Dick's Sporting Goods, Inc. consolidated same-store sales declined 6.0% for the fiscal first quarter ended May 2, besting the company's own estimate for a 12% to 9% decline for the period. Net sales for the quarter increased by 5.2% to $959.7 million, due primarily to the opening of new stores and the addition of e-commerce sales, partially offset by a 6.0% decrease in comparable store sales. The 6.0% consolidated same-store sales decline consisted of a 4.6% decrease in Dick's Sporting Goods stores and a 19.7% decline in the Golf Galaxy stores.

The retailer, which also owns Golf Galaxy and Chick's Sporting Goods, saw net income fall nearly 49% for the quarter to $10.2 million, or 9 cents per diluted share, which includes a $1.1 million tax expense reduction related to the resolution of a tax audit of a prior fiscal year. This compares to net income of $19.6 million, or 9 cents per diluted share, in the year-ago quarter.
 
On a GAAP basis, the company reported net income for the first quarter ended May 2, 2009 of $10.2 million For the first quarter ended May 3, 2008, net income and earnings per diluted share were $19.6 million and 17 cents, respectively.
 
Non-GAAP net income for the first quarter ended May 2 was $12.8 million, or 11 cents per diluted share. Non-GAAP earnings exclude costs related to the Chick's Sporting Goods integration. The first quarter earnings per diluted share exceeded estimated earnings expectations provided on March 10, 2009 of 3 cents to 8 cents per diluted share.
 
Inventory per square foot declined 9.7% at the end of the first quarter of 2009 compared to the end of the first quarter of 2008.

“We are pleased to have generated better than expected same store sales and earnings results in the first quarter. Considering the continued difficult macro economic environment, our associates have done a great job growing the business while controlling expenses and managing inventory. We have a strong balance sheet, and in 2009 we expect to generate positive net operating cash flow in excess of what was generated last year,” said Edward W. Stack, Chairman and CEO.

Integrations

Costs related to the merger and integration of Chick's Sporting Goods were $4.4 million in the first quarter. Merger and integration costs include duplicative administration costs, management and advertising expenses associated with the store conversions and severance. In the first quarter, the company completed the conversion of one Chick's Sporting Goods store to a Dick's Sporting Goods store. The remaining planned Chick's Sporting Goods store conversions have been completed in the second quarter of 2009.

New Stores

In the first quarter, the company opened nine Dick's Sporting Goods stores and one Golf Galaxy store. Also, one Chick's Sporting Goods store was converted to a Dick's Sporting Goods store.

As of May 2, 2009, the company operated 394 Dick's Sporting Goods stores in 39 states, with approximately 22.0 million square feet, 91 Golf Galaxy stores in 31 states, with approximately 1.5 million square feet, and 13 Chick's Sporting Goods stores in California, with approximately 0.6 million square feet.

Balance Sheet

Long term debt declined by $171.7 million from the end of the first quarter of 2008 to the end of the first quarter of 2009 due to the repayment of $172.5 million for the company's senior convertible notes in the first quarter of this year. The inventory per square foot was 9.7% less at the end of the first quarter 2009 as compared to the end of the first quarter 2008.

Current 2009 Outlook

The company believes that the remainder of the year will continue to be challenging. However, based on the first quarter results and the Company's expectations for the second quarter, it is raising the low end of its annual earnings estimates and increasing the expected same store sales for 2009.

Full Year 2009

Based on an estimated 116 million diluted shares outstanding, the company currently anticipates reporting non-GAAP consolidated earnings per diluted share of approximately 88 cents to $1.00, excluding merger and integration costs. For the full year 2008, the company reported consolidated earnings per diluted share of $1.15, excluding a non-cash impairment charge and merger and integration costs.
 
On a GAAP basis, the company is anticipating reporting consolidated earnings per diluted share of approximately 85 cents to 97 cents in 2009, compared to a net loss of 36 cents per diluted share in 2008.
 
Comparable store sales are expected to decrease approximately 9% to 6% compared to a 4.8% decrease in 2008. The comparable store sales calculation for the full year 2009 includes Dick's Sporting Goods stores and Golf Galaxy stores. The comparable store sales calculation for the full year 2008 includes Dick's Sporting Goods stores only.
 
