The sharp increase of the share price of DKS has led to increased exercising of employee stock options that drove total shares outstanding to an estimated 25.5 million shares for Q3, up from 23.0 million shares earlier in the year. Total year shares outstanding for computing EPS are now forecasted at 25.1 million shares, up 5% from a previous forecast of 24.6 million shares.
The increase was a surprise to the “street”, sending shares down 7.2% for the week to close at $35.69 on Friday.
Comparable store sales improved as the quarter progressed, reflecting strength in Water Sports, Womens Apparel, Exercise and Team Sports offset by weaker comps in Inline Skates, Bikes and Fishing Tackle.
Sales of Private Label product was up 136% to $37.3 million, or 10.6% of sales, versus just 5.1% in the year-ago period. Dicks appears to be moving Private Label quickly towards the previously-stated goal of 15% of total sales and said that PL is now being developed in all categories.
DKS said Q4 gross margin will be tougher to beat because they must anniversary the “perfect winter” of last year. Management was applauded by one analyst for not mentioning the weather, but did admit that the quarter was more promotional and had to increase marketing expense to “maintain market share”.
Management said the average ticket remains consistent at “around $50”, indicating the comp sales increase came from better traffic and increased purchases.
Looking ahead, Dick's expects Q3 pro forma earnings to increase in the 31% to 48% range, to $3.8 million to $4.3 million. The resulting 15 cents to 17 cents a share is in line with analysts estimates of 16 cents.
DKS reiterated full-year guidance of $1.95 a share, while net income is seen increasing to $49.0 million versus the previous guidance of $48.0 million. Based on current sales levels, DKS anticipates total year comparable store sales to increase 1% to 2%.
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