Dicks Sporting Goods looks to be quite pleased with their entry into the Indianapolis market, the hometown of rival Galyans Trading Company. The retailer also continues to look south as it soon enters the former home state of its chief competitor, The Sports Authority, establishing a foothold in Florida with a Jacksonville store later this year. DKS has also seen some good results in its larger two-story test locations and will add two more of the format in the second quarter, relocating two existing smaller stores to the two floor model.
DKS said the 4.6% comp store sales gain in Q1 was against an easier comparison from a year-ago when weather negatively impacted sales. On a category basis, the retailer reported “favorable results” in athletic footwear, paintball, golf, team sports, and “all segments of apparel”. Nike Shox, Asics, and Saucony were called out on the footwear side and Under Armour was again the focus in apparel. In-line skates continued to be a drag on sales, along with hunting and bikes. Private label sales were 9.6% of sales in the period versus 7.0% in Q1 last year.
Private label helped in the 100 basis points improvement in the quarter that was said to be due largely to expansion of merchandise margin, a shift of about $1.3 million from vendor co-op advertising, and the leveraging of store occupancy and distribution expenses, which were “offset somewhat” by higher transportation costs. Private label margins are on average about 800 basis points higher than the company average.
Asked about the impact of the TSA renovations in the northeast, CEO Dick Stack said he saw “no impact on Dicks results from the TSA remodels.” Commenting on their entry into Indianapolis, Stack said they ran ads in the market thanking the city for Dicks “Best Grand Opening Ever”. Regarding the impact that retailers like Gander, Bass Pro, and Cabelas have on the Hunt/Fish/Camp business, Stack said they usually see an impact in year one sales, but “comp positively after that”.
DKS did say that they felt the product assortment had “moved away a bit” from the enthusiast hunter and have now added more higher-end product to the mix which they said they had “abdicated to the specialty retailers”. Results to-date were seen as “positive”.
Dicks ended the quarter with inventory per square foot down 2.6%. They also ended the first quarter with $221 million in cash and liquid investments and no outstanding borrowings. They retailer saw $1 million upside to operating income in connection with the Bobs Stores auction.
For the second quarter, Dicks sees earnings increasing 3% to 6% to a range of 32 cents to 33 cents per share on a 2% to 3% comp store sales increase. Last years Q2 saw a two cent benefit from sales of GSI Commerce stock. Excluding that gain, Q2 EPS would increase “about 17%” and net income would grow “about 20%”. Net income for Q2 is forecast in the $16.8 million to $17.2 million range, up 8% to 11% from $15.5 million in the year-ago period.
Dicks increased earnings guidance for the full year to a range of $1.27 to $1.28 per share, or a 21% to 22% increase from last year and a three cent increase from previous guidance. Net income for the full year is seen increasing 28% to 29%, or a range of $67.6 million to $68.1 million, on a 3.0% increase in comp sales.
DKS shares were down 4.4% for the week to close at $25.35 on Friday as investors focused on the conservative Q2 forecast rather than the increased estimates for the year.
>>> Word on the street is that the new Dicks store in Castleton IN, just a Walter Hagen chip shot away from one of Galyans best stores, will be the number one store in the Dicks portfolio