The company currently expects to open approximately 20 new Dick's Sporting Goods stores, relocate one Dick's Sporting Goods store and open one new Golf Galaxy store. The Company anticipates closing two Chick's Sporting Goods stores and converting the remaining Chick's Sporting Goods stores to Dick's Sporting Goods stores.

Second Quarter 2009

Based on an estimated 116 million diluted shares outstanding, the company anticipates reporting non-GAAP consolidated earnings per diluted share of approximately 28 cents to 31 cents in the second quarter of 2009, excluding merger and integration costs. In the second quarter of 2008, the company reported non-GAAP earnings per diluted share of 38 cents, excluding merger and integration costs. 

On a GAAP basis, the company anticipates reporting consolidated earnings per diluted share of approximately 27 cents to 30 cents in the second quarter of 2009 compared to consolidated earnings per diluted share of 34 cents in the second quarter of 2008.
 
Comparable store sales are expected to decrease approximately 9% to 6% compared to a 3.7% decrease in the second quarter last year. The comparable store sales calculation for the second quarter in 2008 and 2009 includes Dick's Sporting Goods stores and Golf Galaxy stores.
 
The company expects to open approximately four new Dick's Sporting Goods stores in the second quarter.
 
The company has already converted the remaining Chick's Sporting Goods stores to Dick's Sporting Goods stores in May.

Cash Flow

In 2009, the company anticipates producing positive operating cash flow, net of capital expenditures, in excess of that generated in 2008. This is expected to be accomplished through continued effective inventory management and the anticipated reduction of net capital expenditures to $60 million in 2009 as compared to $115 million in 2008.
New Accounting Pronouncement

In May 2008, the FASB issued FSP APB 14-1, which impacts the accounting treatment for convertible debt instruments that allow for either mandatory or optional cash settlements. FSP APB 14-1 impacted the accounting associated with the company's senior convertible notes. This FSP requires the company to recognize additional non-cash interest expense based on the market rate for similar debt instruments without the conversion feature. FSP APB 14-1 is effective for fiscal periods beginning in 2009 and requires retrospective application. The company adopted this accounting standard this quarter, and, accordingly, the prior periods' financial statements included herein have been adjusted. Adoption of this standard reduced previously reported earnings per diluted share for the first quarter and full year fiscal 2008 by 1 cent and 4 cents, respectively.

In the first quarter of 2009, the company repaid the senior convertible notes and thus the effect of the adoption of FSP APB 14-1 is not material for fiscal 2009 but is considered in the 2009 outlook.

      DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
                  (In thousands, except per share data)

                                                    13 Weeks Ended
                                          -----------------------------------
                                            May 2,  % of    May 3,    % of
                                             2009  Sales(1)  2008     Sales
                                          -------- ------- -------- ---------
                                                           Adjusted
    Net sales                             $959,662 100.00% $912,112  100.00%
      Cost of goods sold, including
       occupancy and distribution costs    709,239  73.91   653,006   71.59
                                          -------- ------- -------- ---------
        GROSS PROFIT                       250,423  26.09   259,106   28.41
      Selling, general and administrative
       expenses                            226,123  23.56   219,964   24.12
    Merger and integration costs             4,354   0.45         -       -
    Pre-opening expenses                     3,029   0.32     4,924    0.54
                                          -------- ------- -------- ---------
        INCOME FROM OPERATIONS              16,917   1.76    34,218    3.75
    Gain on sale of asset                        -      -    (2,356)  (0.26)
    Interest expense, net                    1,591   0.17     3,608    0.40
                                          -------- ------- -------- ---------
        INCOME BEFORE INCOME TAXES          15,326   1.60    32,966    3.61
    Provision for income taxes               5,105   0.53    13,361    1.46
                                          -------- ------- -------- ---------
        NET INCOME                         $10,221   1.07%  $19,605    2.15%
                                          ======== ======= ======== =========
    EARNINGS PER COMMON SHARE:
      Basic                                  $0.09            $0.18
      Diluted                                $0.09            $0.17

    (1) Column does not add due to rounding