Dick’s Sporting Goods, Inc. reported an 8.3% gain in fourth-quarter earnings. Sales increased by 10.7% to $1.3 billion due primarily to a 2.5% increase in comparable store sales, the opening of new stores and the addition of e-commerce sales. The 2.5% consolidated same store sales increase consisted of a 2.4% increase in Dick’s Sporting Goods stores and a 5.9% increase in Golf Galaxy stores.
For the first quarter, it expects earnings between 12 to 13 cents a share, which compares with 11 cents a year ago. Comps are expected to rise 2% to 3%.
Earnings in the fourth quarter ended Jan. 30, 2010 reached $67.4 million, or 56 cents per diluted share, on both a GAAP and non-GAAP). In the year-ago quater, non-GAAP net income of $62.2 million, or $0.54 per diluted share. Non-GAAP earnings exclude a non-cash impairment charge and merger and integration costs. On a GAAP basis, the company reported a consolidated net loss for the fourth quarter ended January 31, 2009 of $105.6 million, or $0.94 per diluted share.
“Despite the difficult economic environment of 2009, our associates successfully generated more sales, effectively managed inventory levels, and continued to exercise financial discipline. As a result, we generated higher profits, leveraged expenses, further strengthened our balance sheet and believe we gained market share in 2009,” said Edward W. Stack, Chairman and CEO. “Looking to 2010, we expect to generate double-digit earnings growth and positive operating cash flow while further investing in the long-term growth of the company.”
Stores
In 2009, the company opened 24 new Dick’s Sporting Goods stores, relocated one Dick’s Sporting Goods store, closed one Dick’s Sporting Goods store, opened one new Golf Galaxy store, converted the Golf Shop to a Golf Galaxy store, closed two Chick’s Sporting Goods stores and converted the remaining Chick’s Sporting Goods stores to Dick’s Sporting Goods stores.
As of January 30, 2010, the Company operated 419 Dick’s Sporting Goods stores in 40 states, with approximately 23.3 million square feet and 91 Golf Galaxy stores in 31 states, with approximately 1.5 million square feet.
Balance Sheet
The company ended the fiscal year with a strong balance sheet, including $225.6 million in cash and cash equivalents and no outstanding borrowings under its $440 million Credit Agreement. In the first quarter of 2009, the company repaid $172.5 million for its senior convertible notes and during fiscal 2009 increased its net cash position by $324 million. At the end of 2009, the balance sheet included financing lease obligations of $131 million, which reflects the accounting for the Company’s new headquarters, now referred to as its Store Support Center. Excluding inventory related to its e-commerce business, inventory per square foot declined 0.8% at the end of the fiscal 2009 compared to the end of fiscal 2008.
Full Year Results
The company reported consolidated non-GAAP net income for the 52 weeks ended January 30, 2010 of $141.4 million, or $1.20 per diluted share. For the 52 weeks ended January 31, 2009, the company reported consolidated non-GAAP net income of $134.1 million, or $1.15 per diluted share. Non-GAAP earnings exclude merger and integration costs and a non-cash impairment charge.
On a GAAP basis, the company reported consolidated net income for the 52 weeks ended January 30, 2010 of $135.4 million, or $1.15 per diluted share, compared to a net loss of $39.9 million, or $0.36 per diluted share for the 52 weeks ended January 31, 2009. The GAAP to non-GAAP reconciliation is included in a table later in the release under the heading “Non-GAAP Net Income and Earnings Per Share Reconciliation.”
Net sales increased 6.8% to $4.4 billion primarily due to the opening of new stores and the addition of e-commerce sales, partially offset by a consolidated comparable store sales decrease of 1.4%.
Current 2010 Outlook
- Full Year 2010
- Based on an estimated 120 million diluted shares outstanding, the Company currently anticipates reporting consolidated earnings per diluted share of approximately $1.32 – 1.35. For the full year 2009, the company reported consolidated earnings per diluted share of $1.20, excluding merger and integration costs. On a GAAP basis, the Company reported consolidated earnings per diluted share of $1.15 in 2009.
- Consolidated comparable store sales are currently expected to increase approximately 2 to 3% compared to a 1.4% decrease in 2009. The comparable store sales calculation for the full year 2010 includes Dick’s Sporting Goods stores, Golf Galaxy stores and e-commerce business. The comparable store sales calculation for the full year 2009 included Dick’s Sporting Goods stores and Golf Galaxy stores only. The comparable store sales calculation for both 2009 and 2010 exclude converted Chick’s Sporting Goods stores, which will enter the annual comparable store sales calculation in 2011.
- The company currently expects to open at least 24 new Dick’s Sporting Goods stores and approximately five new Golf Galaxy stores.
- Based on an estimated 120 million diluted shares outstanding, the Company currently anticipates reporting consolidated earnings per diluted share of approximately $1.32 – 1.35. For the full year 2009, the company reported consolidated earnings per diluted share of $1.20, excluding merger and integration costs. On a GAAP basis, the Company reported consolidated earnings per diluted share of $1.15 in 2009.
- First Quarter 2010
- Based on an estimated 120 million diluted shares outstanding, the Company anticipates reporting consolidated earnings per diluted share of approximately $0.12 – 0.13 in the first quarter of 2010. In the first quarter of 2009, the Company reported earnings per diluted share of $0.11, excluding merger and integration costs. On a GAAP basis for the first quarter of 2009, the Company reported earnings per diluted share of $0.09.
- Consolidated comparable store sales are expected to increase approximately 2 to 3% compared to a 6% decrease in the first quarter last year. The comparable store sales calculation for the first quarter 2010 includes Dick’s Sporting Goods stores, Golf Galaxy stores and e-commerce. The comparable store sales calculation for the first quarter 2009 includes Dick’s Sporting Goods stores and Golf Galaxy stores only. The comparable store sales calculation for both the first quarter of 2009 and 2010 exclude converted Chick’s Sporting Goods stores, which will enter the quarterly comparable store sales calculation in the third quarter of 2010.
- The Company expects to open approximately five new Dick’s Sporting Goods stores in the first quarter.
- Based on an estimated 120 million diluted shares outstanding, the Company anticipates reporting consolidated earnings per diluted share of approximately $0.12 – 0.13 in the first quarter of 2010. In the first quarter of 2009, the Company reported earnings per diluted share of $0.11, excluding merger and integration costs. On a GAAP basis for the first quarter of 2009, the Company reported earnings per diluted share of $0.09.
New Accounting Pronouncement
In May 2008, the FASB issued new accounting guidance, which impacts the accounting treatment for convertible debt instruments that allow for either mandatory or optional cash settlements. This accounting standard impacted the Company’s senior convertible notes and required the Company to recognize additional non-cash interest expense based on the market rate for similar debt instruments without the conversion feature. This guidance was effective for fiscal periods beginning in 2009 and required retrospective application. The Company adopted this accounting standard in the first quarter of 2009, and accordingly, the prior periods financial statements included herein have been adjusted. Adoption of this standard reduced previously reported earnings per diluted share for the fourth quarter and full year fiscal 2008 by $0.01 and $0.04, respectively.
