Dick’s Sporting Goods reported fourth-quarter earnings exceeded Wall Street’s targets. Overall earnings and sales fell in the quarter due to a calendar shift. For the full year, the leading U.S. sporting goods chain predicted consolidated same-store sales to be approximately flat to an increase of 2 percent, with positive consolidated same-store sales beginning in the second quarter.

Fourth Quarter Results (13 weeks compared to 14 weeks last year)

The company reported consolidated net income for the fourth quarter ended February 2, 2019, of $102.6 million, or $1.07 per diluted share, which was negatively impacted by approximately 8 cents per diluted share versus last year due to the shifted calendar. The company reported consolidated net income for the fourth quarter ended February 3, 2018, of $116.0 million, or $1.11 per diluted share, which was positively impacted by approximately 9 cents per diluted share for the 14th week.

On a non-GAAP basis, the company reported consolidated net income for the fourth quarter ended February 3, 2018, of $127.3 million, or $1.22 per diluted share, which was positively impacted by approximately 9 cents per diluted share for the 14th week. Adjusted results came in ahead of Wall Street’s consensus target of $1.06.

Adjusted for the calendar shift due to the 53rd week in fiscal 2017, which the company believes is the best view of its business, consolidated same-store sales decreased 2.2 percent on a 13-week to a 13-week comparable basis. Based on an unshifted calendar, consolidated same-store sales for the fourth quarter decreased 3.7 percent. Fourth quarter 2017 consolidated same-store sales decreased 2.0 percent. Wall Street on average was expecting an unshifted decline of 3.3 percent.

Net sales for the fourth quarter of 2018 decreased 6.5 percent to approximately $2.49 billion, just ahead of Wall Street’s consensus target of $2.48 billion.

“We are pleased with our fourth quarter results. Our core business performed quite well, as our athletes have responded positively to many of our initiatives, resulting in comp sales gains across key categories and double-digit percentage increases in eCommerce and private brand sales,” said Edward W. Stack, chairman and chief executive officer. “For 2018, we delivered earnings near the high end of our expectations, which represents an 8 percent increase over last year. This achievement is the direct result of the hard work and commitment from our over 40,000 talented teammates.”

Stack continued, “As we look forward to 2019, we are enthusiastic about our business and expect to return to positive comp sales beginning in the second quarter. We will continue to make significant investments in our business to meet our athletes’ ever-changing needs and grow our leadership position in the industry.”

“In 2019, we are focused on enhancing our athletes’ experience in our stores, improving our eCommerce fulfillment capabilities and elevating our technology talent and capabilities,” added Lauren R. Hobart, president of Dick’s Sporting Goods. “This is an exciting time for our company as we remain focused on building the best omnichannel experience in sporting goods.”

Omni-channel Development

Adjusted for the calendar shift due to the 53rd week in 2017, eCommerce sales for the fourth quarter of 2018 increased by approximately 17 percent. eCommerce penetration for the fourth quarter of 2018 was approximately 23 percent of total net sales, compared to approximately 19 percent during the fourth quarter of 2017.

In the fourth quarter, the company closed three of Dick’s Sporting Goods stores. As of February 2, 2019, the company operated 729 Dick’s Sporting Goods stores in 47 states, with approximately 38.6 million square feet, 94 Golf Galaxy stores in 32 states, with approximately 1.9 million square feet and 35 Field & Stream stores in 16 states, with approximately 1.7 million square feet.

Balance Sheet

The company ended the fourth quarter of 2018 with approximately $114 million in cash and cash equivalents and no 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 $412 million to shareholders through share repurchases and quarterly dividends.

Total inventory increased 6.6 percent at the end of the fourth quarter of 2018 as compared to the end of the fourth quarter of 2017. This planned increase was due primarily to strategic investments to support key growth categories.

Full Year Results (52 weeks compared to 53 weeks last year)

The company reported consolidated net income for the 52 weeks ended February 2, 2019, of $319.9 million, or $3.24 per diluted share. The company reported consolidated net income for the 53 weeks ended February 3, 2018, of $323.4 million, or $3.01 per diluted share, which included approximately $0.09 per diluted share for the 53rd week.

On a non-GAAP basis, the company reported consolidated net income for the 53 weeks ended February 3, 2018, of $324.3 million, or $3.01 per diluted share, which also included approximately $0.09 per diluted share for the 53rd week.

Adjusted for the calendar shift due to the 53rd week in 2017 consolidated same-store sales decreased 3.1 percent on a 52-week to a 52-week comparable basis. Net sales for the 52 weeks ended February 2, 2019, decreased 1.8 percent from last year’s 53 week period to approximately $8.44 billion. Fiscal 2017 consolidated same-store sales decreased 0.3 percent on a 52-week to 52-week comparative basis.

Capital Allocation

On February 22, 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 March 29, 2019, to stockholders of record at the close of business on March 15, 2019. This dividend represents an increase of approximately 22 percent over the company’s previous quarterly per share amount and is equivalent to an annualized rate of $1.10 per share.

During the fourth quarter of 2018, the company repurchased 957,000 shares of its common stock at an average cost of $35.23 per share, for a total cost of $33.7 million. In total for 2018, the company repurchased approximately 9.6 million shares of its common stock at an average cost of $33.78 per share, for a total cost of $323.4 million, and has approximately $433 million remaining under its authorization that extends through 2021.

Full-Year 2019 Outlook

Based on an estimated 95 million diluted shares outstanding, the company currently projects earnings per diluted share to be approximately $3.15 to 3.35, which includes approximately $30 million, or $0.23 per diluted share, of net investments in business transformation initiatives. The company’s earnings per diluted share guidance include the expectation of share repurchases to fully offset dilution in 2019. 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 approximately flat to an increase of 2 percent, compared to a 3.1 percent decrease in 2018.

Wall Street’s current consensus targets had been for full-year EPS had been $3.34 with same-store sales up 0.5 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.

Image courtesy Dick’s Sporting Goods