Dick’s Sporting Goods strongly raised its guidance for 2021 after reporting second-quarter earnings that came in well above Wall Street targets. Sales in the quarter increased 20.7 percent compared to the second quarter of 2020 and increased 45.0 percent compared to the second quarter of 2019.

The company also announced a special dividend of $5.50 per share, a 21 percent increase in its quarterly dividend to $0.4375 per share and an increase in its planned share repurchases to a minimum of $400 million.

Second Quarter Results

  • Net sales for the second quarter of 2021 were $3.27 billion, an increase of 20.7 percent compared to the second quarter of 2020 and a 45.0 percent increase compared to the second quarter of 2019. Wall Street’s consensus estimate had been$2.84 billion.
  • Consolidated same-store sales for the second quarter of 2021 increased 19.2 percent, which followed consolidated same-store sales increases of 20.7 percent in the second quarter of 2020 and 3.2 percent in the second quarter of 2019. E-commerce sales increased 111 percent compared to the second quarter of 2019 and as planned, decreased 28 percent compared to the second quarter of 2020, which included a period of temporary store closures. E-commerce penetration has grown from 12 percent of total net sales in the second quarter of 2019 to 18 percent for the second quarter of 2021. E-commerce penetration was approximately 30 percent in the second quarter of 2020.
  • Driven by strong sales and gross margin rate expansion, the company reported consolidated net income for the second quarter ended July 31, 2021 of $495.5 million, or $4.53 per diluted share. The company reported consolidated net income for the second quarter ended August 1, 2020 of $276.8 million, or $3.12 per diluted share, which included approximately $14 million of pre-tax expenses in response to COVID-19. The company reported consolidated net income for the second quarter ended August 3, 2019 of $112.5 million, or $1.26 per diluted share.
  • On a non-GAAP basis, the company reported consolidated net income for the quarter ended July 31, 2021 of $501.2 million, or $5.08 per diluted share, compared to consolidated net income of $281.7 million, or $3.21 per diluted share, for the quarter ended August 1, 2020. Wall Street’s consensus estimate had been $2.80. Non-GAAP consolidated net income excluded non-cash amortization of the debt discount associated with the company’s convertible senior notes and included the share impact of the convertible note hedge purchased by the company, which is anti-dilutive for GAAP purposes, for the quarters ended July 31, 2021, and August 1, 2020. There were no non-GAAP adjustments during the quarter ended August 3, 2019.

“We said 2021 was going to be the most transformational year in our history, and so far, it certainly has been. We continue to perform at a very high level and invest in our future to reimagine the athlete experience in our core business and with new concepts,” said Ed Stack, executive chairman. “I am very pleased with the strength of our business and confident about our growth opportunities.”

“Our record-breaking quarterly sales and earnings significantly exceeded our expectations, reflecting continued strong consumer demand across our diverse category portfolio along with the strength of our omnichannel offering and elevated athlete experience. I’d like to thank all our teammates for how they delivered against our core strategies and for their commitment to Dick’s Sporting Goods, which helped make this performance possible,” said Lauren Hobart, president and chief executive officer. “Based on the strength of our business and our expectations for continued strong consumer demand, we are pleased to increase our full year sales and earnings outlook for the second time this year.”

Balance Sheet

  • The company ended the second quarter of 2021 with approximately $2.24 billion in cash and cash equivalents and no outstanding borrowings under its $1.855 billion revolving credit facility.
  • Total inventory increased 7.2 percent at the end of the second quarter of 2021 compared to the end of the second quarter of 2020.

