Dick’s Sporting Goods raised its outlook for the year after reporting third-quarter earnings handily topped Wall Street targets.

Highlights include:

  • Consolidated same-store sales for the third quarter increased 6.0 percent, driven by increases in both average ticket and transactions, and represents the company’s strongest quarterly comp sales gain since 2013. Wall Street was expecting comps to expand by 2.9 percent.
  • Company delivered third-quarter 2019 earnings per diluted share of $0.66 and non-GAAP earnings per diluted share of $0.52, up 69 percent and 33 percent respectively versus $0.39 per diluted share in the prior year. The 52 cents a share compared to Wall Street’s consensus estimate of 38 cents.
  • Company raises full-year 2019 earnings per diluted share guidance to $3.63 to 3.73 and raises full-year 2019 non-GAAP earnings per diluted share guidance to $3.50 to 3.60, both up from the previous range of $3.30 to 3.45
  • Company repurchased approximately $100 million of common stock during the third quarter

Third Quarter Results

The company reported consolidated net income for the third quarter ended November 2, 2019, of $57.6 million, or $0.66 per diluted share. The company reported consolidated net income for the third quarter ended November 3, 2018, of $37.8 million, or $0.39 per diluted share.

On a non-GAAP basis, the company reported consolidated net income for the third quarter ended November 2, 2019, of $44.8 million, or $0.52 per diluted share. The 52 cents a share compared to Wall Street’s consensus estimate of 38 cents.

Third-quarter 2019 non-GAAP results exclude the gain on sale of subsidiaries, charges related to the exit of eight Field & Stream stores, and non-cash asset impairment.

Net sales for the third quarter of 2019 increased 5.6 percent to approximately $1.96 billion. Wall Street’s consensus estimate for net sales was $1.92 billion

Consolidated same-store sales increased 6.0 percent. Wall Street was expecting comps on average to expand 2.9 percent.

Third-quarter 2018 consolidated same-store sales decreased 3.9 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 are very pleased with our strong third-quarter results, as we delivered a 6.0 percent comp sales increase and meaningful gross margin expansion. We saw increases in both average ticket and transactions, as well as growth across each of our three primary categories of hardlines, apparel and footwear,” said Edward W. Stack, chairman and chief executive officer. “As we head into the holiday season, we remain very enthusiastic about our business, and we are pleased to increase our full-year sales and earnings outlook for the third time this year.”

Lauren R. Hobart, president, added, “The momentum in our stores continued to build with our focus on service standards, recognition of great results and stronger marketing. Combining this with the successful openings of our new eCommerce fulfillment centers and enhanced website functionality, we continue to build one of the best omnichannel experiences in retail.”

Omni-channel Development

eCommerce sales for the third quarter of 2019 increased 13 percent. eCommerce penetration for the third quarter of 2019 was approximately 13 percent of total net sales, compared to approximately 12 percent during the third quarter of 2018. In the third quarter, the company opened six new Dick’s Sporting Goods stores and one new Golf Galaxy store, completing its 2019 store development program. The company also exited eight Field & Stream stores, which were subleased to Sportsman’s Warehouse, and closed one Golf Galaxy Store. As of November 2, 2019, the company operated 733 Dick’s Sporting Goods stores in 47 states, with approximately 38.8 million square feet, 95 Golf Galaxy stores in 32 states, with approximately 2.0 million square feet, and 27 Field & Stream stores in 16 states, with approximately 1.2 million square feet.

Balance Sheet

The company ended the third quarter of 2019 with approximately $87.6 million in cash and cash equivalents and approximately $719.3 million in outstanding borrowings under its revolving credit facility. Over the course of the last 12 months, the company continued to invest in omnichannel growth, while returning over $495 million to shareholders through share repurchases and quarterly dividends.

Total inventory increased 17.1 percent at the end of the third quarter of 2019 as compared to the end of the third quarter of 2018. This planned increase was due primarily to strategic investments to support key growth categories.

Year-to-Date Results

The company reported consolidated net income for the 39 weeks ended November 2, 2019, of $227.6 million, or $2.53 per diluted share. For the 39 weeks ended November 3, 2018, the company reported consolidated net income of $217.3 million, or $2.18 per diluted share.

On a non-GAAP basis, the company reported consolidated net income for the 39 weeks ended November 2, 2019, of $215.8 million, or $2.39 per diluted share, which excludes the gain on sale of subsidiaries, non-cash asset impairments, charges related to the exit of eight Field and Stream stores, and the favorable settlement of a litigation contingency.

Net sales for the 39 weeks ended November 2, 2019, increased 3.3 percent to approximately $6.14 billion. Consolidated same-store sales increased 3.1 percent. Consolidated same-store sales decreased 3.5 percent for the 39-weeks ended November 3, 2018, adjusted for the calendar shift due to the 53rd week in 2017, which the company believes is the best view of its business.

Capital Allocation

On November 21, 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 December 31, 2019, to stockholders of record at the close of business on December 13, 2019.

During the third quarter of 2019, the company repurchased approximately 2.8 million shares of its common stock at an average cost of $35.07 per share, for a total cost of $99.5 million. Under the five-year share repurchase program authorized by the Board of Directors in March 2016, the company has repurchased approximately $933 million of common stock and has approximately $67 million remaining under the program. On June 12, 2019, the company’s Board of Directors authorized an additional five-year share repurchase program of up to $1 billion of the company’s common stock. The company plans to continue to purchase under the 2016 program until it is exhausted or expired.

Full-Year 2019 Outlook

  • Based on an estimated 89 million average diluted shares outstanding, the company currently projects earnings per diluted share to be approximately $3.63 to 3.73. The company reported earnings per diluted share of $3.24 for the 52 weeks ended February 2, 2019.
  • The company’s earnings per diluted share guidance still include approximately $30 million of net investments in business transformation initiatives.
  • The company’s earnings per diluted share guidance include the expected impact from all tariffs currently in effect, as well as any new tariffs slated to go into effect.
  • The company currently projects non-GAAP earnings per diluted share to be approximately $3.50 to 3.60. Previous guidance called for earnings in the range of $3.30 to 3.45.
  • This excludes the gain on sale of subsidiaries, non-cash asset impairments, charges related to the exit of eight Field & Stream stores, and the favorable settlement of a litigation contingency.
  • The company is continuing the strategic review of its hunt business, including Field & Stream.
  • Consolidated same-store sales are currently expected to increase 2.5 percent to 3 percent, compared to a 3.1 percent decrease in 2018. Previous guidance called for comps to increase low-single digits
  • In 2019, the company still 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