Dick's Sporting Goods net income for the second quarter ended July 30, 2005, excluding merger integration and store closing costs and gain on sale of investment, was $24.2 million, or 45 cents per share, as compared to earnings guidance provided on May 17, 2005 of 43 – 45 cents per share. This compares to GAAP net income and earnings per share of $17.9 million and 34 cents, respectively, and proforma, combined company net income and earnings per share of $11.0 million and $0.21, respectively, for the second quarter ended July 31, 2004.
Including after-tax merger integration and store closing costs of $3.2 million, or $0.06 per share, and after-tax gain on sale of investment of $1.1 million, or $0.02 per share, the Company reported net income for the second quarter ended July 30, 2005 of $22.1 million, or $0.41 per share as compared to earnings guidance of $0.37 – $0.39 per share including merger integration and store closing costs.
Total sales for the quarter increased 50% over last year to $622.0 million due to a comparable store sales increase of 0.5%, the opening of new stores, and the inclusion of the former Galyan's operations in this year's quarterly results for the full 13 weeks. The former Galyan's stores will be included in the comparable store base beginning in the second quarter of fiscal 2006.
During the second quarter, the Company opened three stores and relocated one store. The stores that opened in the second quarter include: Toledo, OH, Greenville, SC and Pittsburgh, PA. One of the three new stores was the two- level prototype (Toledo, OH). The relocated store was in Dayton, OH.
As of July 30, 2005, the Company operated 239 stores, with approximately 13.8 million square feet, in 34 states.
“We are pleased to report results at the high end of our earnings guidance. We continued to execute in the second quarter, increasing operating income by 95% over last year's proforma results. Inventory was effectively managed with inventory per square foot decreasing by 3% over last year,” said Edward W. Stack, Chairman & CEO.
Net income for the 26 weeks ended July 30, 2005, excluding merger integration and store closing costs and gain on sale of investment, was $36.3 million, or $0.67 per share. Including after-tax merger integration and store closing costs of $22.7 million, or $0.42 per share, and after-tax gain on sale of investment of $1.1 million, or $0.02 per share, the Company reported net income for the 26 weeks ended July 30, 2005 of $14.8 million, or $0.27 per share. This compares to GAAP net income and earnings per share of $28.5 million and $0.54, respectively, and proforma, combined company net income and earnings per share of $16.1 million and $0.31, respectively, for the 26 weeks ended July 31, 2004.
Total sales for the 26 weeks ended July 30, 2005 increased 53% over last year to $1,192.8. Comparable store sales increased 1.7%.
The conversion, re-merchandising, and grand re-opening of the former Galyan's stores to Dick's stores was completed in the first quarter of 2005. Since the conversion is completed, the former Galyan's stores will be included in the comp store sales base beginning in the second quarter of fiscal 2006.
The Company closed the final store due to the acquisition in the second quarter of 2005.
The Company is lowering expected total merger integration and store closing costs from $70 million to $65 million, of which $37.8 million was incurred in the first two quarters of 2005, and $20.3 million in 2004. The balance of the costs, which relate to future lease payments on closed stores, will be incurred in 2006 and beyond. Merger integration and store closing costs primarily include the expense of closing Dick's stores, advertising the re-branding of Galyan's stores, recruiting, system conversion costs, and duplicative costs such as corporate occupancy.
Full Year 2005
- Earnings guidance is being revised to $1.70 - 1.75 per share, which is
the original guidance provided in the June 21, 2004 press release
announcing the Galyan's acquisition, versus our most recent guidance of
$1.82 - 1.87. This represents an approximate 48% increase over
proforma, combined company earnings per share for the full year 2004 of
$1.17, excluding merger integration and store closing costs and gain on
sale of investment. Including merger integration and store closing
costs, earnings guidance is $1.27 - 1.32 per share. Guidance is based
on an estimated 55 million shares outstanding.
Guidance is being revised due to a sales shortfall to our plan in the
former Galyan's stores. The stores are behaving more similar to a new
Dick's store in a new market, when we had anticipated they would
outperform a new Dick's store. Key business categories, such as golf
and athletic footwear have increased substantially over historic
Galyan's levels, but have performed below our plan. Our ad support for
the former Galyan's stores has not been as aggressive as in the Dick's
stores, which contributed to the sales shortfall while providing
expense savings. The advertising frequency has been less than the
traditional Dick's program, which will change in the third quarter, and
it will be identical to the standard program in the fourth quarter.
- Comparable store sales are expected to increase approximately 2%. The
converted Galyan's stores will be included in the comparable store base
in the second quarter of fiscal 2006, as the re-branding and
re-merchandising effort of all converted Galyan's stores has been
completed as of the end of the first quarter 2005.
- The Company now expects to open 26 new stores in 2005. As of the end
of the second quarter, the Company closed six stores (five Dick's
stores and one Galyan's store) due to overlap, completing that aspect
of the conversion.
- Our 2005 full-year EPS guidance excludes the impact of expensing stock
options as the SEC has amended the compliance date for SFAS 123R. We
are planning to implement the provisions of SFAS 123R beginning in
fiscal 2006.
Third Quarter 2005
- Based on an estimated 55 million shares outstanding, the Company
anticipates EPS for the third quarter of $0.06 - $0.08 per share. This
compares to the third quarter 2004 GAAP net loss per share of $(0.04),
or earnings per share of $0.05, excluding merger integration and store
closing costs.
- Comparable store sales are expected to increase approximately 1-2%.
- The Company expects to open 16 new stores and relocate two stores in
the third quarter.
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(Dollars in thousands, except per share data)
13 Weeks Ended 26 Weeks Ended
------------------ --------------------
July 30, July 31, July 30, July 31,
2005 2004 2005 2004
-------- -------- ---------- --------
Net sales $621,972 $416,135 $1,192,815 $780,342
Cost of goods sold, including
occupancy and distribution
costs 447,556 296,971 866,427 558,420
-------- -------- ---------- --------
GROSS PROFIT 174,416 119,164 326,388 221,922
Selling, general and
administrative expenses 129,449 85,864 255,718 168,031
Pre-opening expenses 1,592 2,443 4,237 5,712
Merger integration and store
closing costs 5,309 52 37,790 52
-------- -------- ---------- --------
INCOME FROM OPERATIONS 38,066 30,805 28,643 48,127
Gain on sale of investment (1,844) - (1,844) -
Interest expense, net 3,079 959 5,875 1,601
Other income - - - (1,000)
-------- -------- ---------- --------
INCOME BEFORE INCOME TAXES 36,831 29,846 24,612 47,526
Provision for income taxes 14,733 11,938 9,845 19,010
-------- -------- ---------- --------
NET INCOME $22,098 $17,908 $14,767 $28,516
======== ======== ========== ========
EARNINGS PER COMMON SHARE:
Basic $0.44 $0.38 $0.30 $0.60
Diluted $0.41 $0.34 $0.27 $0.54
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
Basic 49,750 47,693 49,418 47,503
Diluted 54,115 52,627 53,902 52,506
