Dick's Sporting Goods reported second-quarter earnings that were slightly below previous guidance. The company said the challenging consumer environment along with higher levels of precipitation and cooler temperatures contributed to a decrease in traffic.
The company reported consolidated non-GAAP net income for the second quarter ended Aug. 3, 2013 of $88.9 million, or 71 cents per diluted share, excluding an asset impairment charge, compared to the company's expectations provided on May 21, 2013 of 75 cents to 77 cents per diluted share. For the second quarter ended July 28, 2012, the company reported consolidated non-GAAP net income of $81.3 million, or 65 cents per diluted share, excluding an impairment charge related to the company's investment in JJB Sports.
On a GAAP basis, the company reported consolidated net income for the second quarter ended Aug. 3, 2013 of $84.2 million, or 67 per diluted share. For the second quarter ended July 28, 2012, the company reported consolidated net income of $53.7 million, or 43 cents per diluted share.
Net sales for the second quarter of 2013 increased 6.6 percent to $1.5 billion. Adjusted for the shifted calendar due to the 53rd week in 2012, consolidated same store sales decreased 0.4 percent, compared to the company's guidance of an approximate 2 to 3 percent increase. Second quarter 2012 consolidated same store sales increased 3.8 percent. Shifted same store sales in the second quarter of 2013 for Dick's Sporting Goods increased 0.1 percent while Golf Galaxy decreased 6.1 percent.
Unshifted consolidated same store sales increased 1.2 percent, compared to the company's guidance of an approximate 3.5 to 4.5 percent increase. Unshifted same store sales in the second quarter of 2013 for Dick's Sporting Goods increased 1.9 percent while Golf Galaxy decreased 7.2 percent. eCommerce penetration was 5.6 percent of total sales.
“Our second quarter results were below our guidance as a sluggish consumer environment along with higher levels of precipitation and cooler temperatures contributed to a decrease in traffic, resulting in lower than expected same store sales,” said Edward W. Stack, chairman and CEO. “Despite these challenges in the second quarter, we were able to generate record non-GAAP earnings per share.”
Mr. Stack continued, “We are revising our full year guidance to a range of $2.60 to $2.65 per share, primarily due to lower sales expectations for the second half of the year, which are a result of our belief that consumers will remain relatively cautious. In order to drive traffic and respond to the consumer environment we are increasing our advertising levels, enhancing the customer experience, and investing in growth categories.”
Stack concluded, “The current challenges we are facing are short-term in nature and we are actively pursuing strategies to address them. This does not change our view of the profitable long-term growth opportunities for our business.”
Dick's SG had projected EPS of $2.84 to 2.86 for 2013.
New Stores
In the second quarter, the company opened seven new Dick's Sporting Goods stores. These stores are listed in a table later in the release under the heading “Store Count and Square Footage.”
As of August 3, 2013, the company operated 527 Dick's Sporting Goods stores in 44 states, with approximately 28.7 million square feet and 81 Golf Galaxy stores in 30 states, with approximately 1.4 million square feet.
Balance Sheet
The company ended the second quarter of 2013 with approximately $135 million in cash and cash equivalents as compared to $350 million at the end of the second quarter of 2012. As of the end of the second quarter of 2013, the company did not have any outstanding borrowings under its $500 million revolving credit facility. Over the course of the past twelve months, the company utilized capital to invest in omni-channel growth, remodel stores, build a distribution center, fund shares purchased pursuant to share repurchase programs, pay a special dividend and quarterly dividends, and acquire intellectual property rights to the Field & Stream brand.
Inventory per square foot was 5.0 percent higher at the end of the second quarter of 2013 as compared to the end of the second quarter of 2012, while clearance inventory per square foot decreased 4.1 percent during the same period.
Year-to-Date Results
The company reported consolidated non-GAAP net income for the 26 weeks ended August 3, 2013 of $149.4 million, or $1.19 per diluted share. For the 26 weeks ended July 28, 2012, the company reported consolidated non-GAAP net income of $138.5 million, or $1.10 per diluted share.
On a GAAP basis, the company reported consolidated net income for the 26 weeks ended August 3, 2013 of $149.0 million, or $1.18 per diluted share. For the 26 weeks ended July 28, 2012, the company reported consolidated net income of $110.8 million, or $0.88 per diluted share.
Net sales for the first half of 2013 increased 5.4 percent from the first half of 2012 to $2.9 billion primarily due to the opening of new stores, partially offset by a consolidated same store sales decrease of 0.2 percent on an unshifted basis.
Dividend
On August 14, 2013, the company's Board of Directors authorized and declared a quarterly dividend in the amount of $0.125 per share on the company's Common Stock and Class B Common Stock. The dividend is payable in cash on September 27, 2013 to stockholders of record at the close of business on September 6, 2013.
