Why did Big 5 Sporting Goods' operating profit plummet in Q4 2024?

Big 5 Sporting Goods' operating profit plummeted in Q1 2025 due to a combination of factors: 1. **Soft Sales and Margins**: The company experienced a significant decline in net sales, which decreased by 9.2% to $175.6 million compared to the previous year's $193.4 million. Additionally, same-store sales dropped by 7.8%. This decline in sales volume and margin pressure contributed to the lower operating income. 2. **Higher Store Occupancy Expense**: The gross profit margin decreased to 30.9% in Q1 2025, down from 31.2% in the same period of the previous year. This decline was primarily due to higher store occupancy expense as a percentage of net sales and lower merchandise margins, which declined by 78 basis points year-over-year. 3. **Decreased Merchandise Margins**: The company's merchandise margins decreased by 78 basis points year-over-year, which had a direct impact on the gross profit and operating income. This decrease was likely due to shifts in product mix and increased promotional efforts to drive sales in a soft retail environment. 4. **Increased Selling and Administrative Expenses**: Although overall selling and administrative expense for the quarter decreased by $0.6 million from the prior year, the percentage of these expenses as a proportion of net sales increased to 40.3% in Q1 2025 compared to 36.9% in the same period of the previous year. This deleverage from the reduced revenue base further contributed to the lower operating profit. 5. **Negative EBITDA**: The company reported a negative EBITDA of $12 million in Q1 2025, which is a significant increase from the negative $6.5 million EBITDA in the same period of the previous year. Negative EBITDA indicates that the company's operating cash flow is insufficient to cover its operating expenses, which can lead to financial strain and potentially impact the bottom line. In summary, Big 5 Sporting Goods' operating profit plummeted in Q1 2025 due to a combination of soft sales, margin pressure, higher store occupancy expense, decreased merchandise margins, increased selling and administrative expenses, and negative EBITDA. These factors collectively contributed to the company's challenging financial performance in the quarter.