Dick’s Sporting Goods reported net income for the third quarter ended October 30, 2004, excluding merger integration and store closing costs, of $2.9 million, or 5 cents per diluted share as compared to earnings guidance of 3 – 4 cents per diluted share before merger costs.
Including merger integration and store closing costs, the Company reported a net loss for the third quarter ended October 30, 2004 of $1.8 million or $(0.04) per diluted share as compared to net income of $4.7 million, and earnings per share of $0.09 per diluted share for the third quarter ended November 1, 2003.
Total sales for the quarter increased 60% over last year to $541.0 million due to a comparable store sales increase of 1.5%, the opening of new stores and the inclusion of Galyan’s operations in this year’s quarterly results. Galyan’s stores will not be included in the comparable store base until 13 months after the completion of the re-branding and re-merchandising effort expected to occur by the end of the first half of 2005.
As noted in our press release dated July 29, 2004, the Company acquired 100% of the issued and outstanding common stock of Galyan’s Trading Company, Inc. for $16.75 per share in cash. The Consolidated Statements of Operations for the 13 weeks ended October 30, 2004 reflect the results of the combined company for the entire 13 weeks whereas the results for the 39 weeks ended October 30, 2004 reflect the results of Dick’s Sporting Goods on a stand-alone basis from February 1, 2004 to July 28, 2004 and the combined company from the acquisition date of July 29, 2004 to October 30, 2004. Prior year results include Dick’s Sporting Goods, Inc. on a stand-alone basis.
“Dick’s associates rose to another challenge as strong performance was posted while opening 14 new stores and making good progress on the conversion of Galyan’s which was purchased only 3 months ago,” said Edward W. Stack, Chairman and CEO. “We have re-signed 16 former Galyan’s stores as Dick’s Sporting Goods to begin leveraging advertising in overlap markets and we have begun to synchronize the assortments,” he added.
Galyan’s Conversion
The Company announced its intention to close nine stores in conjunction with the conversion, six Dick’s stores (one of which closes in 2005) and three Galyan’s stores. In addition, two Dick’s stores closed during the third quarter, one due to its being replaced by a new store which opened last year and the second due to performance.
The Company also announced it expects total merger integration and store closing costs of approximately $70 million pre-tax to be incurred of which $7.7 million was incurred in the third quarter. The Company estimates future merger costs of $35 million in the fourth quarter of 2004, $17 million in 2005 with the balance in 2006 and beyond, which relates to future lease payments on closed stores. Merger integration and store closing costs include the expense of closing stores, advertising the re-branding of Galyan’s stores, duplicative costs, recruiting and system conversion costs.
Third Quarter Store Openings and Closings
During the third quarter, the Company opened 14 new stores and closed two stores, bringing the year-to-date net new store openings to 22 (including one Galyan’s store). The new stores that opened included two stores opened as Dick’s Sporting Goods stores that had previously been planned to open as Galyan’s stores. One store, in Algonquin, IL in the Chicago market, opened as a Galyan’s store. This store will be converted along with the other Chicago stores in 2005.
The stores that opened in the third quarter include: Enfield and Meriden, CT (the 4th and 5th stores in Hartford); Bangor, ME; Pottstown, PA (the 13th store in the Philadelphia/Southern New Jersey market); our 2nd store in Fort Wayne, IN; Lafayette, IN; Algonquin, IL (the 7th store in Chicago); our 7th store in Charlotte, NC; two stores in Madison, WI; Carmel, IN (our 5th store in Indianapolis); Westlake, OH and North Olmsted, OH (the 7th and 8th stores in Cleveland) and Muskegon, MI. Two Dick’s stores were closed, one in Philadelphia, PA and another in Cleveland, OH.
As of October 30, 2004, Dick’s Sporting Goods, Inc. operated 233 stores, with approximately 13.4 million square feet, in 32 states.