Current 2013 Outlook
* Full Year 2013 (52 Week Year) Comparisons to Fiscal 2012 (53 Week Year)
Based on an estimated 126 million diluted shares outstanding, the company currently anticipates reporting consolidated non-GAAP earnings per diluted share of approximately $2.60 to 2.65, excluding an asset impairment charge and the partial recovery of a previously impaired asset. For the 53 weeks ended February 2, 2013, the company reported consolidated non-GAAP earnings per diluted share of $2.53, excluding an impairment charge. The 53rd week in fiscal 2012 contributed approximately $0.03 to earnings per diluted share.
Consolidated same store sales are currently expected to be approximately flat to an increase of 1 percent on a 52-week to 52-week comparative basis, compared to a 4.3 percent increase in fiscal 2012.
The company expects to open approximately 40 new Dick's Sporting Goods stores, relocate one Dick's Sporting Goods store and complete four full and 75 partial remodels of Dick's Sporting Goods stores in 2013. The company also expects to open one new Golf Galaxy store and relocate one Golf Galaxy store in 2013, both of which will be in the new, larger format.
The company expects to open approximately one new True Runner store and approximately two new Field & Stream stores in 2013.
* Third Quarter 2013
Based on an estimated 126 million diluted shares outstanding, the company currently anticipates reporting consolidated earnings per diluted share of approximately $0.37 to 0.39 in the third quarter of 2013, compared to third quarter 2012 consolidated earnings per diluted share of $0.40.
Consolidated same store sales adjusted for the shifted calendar, due to the 53rd week in 2012, are currently expected to be approximately flat to an increase of 1 percent in the third quarter of 2013, or decrease approximately 2 to 3 percent on an unshifted basis, as compared to a 5.1 percent increase in the third quarter of 2012.
The company expects to open approximately 20 new Dick's Sporting Goods stores, relocate one Dick's Sporting Goods store and remodel three Dick's Sporting Goods stores in the third quarter of 2013.
The company expects to open one new True Runner store and one new Field & Stream store in the third quarter of 2013.
* Fourth Quarter 2013
Based on an estimated 126 million diluted shares outstanding, the company currently anticipates reporting consolidated earnings per diluted share of approximately $1.04 to 1.07 in the fourth quarter of 2013, compared to fourth quarter 2012 consolidated earnings per diluted share of $1.03. The 14th week in fiscal 2012 contributed approximately $0.03 to earnings per diluted share.
Consolidated same store sales adjusted for the shifted calendar, due to the 53rd week in 2012, are currently expected to increase approximately 3 to 4 percent in the fourth quarter of 2013, or approximately negative 2 to negative 1 percent on an unshifted basis, as compared to a 1.2 percent increase in the fourth quarter of 2012.
The company expects to open approximately eleven new Dick's Sporting Goods stores and remodel one Dick's Sporting Goods store in the fourth quarter of 2013.
The company expects to open approximately one new Field & Stream store in the fourth quarter of 2013.
* Capital Expenditures
In 2013, the company anticipates capital expenditures to be approximately $299 million on a gross basis and approximately $258 million on a net basis.
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES | ||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME – UNAUDITED | ||||||||||||||
(In thousands, except per share data) | ||||||||||||||
13 Weeks Ended | ||||||||||||||
August 3, | % of Sales (1) | July 28, | % of Sales (1) | |||||||||||
Net sales | $ | 1,531,431 | 100.00 | % | $ | 1,437,041 | 100.00 | % | ||||||
Cost of goods sold, including occupancy and distribution costs | 1,052,101 | 68.70 | 989,261 | 68.84 | ||||||||||
GROSS PROFIT | 479,330 | 31.30 | 447,780 | 31.16 | ||||||||||
Selling, general and administrative expenses | 336,950 | 22.00 | 310,864 | 21.63 | ||||||||||
Pre-opening expenses | 5,285 | 0.35 | 2,276 | 0.16 | ||||||||||
INCOME FROM OPERATIONS | 137,095 | 8.95 | 134,640 | 9.37 | ||||||||||
Impairment of available-for-sale investments | – | – | 32,370 | 2.25 | ||||||||||
Interest expense | 716 | 0.05 | 1,000 | 0.07 | ||||||||||
Other (income) expense | (1,735) | (0.11) | 54 | – | ||||||||||
INCOME BEFORE INCOME TAXES | 138,114 | 9.02 | 101,216 | 7.04 | ||||||||||
Provision for income taxes | 53,951 | 3.52 | 47,553 | 3.31 | ||||||||||
NET INCOME | $ | 84,163 | 5.50 | % | $ | 53,663 | 3.73 | % | ||||||
EARNINGS PER COMMON SHARE: | ||||||||||||||
Basic | $ | 0.68 | $ | 0.45 | ||||||||||
Diluted | $ | 0.67 | $ | 0.43 | ||||||||||
WEIGHTED AVERAGE COMMON SHARES | ||||||||||||||
OUTSTANDING: | ||||||||||||||
Basic | 122,901 | 119,928 | ||||||||||||
Diluted | 125,593 | 124,533 | ||||||||||||
