Dick’s Sporting Goods Inc. raised the company’s outlook for the year after reporting first-quarter earnings that came in well above Wall Street’s consensus target. Same-store sales dipped 2.5 percent.
First Quarter Results
The company reported consolidated net income for the first quarter ended May 5, 2018 of $60.1 million, or 59 cents per diluted share, well above the consensus estimate of 45 cents. Earnings were essentially flat against adjusted year-ago results.
The company reported consolidated net income for the first quarter ended April 29, 2017 of $58.2 million, or 52 cents per share. On a non-GAAP basis, the company reported consolidated net income for the first quarter ended April 29, 2017 of $60.3 million, or 54 cents per share. First quarter 2017 non-GAAP results excluded costs incurred to convert former The Sports Authority (TSA) stores.
Net sales for the first quarter of 2018 increased 4.6 percent to approximately $1.91 billion, ahead of Wall Street’s consensus target of $1.88 billion.
Adjusted for the calendar shift due to the 53rd week in 2017, consolidated same store sales decreased 2.5 percent on a 13-week to 13-week comparable basis. Based on an unshifted calendar, consolidated same store sales for the first quarter decreased 0.9 percent. Wall Street on average was expecting a 1.5 percent decline.
Consolidated same store sales were impacted by a continued deceleration in hunt and electronics sales, as well as colder spring weather, which resulted in a delayed start to key outdoor sports and activities. First quarter 2017 consolidated same store sales increased 2.4 percent.
“Our strong first quarter earnings reflect improved execution against our merchandising strategy, which resulted in higher merchandise margins. Product newness, strength in our private brands and a more refined assortment led to a much healthier business, with fewer promotions and cleaner inventory throughout the quarter. We believe these benefits will continue as we further optimize our assortments,” said Edward W. Stack, chairman and chief executive officer. “We are also continuing to see the results of investments in our digital experience, and we will continue to invest as we build the best omni-channel experience for all athletes.”
“This is an exciting time for our company, as we focus on driving executional excellence, delivering an improved shopping experience and differentiating ourselves to create a premier omni-channel experience,” added Lauren R. Hobart, president of Dick’s Sporting Goods. “We continue to see significant opportunity to drive competitive marketplace advantage and win with our athletes longer-term.”
Adjusted for the calendar shift due to the 53rd week in 2017, e-commerce sales for the first quarter of 2018 increased 24 percent. E-commerce penetration for the first quarter of 2018 was approximately 11 percent of total net sales, compared to approximately 9 percent during the first quarter of 2017.
In the first quarter, the company opened eight new Dick’s Sporting Goods stores. As of May 5, 2018, the company operated 724 Dick’s Sporting Goods stores in 47 states, with approximately 38.4 million square feet; 94 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.
Store count, square footage and new stores are listed in a table later in the release under the heading “Store Count and Square Footage.”
The company ended the first quarter of 2018 with approximately $105 million in cash and cash equivalents and approximately $280 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 $446 million to shareholders through share repurchases and quarterly dividends.
Total inventory decreased 3.8 percent at the end of the first quarter of 2018 as compared to the end of the first quarter of 2017.
On May 17, 2018, the company’s board of directors authorized and declared a quarterly dividend in the amount of $0.225 per share on the company’s common stock and class B common stock. The dividend is payable in cash on June 29, 2018 to stockholders of record at the close of business on June 8, 2018.
During the first quarter of 2018, the company repurchased approximately 3.3 million shares of its common stock at an average cost of $32.33 per share, for a total cost of $107.9 million. The company has approximately $650 million remaining under its authorization that extends through 2021.
Full Year 2018 Outlook
Based on an estimated 101 million diluted shares outstanding, the company currently anticipates reporting earnings per diluted share in the range of $2.92 to 3.12, compared to the previous range of $2.80 to 3.00. The company’s earnings per diluted share guidance is not dependent upon share repurchases beyond the $107.9 million executed through the first quarter of fiscal 2018. The company reported GAAP and non-GAAP earnings per diluted share of $3.01 for the 53 weeks ended February 3, 2018.
Consolidated same store sales are still expected to be in the range of approximately flat to a low-single-digit decline on a 52-week-to-52-week comparative basis, compared to a decline of 0.3 percent in 2017.
The company expects to open 19 new Dick’s Sporting Goods stores and relocate four Dick’s Sporting Goods stores in 2018. The company does not expect to open any new Field & Stream or Golf Galaxy stores in 2018.
In 2018, the company anticipates net capital expenditures to be approximately $250 million. In 2017, net capital expenditures were $373 million.
Photo courtesy Dick’s Sporting Goods