Dick’s Sporting Goods raised its full-year guidance after reporting sales and earnings for the first quarter ended May 1 came in well ahead of Wall Street’s consensus targets.

First Quarter Results

  • Net sales for the first quarter of 2021 were $2.92 billion, an increase of 119 percent compared to the first quarter of 2020, or a 52 percent increase compared to the first quarter of 2019. The increase compared to last year’s quarter was driven by a 115 percent increase in consolidated same-store sales, which included an increase in eCommerce sales of 14 percent. eCommerce sales increased 110 percent in last year’s first quarter and eCommerce penetration has grown from 13 percent of total net sales in the first quarter of 2019 to 20 percent for the first quarter of 2021. First-quarter 2020 consolidated same-store sales decreased 29.5 percent, driven by temporary store closures that started on March 18th, 2020 to help prevent the spread of COVID-19. First-quarter 2019 consolidated same-store sales were flat.
  • The company reported consolidated net income for the first quarter ended May 1, 2021 of $361.8 million, or $3.41 per diluted share, compared to a consolidated net loss for the first quarter ended May 2, 2020 of $143.4 million, or $1.71 per diluted share. The company incurred approximately $13 million of pre-tax incremental safety costs in response to COVID-19 during the 13 weeks ended May 1, 2021. During last year’s quarter, the company incurred approximately $62 million of pre-tax expenses in response to COVID-19. The company reported consolidated net income for the first quarter ended May 4, 2019, of $57.5 million, or $0.61 per diluted share.
  • On a non-GAAP basis, the company reported consolidated net income for the quarter ended May 1, 2021 of $367.2 million, or $3.79 per diluted share, which excluded non-cash amortization of the debt discount associated with the company’s convertible senior notes and included the share impact of the convertible note hedge purchased by the company, which is anti-dilutive for GAAP purposes. For the quarter ended May 4, 2019, non-GAAP consolidated net income was $58.4 million, or $0.62 per diluted share. First-quarter 2019 non-GAAP results exclude non-cash asset impairment and the settlement of a litigation contingency.

Net sales of $2.92 billion easily topped Wall Street’s consensus estimate of $2.18 billion. Adjusted EPS of $3.79 compared with Wall Street’s consensus target of $1.12.

“We are in a great lane right now, and 2021 will be our boldest and most transformational year in the company’s history. We believe the future of retail is experiential, powered by technology and a world-class omnichannel operating model. Importantly, we are reimagining the athlete experience, both across our core business and through new concepts that we have been working on for the past several years, which will collectively propel our growth in the future,” said Ed Stack, Executive Chairman and CMO.

“We are very pleased to deliver another exceptionally strong quarter, achieving record first-quarter sales and our highest-ever quarterly earnings, both significantly exceeding our expectations. The strength of our diverse category portfolio, supply chain, technology capabilities and omnichannel execution helped us continue to capitalize on strong consumer demand across golf, outdoor activities, home fitness and active lifestyle. We also saw a resurgence in our team sports business as kids began to get back out on the field after a year in which many youth sports activities were delayed or canceled,” said Lauren Hobart, President and CEO. “Looking ahead, we remain very enthusiastic about our business and are pleased to increase our full-year sales and earnings outlook.”

Balance Sheet
The company ended the first quarter of 2021 with approximately $1.86 billion in cash and cash equivalents and no outstanding borrowings under its $1.855 billion revolving credit facility. In April 2020, the company issued $575 million aggregate principal amount of 3.25 percent convertible senior notes, which added over $500 million of net proceeds to its cash position.

Total inventory decreased 4.0 percent at the end of the first quarter of 2021 compared to the end of the first quarter of 2020.

Capital Allocation
On May 21, 2021, the company’s Board of Directors authorized and declared a quarterly dividend in the amount of $0.3625 per share on the company’s Common Stock and Class B Common Stock. The dividend is payable in cash on June 25, 2021 to stockholders of record at the close of business on June 11, 2021.

During the first quarter of 2021, the company repurchased 1.03 million shares of its common stock at an average price of $74.59 per share, for a total cost of $76.8 million. Approximately $954 million remains under an authorization that extends through June 2024.

