something historically that maybe you can share some insight in terms of how Big 5 has performed in terms of previous economic downticks, either 2001 and 2002 or maybe '94 to '95? Obviously, part of that time you guys were part of Lenny Green's, so we really didn't have the degree of insight that we can have now in terms of what may unfold in terms of the economic impact on Big 5's performance.

Well, we played through the 2000, 2001 period pretty positively. That was right in the midst of our 45 quarters of consecutive positive comps. We were down over 1995, when particularly the economy in California in particular was very, very soft. We had some struggles, as I recall, in the early '90s. I think generally speaking we have outperformed the market as a whole during challenging times.

I think that what we are feeling right now arguably is more challenging than what we have experienced certainly through this entire period that we have just spoken of. It is particularly, in many of our markets, in California, Arizona, Nevada, amongst others, are, I think, very, very challenging. I think our consumer is definitely having their pockets pinched. We are certainly hopeful that the measures taken by the government, the Economic Stimulus Plan, lower interest rates, will have a positive effect on consumer spending. But we are not economists. We really feel that it is not our position to try and predict how consumers will react to those measures.

Right. But it seems like you are taking a much more negative viewpoint in terms of the outlook than most other either athletic or sporting good retailers are taking. Most of them are anticipating, obviously, the front half of the year is going to be tough, but feel a little bit more comfortable with the back half. What makes you so negative all the way through for the entire fiscal year?

We certainly hope that the measures taken by the government and lower interest rates will have a positive effect on consumer spending. But we have no real way of predicting how consumers are going to react to these measures. Currently, we are not seeing any indication that the consumer spending environment is improving. The housing issues have worsened, the inflation has worsened. And the gas prices are still high and still going up. For that reason, we are maintaining a cautious outlook for the full year.

Last question I have is, can you tell me how many Big 5 stores are in the trading area of Chick's down in the San Diego market area?

In San Diego?

Not just San Diego, wherever Chick's is -- how many Big 5 stores are in the same trading area as the Chick's stores?

Roughly however many stores Chick's has, which I think is somewhere in the neighborhood of 16 --

Yes, it is 15.

-- 15 or 16, but for all intents and purposes, I would think we would say we are in all those trading areas, certainly.

So is it like 15 stores, would that be fair, or it would be more than that?

It depends, I guess, how you define the trading areas. Chick's could have a store someplace and we could have a store three miles to the east and two miles to the west. So if you want to count both of them, I guess arguably one could.

David Magee, SunTrust Robinson Humphrey.

A couple of questions. One, as you evaluate your sales performance here and you are recognizing the fact that over time a lot of sporting goods have been somewhat defensive in nature, some of that is replacement product and whatnot, are you worried that maybe you're losing share to somebody else right now?

I don't believe there is any data points that I have seen, just trying to follow the general retail world, that suggests that we are losing market share. Others in our -- carry our product lines certainly in our geographical regions for the most part that I have heard reporting are reporting results not too dissimilar. And I would argue that in some cases, in most cases, we've generally outperformed, I suspect, by some definition, would suggest we may even be gaining market share.

So I really feel that it is more a case of just a very soft consumer environment, particularly in our markets, that is affecting the general retail population of which we are a member.

Given the current forecast for this coming year, do you anticipate the ability to pay down debt further during this year?

It really depends on use of cash. We are going to continue to evaluate that, just like we always do, in terms of interest rates and the market price of our stock and so on. So it really is contingent on those factors. We do certainly expect to get back to generating operating cash flow and free cash flow consistent with historical trends, which have exceeded $20 million a year. So depending on how we utilize that cash, certainly a portion of it could be used to pay down debt.

How secure is the dividend, given the current forecast?

We feel it is very secure.

So that is a very high priority to you relative to some other uses of cash?

Yes.

And then lastly, did you entertain the thought of slowing down the growth this year in terms of stores, just given the environment and everything else?

It is certainly something that we looked hard at and thought about. So I guess entertained, arguably, yes. But we took a hard look at the stores that are in our pipeline. We feel that it is a strong group store by store. And additionally, we think there is a possibility that the general softness may even provide us with opportunistic real estate situations. We feel at this point in time that maintaining our growth, solid growth should allow us to further secure market position. And certainly it is going to benefit us in the long run as the consumer climate improves.

And just the last question, did I hear you correctly in saying that you are continuing to better leverage the distribution facility, but that in 2008 the benefit will be offset by higher distribution costs, I guess in the form of higher energy costs? Did I hear that correctly?

Yes, that's right. Our overall -- we continue to become even more efficient in that operation. From an operations and labor standpoint, our trucking costs are going up with store growth and so on. So we are going to delever, actually, slightly in our warehousing, just based on the soft sales conditions.

Is that also because of higher fuel costs, or did you say just because you're putting in the stores, the new stores?

Yes, that is a combination of the new stores, shipping to the new stores that we opened. We opened -- our store openings were backloaded this year. We opened 10 new stores in the fourth quarter. We expect to open 20 new stores next year. So the additional store count in those markets is causing us to ship more, and increased costs go along with that. We haven't anticipated significant increases in fuel prices, but that is certainly the distance we have to travel to our new stores.

I thought that the additional new stores would help you lever the DC costs over time, as you build out the store network -- that would help bring down that overall distribution cost.

