Dick’s Sporting Goods raised its full-year profit outlook after reporting first-quarter earnings that topped analysts’ estimates.
First Quarter Results
The company reported consolidated net income for the first quarter ended May 4, 2019 of $57.5 million, or 61 cents per diluted share. The company reported consolidated net income for the first quarter ended May 5, 2018 of $60.1 million, or 59 cents per diluted share.
On a non-GAAP basis, the company reported consolidated net income for the first quarter ended May 4, 2019 of $58.4 million, or 62 cents per diluted share, which compares to Wall Street’s consensus estimate of 58 cents. First quarter 2019 non-GAAP results exclude a non-cash asset impairment and the settlement of a litigation contingency.
Net sales for the first quarter of 2019 increased 0.6 percent to approximately $1.92 billion compared with Wall Street’s average target of $1.9 billion.
Consolidated same-store sales were flat. First quarter 2018 consolidated same-store sales decreased 2.5 percent, adjusted for the calendar shift due to the 53rd week in fiscal 2017, which the company believes is the best view of its business.
“We were pleased with our start to 2019, delivering higher merchandise margins and first quarter earnings per diluted share above last year. Same-store sales turned positive in March and remained positive in April, as we started to see the benefits of our key strategies and investments,” said Edward W. Stack, chairman and chief executive officer. “We are very enthusiastic about our business and are pleased to increase our full-year earnings outlook.”
“During the first quarter, we made great progress in executing against our strategic priorities and investments as we remain focused on improving the in-store and online experience for our athletes and driving productivity improvements across our business,” added Lauren R. Hobart, president. “As we continue to build the best omnichannel experience in sporting goods, we see significant opportunity to drive competitive advantage in the marketplace and strengthen our leadership position.”
E-commerce sales for the first quarter of 2019 increased 15 percent. eCommerce penetration for the first quarter of 2019 was approximately 13 percent of total net sales, compared to approximately 11 percent during the first quarter of 2018.
In the first quarter, the company opened one new Golf Galaxy store, relocated one Dick’s Sporting Goods store, and closed two Dick’s Sporting Goods stores. As of May 4, 2019, the company operated 727 Dick’s Sporting Goods stores in 47 states, with approximately 38.6 million square feet, 95 Golf Galaxy stores in 32 states, with approximately 2.0 million square feet, and 35 Field & Stream stores in 16 states, with approximately 1.7 million square feet.
The company ended the first quarter of 2019 with approximately $92.4 million in cash and cash equivalents and approximately $369.5 million in outstanding borrowings under its revolving credit facility. Over the course of the last 12 months, the company continued to invest in omni-channel growth, while returning over $414 million to shareholders through share repurchases and quarterly dividends.
Total inventory increased 16.2 percent at the end of the first quarter of 2019 as compared to the end of the first quarter of 2018. This planned increase was due primarily to strategic investments to support key growth categories.
On May 24, 2019, the company’s Board of Directors authorized and declared a quarterly dividend in the amount of $0.275 per share on the company’s Common Stock and Class B Common Stock. The dividend is payable in cash on June 28, 2019 to stockholders of record at the close of business on June 14, 2019.
During the first quarter of 2019, the company repurchased approximately 2.97 million shares of its common stock at an average cost of $36.15 per share, for a total cost of $107.3 million. As of May 4, 2019, the company has approximately $326 million remaining under its authorization that extends through 2021.
During the first three weeks of the second quarter, the company repurchased additional shares of its common stock for a total cost of $78.5 million. As of May 24, 2019, the company has approximately $248 million remaining under its authorization.
Full Year 2019 Outlook
- Based on an estimated 91.5 million diluted shares outstanding, the company currently projects earnings per diluted share to be approximately $3.20 to 3.40. The company’s earnings per diluted share guidance includes approximately $30 million of net investments in business transformation initiatives. Previously, guidance called for earnings in the range of $3.15 to $3.35. The company reported earnings per diluted share of $3.24 for the 52 weeks ended February 2, 2019.
- Consolidated same-store sales are currently expected to be slightly positive to an increase of 2 percent, compared to a 3.1 percent decrease in 2018. The retailer previously guided consolidated same-store sales to be approximately flat to an increase of 2 percent. The company expects to deliver positive consolidated same-store sales beginning in the second quarter.
- The company expects to open seven new Dick’s Sporting Goods stores and relocate three Dick’s Sporting Goods stores in 2019. The company also expects to open two new Golf Galaxy stores and relocate one Golf Galaxy store in 2019. Six of the new stores are expected to open during the third quarter.
- In 2019, the company anticipates capital expenditures to be approximately $230 million on a gross basis and approximately $200 million on a net basis. In 2018, capital expenditures were $198 million on a gross basis and $170 million on a net basis.
Photo courtesy Dick’s Sporting Goods