Dicks Sporting Goods reported that net income for the fourth quarter ended January 29 increased 12.1% to $39.9 million, or 75 cents per share, compared to pro forma net income of $35.6 million, or 69 cents per diluted share, for the year-ago period. Pro forma results for 2003 include results from Galyans, which was acquired in August 2004. Excluding merger integration and store closing costs and other charges, net income was up 22% to $43.4 million, or 81 cents per share, compared to earnings guidance of 77 cents to 78 cents per share.
Gross margin dipped 40 basis points to 28.7% of sales from 29.1% in the year-ago quarter on a pro forma basis. SG&A declined as a percentage of sales to 19.1% from 20.4% in Q4 2004 on a pro forma basis.
Fourth quarter after-tax integration costs associated with the Galyans deal equaled $7.5 million, or 14 cents per share, offset a bit by a $6.6 million, or 12 cents per share, gain from the sale of GSI Commerce shares. Dicks still has another 400,000 shares to sell of their e-commerce partner.
Total sales for the quarter increased 9.0% to $788.0 million, compared to pro forma sales of $723.1 million. Comp store sales, which do not include the Galyans results, increased 1.1% for the quarter.
Chairman and CEO Ed Stack said the positive sales results ran throughout much of the business, including golf, exercise, athletic footwear, and athletic apparel. The retailer even saw “favorable results” in licensed apparel, due to strong NFL sales. Offsetting the positive categories was weakness in winter outerwear, snow sports, boots, and in-line skates.
Stack said they had eliminated in-line skates from “a number of stores” and said they do not think they have seen the bottom of the category yet.
In addition to continued strength in the womens athletic business, DKS will be investing more heavily in the rugged outdoor category in womens. It has reportedly done well in a number of test markets and will be rolled out to the vast majority of the chain” this year.
Snow sports hardlines will probably continue in 40 stores, primarily in snowboard, rather than alpine ski.
Private label, excluding the Galyans private label, represented 9.2% of total sales in Q4, compared to 8.9% of pro forma sales in the year-ago period. For the year, private label excluding the Galyans brands was 7.9% of sales versus 7.1% of sales in 2003.
In discussing the transition of brands from Galyans to Dicks, Stack said the only line they havent been able to add to the mix since the acquisition is Patagonia. He said it was an “insignificant amount of business” with Galyans, but they would have liked to have the brand.
All Galyans stores have been re-signed and now operate as Dicks stores. Grand re-openings were conducted in most major markets over the last weekend. All stores are now running on the same systems. Based on what SEW witnessed at the Denver stores, the customer is responding very well to the change. The traffic at one major mall location was reminiscent of a Just for Feet grand opening, sans the carnival barker and the car give-away.
Dicks opened 29 stores for the year. Total stores closed for the year include three Dick's stores and three Galyan's stores. At quarter-end, DKS operated 234 stores with approximately 13.5 million square feet, in 33 states. The company expects to open at least 25 new stores in 2005 while closing five Dick's stores and one Galyan's store due to overlap, one additional store than was previously planned and announced.
New store productivity at Dicks in Q4 returned to more historical levels to “a bit over 92%”, up nicely from the 81% figure reported for third quarter.
DKS estimates EPS in the $1.79 to $1.84 per share range for the full year, excluding merger integration and store closing costs, or $1.36 to $1.41 per share including those costs. Comparable store sales are expected to increase approximately 1% to 2% for 2005.
Dicks Sporting Goods sees fiscal first quarter EPS in the 18 cents to 20 cents per diluted share range, excluding integration and closing costs, versus pro forma EPS of 10 cents per share for the first quarter of 2004.