For the 13 weeks ended May 1, 2021, capital expenditures totaled $71.1 million on a gross basis, or $57.2 million net of construction allowances provided by landlords. For the 13 weeks ended May 2, 2020, capital expenditures totaled $59.6 million on a gross basis, or $51.0 million net of construction allowances provided by landlords.

Outlook

  • Due to the uneven nature of sales and earnings in 2020, the company planned 2021 off of a 2019 baseline and for the same reason believes it is important to compare 2021 against both 2019 and 2020.
  • The company’s non-GAAP outlook for 2021 and its non-GAAP results for 2020 exclude amortization of the non-cash debt discount on the company’s convertible senior notes and diluted shares that will be offset at settlement by shares delivered from the convertible note hedge purchased by the company. Non-GAAP results for 2019 exclude hunt restructuring charges, a gain on the sale of subsidiaries, non-cash asset impairments and the favorable settlement of a litigation contingency.
  • As a result of actions taken to support its teammates as well as impacts from its temporary store closures in 2020, the company incurred approximately $175 million of pre-tax incremental teammate compensation and safety costs. For fiscal 2021, the company incurred approximately $13 million of COVID-19-related safety costs in the first quarter and in light of the latest CDC guidance, expects such costs to decline significantly beginning in the second quarter.
  • The company expects to open six new Dick’s Sporting Goods stores and eight specialty concept stores in 2021, including the conversion of two former Field & Stream stores into Public Lands stores. The company also expects to relocate 11 Dick’s Sporting Goods stores in 2021.
  • The company plans to repurchase a minimum of $200 million of its common shares in 2021.

Full-Year Outlook 2021

  • Sales are expected in the range of $10,515 million to $10,806 million in 2021 compared to $8,751 million in 2019 and $9,584 million in 2020. At the mid-point, sales are expected to grow 22 percent against 2019 and 11 percent against 2020. Previously, sales were expected to expand 11 percent against 2019 and 2 percent against 2020.
  • Consolidated same-store sales are projected to expand in the range of 8.0 percent to 11.0 Previously, comps were expected range between a decline of 2 percent or an increase of 2 percent.
  • Income before income taxes is projected in the range of $990 million to $1,080 million against $408 million in 2019 and $712 million in 2020. At the midpoint, sales are expected to grow 154 percent against 2019 and 45 percent against 2020. Previously, income before income taxes was projected in the range of $520 million to $620 million, representing a gain of 40 percent against 2019 and a decline of 20 percent against 2020.
  • Income before income taxes on a non-GAAP basis are expected in the range of $1,020 million to $1,110 million against $440 million in 2019 and $733 million in 2020. At the midpoint, income before income taxes on a non-GAAP basis surged 142 percent against 2019 and 45 percent against 2020. Previously, income before income taxes was projected in the range of $550 million to $650 million, representing a gain of 36 percent against 2019 and a decline of 18 percent against 2020.
  • EPS is expected in the range of range from $7.05 to $7.68, up from $3.34 in 2019 and $5.72 in 2020. At the midpoint, earnings are expected to climb 120 percent over 2019 and 29 percent over 2020. Previously, EPS was expected in the range of $3.81 and $4.55, representing a gain of 25 percent against 2019 and a decline of 27 percent versus 2019.
  • EPS on a non-GAAP basis are expected to range between $8.00 and $8.70 versus $3.69 in 2019 and $6.12 in 2020. At the mid-point of the range, non-GAAP EPS is expected to grow 120 percent versus 2019 and 29 percent versus 2020. Previously, non-GAAP EPS was expected in the range of $4.40 and $5.20, representing a gain of 30 percent against 2019 and a decline of 22 percent versus 2019.
  • Gross capital expenditures are expected in the range of $370 million to $395 million.  Previously, the range was $345 million to $370 million. Gross capital expenditures were $217 million in 2019 and $224 million in 2020.
  • Net capital expenditures are projected in the range of $300 million to $325 million. Previously, the range was $275 million to $300 million.Net capital expenditures were $180 million in 2019 and $167 million in 2020.

Photo courtesy Dick’s Sporting Goods