Shares of Dick’s Sporting Goods Inc. surged 15.4% for the week after DKS issued a report Monday raising earnings expectations for the Pittsburgh-based retailer. Strong comp store gains – up 4.9% in the quarter ending February 1, 2003 – coupled with stronger-than-expected margins drove heavy trading — 10x average — pushing the stock up as much as 24% the day following the positive release.
DKS raised its Q4 EPS forecast to 80 cents to 81 cents, up from a prior forecast of 63 cents to 64 cents a share. Net sales rose 16.1% to $395.2 million.
DKS closed Friday at $20.77, up 66% since its IPO in September and up 8.2% since January 1st.
The DKS announcement was clearly compared to expectations and reports from other full-line sporting goods retailers, sending some lower for the week.
“They raised their forecast for the fourth quarter very significantly,” said Bob Simonson, analyst with William Blair & Co., “And it’s in fairly sharp contrast to their competitors, who have reported that sales did not come through as anticipated.”
Douglas Neviera, a retail analyst at Merrill Lynch said that the better-then-expected results at Dick’s showed the chain was siphoning market share from others. The analyst wrote in a research note that “…Dick’s is driving solid comp results by taking (market) share in both new and existing markets through its preferred shopping format and top-notch customer service.”
The Sports Authority Inc. cut its earnings forecast for the fourth quarter on Jan. 30, citing soft holiday sales.
Gary Balter, an analyst for Credit Suisse First Boston, set a new 12-month stock price target of $27, citing “better service than its competitors” and an expansion rate it can support.
Overall, the channel has suffered this year amid tough retail sales and persistent consolidation rumors. The following chart outlines share price increase/decrease for this week and the year-to-date. The Specialty Index also includes Athletic Specialty retail.
In other news related to Dicks, Microsoft co-founder Paul Allen reported holding a 9.5% stake in the retailer through his Vulcan Ventures investment vehicle. As of December 31, 2002, Allen beneficially owned 1.1 million of DKS common shares, according to the filing.
In a filing in July prior to its IPO, Dicks reported Vulcan owned 892,109 shares for a 12.25% stake in DKS.
Additionally, DKS revealed in its revised guidance that it was taking a $2.4 million charge against its non-cash investment in GSI Commerce, DKSs e-commerce partner, due to a decline in the value of GSIC shares. The charge, included in its revision, will have a six cents per share after-tax effect.