Year-to-Date Results

  • Net sales for the 26 weeks ended July 31, 2021 were $6.19 billion, an increase of 53 percent compared to the 26 weeks ended August 1, 2020 and a 48 percent increase compared to the 26 weeks ended August 3, 2019. Consolidated same-store sales for the 26 weeks ended July 31, 2021 increased 51 percent compared to the 2020 period, which followed a consolidated same-store sales decrease of 2.3 percent for the 2020 period and a 1.7 percent increase for the 2019 period. eCommerce sales increased 124 percent compared to the 26 weeks ended August 3, 2019, and as planned, eCommerce sales decreased 12 percent compared to the 26 weeks ended August 1, 2020, which included a period of temporary store closures in March, April and May. eCommerce penetration has grown from 12 percent of total net sales in the 2019 period to 19 percent in the 2021 period. eCommerce penetration was approximately 33 percent in the 26 weeks ended August 1, 2020.
  • Driven by strong sales and gross margin rate expansion, the company reported consolidated net income for the 26 weeks ended July 31, 2021 of $857.3 million, or $7.96 per diluted share, compared to consolidated net income for the 26 weeks ended August 1, 2020 of $133.4 million, or $1.53 per diluted share. The company incurred approximately $15 million of pre-tax incremental safety costs in response to COVID-19 during the 26 weeks ended July 31, 2021. During last year’s period, the company incurred approximately $76 million of pre-tax expenses in response to COVID-19. The company reported consolidated net income for the 26 weeks ended August 3, 2019 of $170.1 million, or $1.85 per diluted share.
  • On a non-GAAP basis, the company reported consolidated net income of $868.3 million, or $8.89 per diluted share, for the 26 weeks ended July 31, 2021, and consolidated net income of $139.1 million, or $1.60 per diluted share, for the 26 weeks ended August 1, 2020. Non-GAAP consolidated net income excluded non-cash amortization of the debt discount associated with the company’s convertible senior notes and included the share impact of the convertible note hedge purchased by the company, which is anti-dilutive for GAAP purposes, for the periods ended July 31, 2021 and August 1, 2020. For the 26 weeks ended August 3, 2019, the company reported a consolidated net income of $171.0 million, or $1.86 per diluted share, which excluded a non-cash asset impairment and the favorable settlement of a litigation contingency.

Capital Allocation
The company announces enhancements to its 2021 capital allocation plan, including a special dividend of $5.50 per share, a 21 percent increase in its quarterly dividend to $0.4375 per share and an increase in its planned share repurchases to a minimum of $400 million.

“This additional cash return to our shareholders demonstrates the confidence we have in our business, the strength of our balance sheet and a commitment to efficiently deploy our cash,” said Hobart. “We continue to remain firmly committed to investing in the profitable growth of our core business.”

On August 19, 2021, the company’s Board of Directors authorized and declared a special dividend in the amount of $5.50 per share on the company’s Common Stock and Class B Common Stock, which will return over $475 million to shareholders and is expected to be funded from the company’s cash on hand. The dividend is payable in cash on September 24, 2021 to stockholders of record at the close of business on September 10, 2021.

Also on August 19, 2021, the company’s Board of Directors authorized and declared a quarterly dividend in the amount of $0.4375 per share on the company’s Common Stock and Class B Common Stock. The dividend is payable in cash on September 24, 2021 to stockholders of record at the close of business on September 10, 2021. This dividend represents an increase of 21 percent over the company’s previous quarterly amount per share and is equivalent to $1.75 per share on an annualized basis.

The company now expects to repurchase a minimum of $400 million of its common stock during 2021, an increase of $200 million from its prior guidance. During the second quarter of 2021, the company repurchased 0.8 million shares of its common stock at an average price of $93.84 per share, for a total cost of $75.8 million. For the 26 weeks ended July 31, 2021, the company has repurchased common stock totaling $152.7 million under its share repurchase program. The company has $879 million remaining under its authorization that extends through June 2024.

For the 26 weeks ended July 31, 2021, capital expenditures totaled $167.7 million on a gross basis, or $149.3 million net of construction allowances provided by landlords. For the 26 weeks ended August 1, 2020, capital expenditures totaled $94.3 million on a gross basis, or $63.4 million net of construction allowances provided by landlords. For 2021, the company anticipates capital expenditures to be in the range of $370 to 395 million on a gross basis and in the range of $300 to 325 million on a net basis.

Full Year 2021 Outlook
Looking ahead, updated guidance calls for :

  • Sales in the range of $11,520-$11,720 million, up 33 percent versus 2019 and 21 percent versus 2020. Previously, sales were expected in the range of $10,515-$10,806 million, representing a gain of 22 percent against 2019 and 11 percent versus 2020.
  • Same-store sales are now expected in the range of 18.0 percent and 20.0 percent, up from 8 percent to 11 percent previously.
  • EPS in the range of $11.00 to $11.45, up 236 percent versus 2019 and 96 percent versus 2020. Previously, EPS was expected in the range of $7.05 to $7.68, up 120 percent versus 2019 and 29 percent versus 2020.
  • EPS on a non-GAAP basis in the range of $12.45 to $12.95, up 244 percent versus 2019 and 108 percent versus 2020. Previously, adjusted EPS was expected in the range of $$8.00 to $8.70, up 126 percent versus 2019 and 36 percent versus 2020.

Photo courtesy Dick’s Sporting Goods