Dick's Sporting Goods, Inc. reported that net income for the second quarter ended July 31, 2004 increased 16% to $17.9 million, or 34 cents per diluted share, compared to net income of $15.5 million, or 31 cents per diluted share, in the year-ago period. Operating income increased 23% for the period. Total sales for the quarter increased 18% to $416.1 million. Comparable store sales increased 2.9% versus Q2 2003.
The second quarter 2004 results include $1.2 million of pre-tax store relocation expense, while the prior year's second quarter includes a $1.2 million pre-tax gain on sale of investment. Adjusting for these two items, earnings per share increased 21%, from $0.29 per diluted share to $0.35 per diluted share.
Near the end of the quarter, Dick's acquired 100% of the issued and outstanding common stock of Galyan's Trading Company, Inc. for $16.75 per share in cash. The Condensed Consolidated Statements of Income for the 13 and 26 weeks ended July 31, 2004 reflect the results of the combined company for the three days from the acquisition date of July 29, 2004. The operating results for the three days Galyan's was owned were insignificant. Prior year results include Dick's Sporting Goods, Inc. on a stand-alone basis.
“We are pleased to have delivered such a solid quarter, which is yet another quarter with double-digit earnings growth, comp store sales gains, and sound inventory metrics, while negotiating, financing and closing the Galyan's acquisition,” said Edward W. Stack, Chairman and CEO.
During the second quarter, the Company opened four new stores and relocated three stores. The four stores had previously been expected to open at the beginning of the third quarter. Two of these stores were in new markets: One in Springfield, IL and one in Steubenville, OH. Two of the stores opened were in existing markets: Cincinnati, OH (the seventh store in the Cincinnati market) and Glens Falls, NY (the fourth store in the Albany market). These new stores opened during the last two weeks of the quarter. The relocated stores were in Kansas City, MO, Harrisburg, PA and Raleigh, NC. As of July 31, 2004, the Company operated 173 Dick's stores (approximately 8.5 million square feet) in 27 states and 48 Galyan's stores (approximately 4.2 million square feet) in 21 states. On a consolidated basis Dick's Sporting Goods, Inc. operated 221 stores (approximately 12.7 million square feet) in 32 states.
Net income for the 26 weeks ended July 31, 2004 increased 30% to $28.8 million and earnings per share increased 22% to $0.55 per diluted share as compared to net income of $22.1 million and earnings per share of $0.45 per diluted share for the 26 weeks ended August 2, 2003. Total sales for the 26 weeks ended July 31, 2004 increased 19% to $780.3 million. Comparable store sales increased 3.8%.
Based on an estimated 53 million fully-diluted shares outstanding, the company anticipates reporting EPS for the full year of $1.35 – 1.37 per diluted share, which includes EPS of $0.06 from the operations of Galyan's and excludes merger, integration and store closing costs.
This is an increase from the guidance provided on June 21, 2004 of $1.28 – $1.30 and compares to the full year 2003 EPS of $1.05.
Full year net income is expected to approximate $71.7 million, which includes income of $3.5 million from the operations of Galyan's and excludes merger, integration and store closing charges. This compares to full year 2003 net income of $52.8 million. Comparable store sales are expected to be approximately 2-3%. Galyan's stores are not included in the comparable store base until 13 months after the completion of the re-branding and re-merchandising effort expected to occur during the first half of 2005.
The Company now expects to open 28 stores this year. Prior guidance of 25 stores is being increased to include three stores that were to have opened as Galyan's.
For full year 2005, earnings per share is anticipated to be in the range of $1.77 – $1.82 for the full year of 2005. This is an increase from the guidance provided on June 21, 2004 of $1.70 – $1.75. These estimates include savings and synergies from the Galyan's acquisition and exclude any merger, integration and store closing costs.
Beginning in fiscal 2005, the Company anticipates there will be approximately $20 million of annualized cost savings and merchandise buying improvements that will result from the acquisition of Galyan's.
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(In thousands, except per share data)
13 Weeks Ended 26 Weeks Ended
------------------ ------------------
July 31, August 2, July 31, August 2,
2004 2003 2004 2003
-------- -------- -------- --------
Net sales $416,135 $353,521 $780,342 $658,249
Cost of goods sold, including
occupancy and distribution costs 297,055 256,973 558,583 478,854
-------- -------- -------- --------
GROSS PROFIT 119,080 96,548 221,759 179,395
Selling, general and
administrative expenses 85,864 70,284 168,031 139,085
Acquisition, integration and store
closing costs 52 - 52 -
Pre-opening expenses 2,357 1,162 5,099 3,619
-------- -------- -------- --------
INCOME FROM OPERATIONS 30,807 25,102 48,577 36,691
Gain on sale of investment - (1,212) - (1,212)
Interest expense, net 959 535 1,601 1,040
Other income - - (1,000) -
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 29,848 25,779 47,976 36,863
Provision for income taxes 11,939 10,312 19,190 14,745
-------- -------- -------- --------
NET INCOME $17,909 $15,467 $28,786 $22,118
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EARNINGS PER COMMON SHARE:
Basic $0.38 $0.35 $0.61 $0.52
Diluted $0.34 $0.31 $0.55 $0.45