It certainly will as the sales climate improves. And hopefully, it will be, between now and the end of the year, we will see improvement in the climate and our sales numbers will allow us to lever. Again, we are maintaining a cautious outlook at this point in time.

And just to put it in perspective, our overall DC costs were down just under $4 million this year in 2007. That was offset in large part by a switch in the inventory cost cap. But for this year, for the coming year in 2008, we do have higher DC costs budgeted because of the higher trucking costs.

Thank you. Good luck.

Rick Nelson, Stephens.

Steve, is there a way you can separate California from the rest of the store base? Were comps measurably worse in California than elsewhere? Is there any regions that are performing okay, Texas, for example?

No, we're not going to get overly specific in geographic performance. There is other impacts -- the weather impact has influenced us, California, in different ways than some of our other regions. Frankly, the roller shoe impact has been more -- the roller shoe decline and the impact of the decline has been more significant outside of California than in California, I think partially because the trend picked up sooner, earlier in California, and it kind of went up faster in some areas and came down harder. It's very difficult for us to totally quantify the economic impact in California.

Following up on the roller shoe, where do you stand now with inventories of roller shoes and when do you cycle the downturn in that product?

Well, it is certainly very meaningfully impacting our results in Q1. And it will have a significant drag in sales in Q2, less than in Q1. From an inventory standpoint, we have made good progress in selling down our inventory. We are actually now turning to be in a buying mode for product. Our inventory that we have on hand is a little choppy in terms of having size runs. And I would argue we are arguably underachieving these -- we are not filled in as positively as we should be. And we are in the process now of freshening up our product mix. As we do this, it is going to help us, certainly help margins, the margin drag improve.

I think again, meaningful impact in Q1, meaningful but not nearly as huge a number, negative number, into Q2. By the time we get to Q3, I don't think that the impact will be very, very material to our overall results. And depending on -- we think this is a go-forward category for us and a go-forward item. And in Q4, we are highly confident there is strong upside in terms of the margin within the product. And we will see how the sales evolve in the category.

How about other merchandise categories, the Under Armour shoe, for example, are you going to be getting that, and would that be a benefit to your footwear business?

We are part of the Under Armour cross-training rollout in early May. We hope for that to be a plus. I don't know that I could characterize it in the overall as being highly significant to our footwear business, but certainly we look for good results there.

And will you get that in all of your stores?

We have determined not to put it out into all of our stores.

And how about the Olympics? Do you see that having an impact?

We have never found the Olympics to be extremely meaningful one way or the other to our business.

And then just a follow-up on the promotional environment. You indicated you're planning promotional cadence consistent with prior year. What are you seeing from competitors now? Are things getting more promotional subsequent to holiday as we move into the first quarter year over year?

No. From what I am seeing, I don't believe it is materially different from what it might have been a year ago.

Thank you. Good luck.

Anthony Lebiedzinski, Sidoti & Co.

With respect to the guidance, basically you guys are assuming that same-store sales will continue at the current pace, even though in the fourth quarter you'll be facing much easier comparisons. It that a safe assessment of how you view the guidance?

Our guidance is based on the current challenging environment just continuing through the full year.

We think that, assuming the consumer environment remains just as it is today, we will get a little benefit in the back half of the year because we will not have the drag of the roller shoes to our comp stores.

And also, you mentioned before that you are seeing some nice positive results from sales of winter products. How much of your first-quarter sales are typically from winter products?

I am not sure I have that number at the tip of my tongue.

While Steve is looking for that, let me just comments again on the forecast here or the guidance. Clearly, we have purposely laid out our assumptions here. Based on those assumptions, we would earn the EPS that we had indicated within that range. But purposely, that range is wide. And clearly, if the economic conditions either improve materially or decline materially, our results will change with that economic climate.

And Steve is still looking for that number for the products?

I don't want to give you a wrong number and take a stab at it. We don't look at it -- I mean, over the course of the year, but it's fourth quarter -- I mean, it's something, certainly -- certainly something more than 10 and probably less than 20. But I won't sign up for that.

Also, as far as the store growth that you're planning for 2008, are you mostly looking to backfill your markets or are you going into any new markets?

We are primarily looking at staying within our current footprint at this time. We are pretty much in our plans at this point in time. Last year, we opened 20 stores. Three of them were in California in terms of our net new openings. I think we will have a few, potentially a few more within California, a little closer to home, which we think will be a positive for us this year.

And also, you guys mentioned that you are looking to upgrade your point-of-sale systems. Has that already started? And when do you expect that to be completed? And also, just curious as to which firm are you using as far as the point-of-sale systems?

The program is going to take place in the second half of this year. And it's a two-year program. We are doing roughly half our stores in one year and half our stores the next year. Our terminals are eight to nine years old, and we certainly want to upgrade. The initiative is really needed to update the technology and to avoid downtime and also to comply with PCI. I don't honestly have the vendor name with me here today. So it is really a two-year program.

Ladies and gentlemen, that does conclude our question-and-answer session. I will turn the call back to management for concluding remarks.

Well, thank you very much for being on our call today. We look forward to speaking to you with our first-quarter results in a couple of months. Thank you.

Ladies and gentlemen, that does conclude the Big 5 Sporting Goods fourth-quarter 2007 earnings results conference call. We would like to thank you for your participation. Have a pleasant day. You may now disconnect.