Fitness financials: Big 5 shares fall on downgrade, plus adidas, Foot Locker

Big 5 shares fall on downgrade
Shares of Big 5 Sporting Goods (Nasdaq: BGFV) dropped on April 17 after a Credit Suisse analyst said Big 5 potentially faces lower consumer spending due to continued declines in the housing industry and a faltering subprime mortgage market.

“There is a high correlation between Big 5 comps and existing home sales in California, as well as between Big 5’s stock and home prices,” analyst Gary Balter wrote in a note to clients. “Combined with subprime issues, this may cap upside surprises and raise the risk profile for Big 5.”

Balter downgraded the stock to “Underweight” from “Neutral,” noting that 70 percent of Big 5 stores are in states heavily exposed to subprime problems — particularly California.

Subprime lenders grant loans to customers with spotty credit histories. More than two dozen of these banks have gone bankrupt in recent months as customer defaults surge amid a prolonged slowdown in the housing market.

Balter did lift his outlook for 2007 earnings per share to $1.53 from $1.46, and said he continues to see improvement under the leadership of CEO Steve Miller and CFO Barry Emerson. However, he said he believes the stock is currently fairly valued and reiterated a $24 price target.

Shares fell as much as $1.54 to $25.32 in day’s trading on the Nasdaq Stock Market, and closed at $26.06. Despite the drop on April 17, Big 5’s stock has performed relatively well over the past year. Since bottoming at a 52-week low of $18 in July 2006, the stock has steadily increased to hit a year-high of $27.24 earlier this month.

adidas shares fall after buyout talk
Shares of adidas (ADSG.DE), parent of Reebok, closed lower after shooting up more than 4 percent earlier April 18 as media reports said the company was being eyed for a takeover.

As trading advanced, shares of adidas slowed their pace, and later closed 1.44 percent lower at EUR 44.40 (USD $60.15).

Media reports, without citing any sources, have said that private equity firm Apax Partners was mulling a bid for the company. Neither adidas nor Apax have commented, reports added.

(Conversion of Euros into U.S. dollars is for information only, is not necessarily relative to earnings, and is based on the currency rate as of April 18.)

Genesco rejects Foot Locker’s offer
Genesco, a footwear and accessories company, rejected a $1.2 billion buyout offer from rival Foot Locker (NYSE: FL), saying the offer was not in the best interests of its shareholders.

Genesco rejected Foot Locker’s offer of $46 a share after consulting with financial adviser Goldman, Sachs & Co. and legal adviser Bass, Berry & Sims PLC. In a letter to Foot Locker, Genesco said previous discussions about a buyout had mentioned offer prices between $48 and $50 per share.

Genesco operates more than 2,000 stores in the United States and Canada under the Journeys, Lids, Hat World and Underground Station brands, among others. The company also sells shoes wholesale under the Johnston & Murphy brand and under the licensed Dockers brand.

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