Year-to-date Results
Net income for the 39 weeks ended October 30, 2004 was $27.0 million, or $0.51 per diluted share as compared to net income of $26.8 million, or $0.54 per diluted share for the 39 weeks ended November 1, 2003.
Excluding merger integration and store closing costs of $4.7 million after tax, net income for the 39 weeks ended October 30, 2004 was $31.7 million, or $0.60 per diluted share.
Total sales for the 39 weeks ended October 30, 2004 increased 33% to $1,321.4 million. Comparable store sales increased 3.0%. Galyan’s stores will not be included in the comparable store base until 13 months after the completion of the re-branding and re-merchandising effort expected to occur by the end of the first half of 2005.
Earnings Guidance
Full Year 2004
- Based on an estimated 53 million diluted shares outstanding, the
Company anticipates reporting EPS for the full year of $1.37 - 1.39 per
diluted share excluding merger integration and store closing costs.
Most recent guidance had been $1.35 - 1.37. The Company anticipates
reporting $0.89 - 0.91 per diluted share including merger integration
and store closing costs. This compares to full year 2003 EPS of $1.05.
- Comparable store sales are expected to be approximately 2-3%. Galyan's
stores will not be included in the comparable store base until 13
months after the completion of the re-branding and re-merchandising
effort expected to occur by the end of the first half of 2005.
- The Company now expects to open 29 new stores this year while closing
10 stores (seven Dick's stores and three Galyan's).
Full Year 2005
- Earnings per share is anticipated to be in the range of $1.79 - 1.84
for the full year of 2005 excluding merger integration and store
closing costs. Including these merger costs, earnings per share is
anticipated to be in the range of $1.60 - 1.65.
- 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.
- The Company expects to open at least 20 new stores in 2005, an increase
from earlier guidance.
Fourth Quarter 2004
- Based on an estimated 53 million diluted shares outstanding, the
Company anticipates EPS for the fourth quarter of $0.77 - 0.78 per
diluted share excluding merger integration and store closing costs of
$35 million. The Company anticipates reporting $0.37 - 0.38 per
diluted share including merger integration and store closing costs.
This compares to fourth quarter 2003 EPS of $0.50.
- Comparable store sales are expected to increase 1-2%. Galyan's
stores will not be included in the comparable store base until 13
months after the completion of the re-branding and re-merchandising
effort expected to occur by the end of the first half of 2005.
- The Company expects to open five new stores in the fourth quarter, all
of which have opened, and close eight of the nine stores described
earlier in this release.
DICK's SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(In thousands, except per share data)13 Weeks Ended 39 Weeks Ended
-------------------- --------------------
Oct. 30, Nov. 1, Oct. 30, Nov. 1,
2004 2003 2004 2003
--------- --------- ---------- ----------Net sales $541,009 $338,164 $1,321,351 $996,413
Cost of goods sold, including
occupancy and distribution
costs 402,848 249,325 961,431 728,179GROSS PROFIT 138,161 88,839 359,920 268,234
Selling, general and
administrative expenses 124,832 80,210 292,863 219,295Pre-opening expenses 5,101 2,594 10,200 6,212
Merger integration and store
closing costs 7,742 - 7,793 -
--------- --------- ---------- ----------INCOME FROM OPERATIONS 486 6,035 49,064 42,727
Gain on sale of investment - 2,324 - 3,536
Interest expense, net 3,455 504 5,057 1,545
Other income - - 1,000 -
--------- --------- ---------- ----------INCOME (LOSS) BEFORE INCOME
TAXES (2,969) 7,855 45,007 44,718(Benefit) Provision for income
taxes (1,188) 3,142 18,003 17,887
--------- --------- ---------- ----------NET INCOME (LOSS) $(1,781) $4,713 $27,004 $26,831
========== ======== ========== ==========EARNINGS PER COMMON SHARE:
Basic $(0.04) $0.10 $0.57 $0.61
Diluted $(0.04) $0.09 $0.51 $0.54WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
Basic 48,251 46,430 47,755 44,062
Diluted 48,251 51,168 52,731 49,854
