PR Newswire
SAN DIEGO, May 31, 2018
SAN DIEGO, May 31, 2018 /PRNewswire/ -- Johnson Fistel, LLP is working with a group of investors (the "Group") who have taken a stock position in Big 5 Sporting Goods (NASDAQ: BGFV) (referred to below as "Big 5" or the "Company") because they believe that the shares of Big 5 are undervalued and represent an attractive investment opportunity. The Group approached the Board of Directors seeking significant changes, including changes to the Company's senior management and its marketing. They believe there are significant opportunities to increase shareholder value as Big 5 is deeply undervalued, especially considering its earning potential. The Group includes individuals who have decades of experience as C-level executives at publicly traded off-price retail companies as well as extensive experience in the shoe industry (one of Big 5's largest sources of revenue). Johnson Fistel also has extensive experience and success representing shareholders to increase shareholder value in connection with securities litigation and corporate takeover litigation. This combined experience provides the bases for the recommendations contained in a letter sent to the Board of Directors on May 7, 2018.
Big 5's History
To put the letter in context, it is important to consider the Company's history and the fact that there has been little to no change in management for nearly 70 years. Unlike most publicly traded companies, Big 5 has been managed by a father and then his son since the 1950's. Specifically, Robert W. Miller co-founded Big 5 in 1955. Since then, Big 5 has been managed by Robert or his son, Steven G. Miller. Steven started working for Big 5 when he was still in college. In 1971, Big 5 was purchased by Thrifty Corp. It changed owners again in 1992 when Leonard Green bought Thrifty. The Millers have stayed and managed Big 5 the same way throughout its ownership changes.
In November 1997, the father-son team led a management effort to take control of the Company. At that time, Jennifer Holden Dunbar, one of Big 5's current directors, stated in a story published in the Los Angeles Times, "Big 5 management has always run the company as if they owned it. Now they can say they do." And in the same article, Steven proudly proclaimed that he was "going to continue to grow the company the same way we have for the past 42 years." Despite going public in June 2002, not much has changed.
Steven Miller has served as President, CEO, and Chairman of the Board since 1992, 2000, and 2002, respectively. Similarly, there has also been little change in other senior positions in management. Since the company went public in 2002, six of the seven current executive officers have remained the same. Robert Miller's other son, Michael D. Miller, served as a director from 1997 to June 2013.
A look at some performance measures, when compared to Big 5's apparent competitors, suggest that changes are in order. First, since going public, Big 5's offering price has dropped more than 35% while the apparent competitors have all increased in value between 282% and 1178%. Second, the annual average yield over the past 15 years for Big 5 is -.19% whereas all the apparent competitors have yielded between 7.48% and 13.51%.
Company | Big 5 | Dick's | Hibbett Sports | Finish Line | Foot Locker |
IPO Date | 6/25/2002 | 10/16/2002 | 10/11/1996 | 6/21/1992 | 11/2/2001 * |
IPO Price (Split Adjusted) | $13.00 | $3.00 | $3.65 | $2.75 | $14.30 |
Price (5/30/2018) | $8.45 | $38.35 | $27.15 | $13.59 | $54.56 |
| * On November 2, 2001 Venator changed its name to Foot Locker, Inc. | ||||
| | | | | |
Average Annual Total Return: | | | | | |
Stock Return with Dividend | | | | | |
01/02/2003 to 01/02/2018 (15YRS) | -0.19% | 13.51% | 7.48% | 8.05% | 13.02% |
The Letter to the Board
The May 7 letter to the Board calls for drastic changes, including changing the senior management or considering a sale of the Company. Despite the Group's effort to meet with the Board, there has been resistance. If the Board is not willing to make the requested changes, the Group renews its request that the Board initiate a formal process to explore strategic alternatives for the Company focused on maximizing shareholder value. The Group also intends to take steps to facilitate a process by which potential buyers of the Company may approach the Board. A summation of the letter is as follows:
The Group has carefully reviewed Big 5's public filings and believes the actions needed to realize this potential are within the control of the Board of Directors (the "Board") and should be immediately addressed. As you know, Big 5's stock price has been in a freefall and we believe changes will add value to the Company and its shareholders. The once dominant off-price sporting goods retailer that focused on footwear has tripped up. The Company reported several miserable quarters and Big 5 stock fell from over $15 to nearly $5. If these changes are made, the Group believes the stock price should well exceed its 52-week high of over $15.00. Additionally, shareholder value will be positively impacted by the recent tax reform passed by Congress.
Big 5's Opportunities
The Group has identified at least four critical areas where Big 5 could make improvements immediately to increase shareholder value and help make the Company the leading off-price sporting goods retailer:
In conclusion, the Group believes it is time for Big 5 to get out of its rocking chair and reinvigorate the Company. The Board has an exceptional chance to increase Company value in the short term by implementing the proposals above. We hope that the Board will do the right thing and take the necessary steps to maximize value for all shareholders. We intend to monitor closely the developments at the Company. If we do not hear from you within a week of the date of this letter, the Group reserves its rights to take whatever actions necessary, including making an appeal to the shareholders at large or initiating a takeover attempt, intended to protect the best interests of all shareholders.
About Johnson Fistel, LLP:
Johnson Fistel, LLP is a nationally recognized law firm with offices in California, New York, and Georgia. For more information about the firm and its attorneys, please visit https://www.johnsonfistel.com.
If you are an individual or institutional investor interested in assisting the Group, please call 619-814-4471.
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SOURCE Johnson Fistel, LLP
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