Dick’s Sporting Goods raised its outlook for the year after reporting sales and earnings easily topped analyst targets with the help of healthy back-to-school selling., Same-store sales in the quarter improved 1.7 percent with gains in transaction and average ticket prices.
In pre-market trading, DKS shares were up about 8 percent.
“Our strong Q3 comps demonstrate the impact of our strategies and our commitment to innovation,” said Ed Stack, executive chairman, in a statement. “We are confident in the future of our business and believe our results demonstrate how we are successfully differentiating ourselves in the marketplace,” said Ed Stack, executive chairman, in a statement.
“We are pleased with our third quarter results,” said Lauren Hobart, president and chief executive officer. “With our best-in-class athlete experience and differentiated assortment, we had a very strong back-to-school season and continued to gain market share as consumers prioritize Dick’s Sporting Goods to meet their needs. Our Q3 comps were driven by increases in both transactions and average tickets, and we delivered a double-digit EBT margin on a non-GAAP basis. As a result of our strong Q3 performance, we are raising our full-year outlook, which balances the confidence we have in our key strategies with an acknowledgment of the uncertain macroeconomic environment. We’re excited for the upcoming holiday season and the product, service and experience we are providing to our athletes.”
In the third quarter, sales grew 2.8 percent to $3.4 billion, topping analysts’ consensus estimate of $2.93 billion.
Same-store sales improved 1.7 percent against a gain of 6.5 percent in the 2022 third quarter. Analysts on average had expected a decline of 1.9 percent.
Net income declined 12 percent to $201 million, or $2.39 a share, from $228 million, or $2.60, a year ago. The latest year includes charges related to a business optimization program first announced when Dick’s reported second-quarter results.
On an adjusted basis excluding non-recurring charges, earnings increased 5 percent to $240 million, or $2.85 a share, topping analysts’ consensus target of $2.46.
Charges related to the business optimization plan in the quarter included $23.3 million of severance-related costs, $22.9 million of non-cash impairments of store and intangible assets and a $6.3 million write-down of inventory.
Gross margins were 34.89 percent on a GAAP basis and 35.10 percent on a non-GAAP basis in the latest quarter against 34.22 percent a year ago. SG&A expenses were 25.51 percent of sales on a GAAP basis and 23.99 percent on a non-GAAP basis in the latest quarter against 22.97 percent a year ago.
Inventories ended the quarter at $3.28 billion, down 2.3 percent year over year.
As previously announced, DKS is conducting a business optimization to align its talent, organizational design and spending in support of its critical strategies while also streamlining the overall cost structure. During the third quarter of 2023, the company incurred pre-tax business optimization charges of $52.5 million related to the elimination of certain positions primarily at its customer support center, the integration of its Moosejaw operations and other charges to optimize the cost structure of its outdoor specialty business. Dick’s plans to close ten of the previously acquired Moosejaw stores by early 2024. The company anticipates additional pre-tax charges of approximately $10 million during the fourth quarter of 2023 related to its actions to optimize the outdoor specialty business and plans to continue its business optimization review, which it expects to complete during fiscal 2023.
Earnings per diluted share
- $11.45 to 12.05 on a GAAP basis (prior, $11.33 to $12.13)
- Includes approximately $0.20 per diluted share for the 53rd week (same as prior guidance)
- Based on approximately 86 million diluted shares outstanding (prior, based on approximately 87 million diluted shares outstanding)
- Based on an effective tax rate of approximately 21 percent (same as prior guidance)
- 12.00 to 12.60 on a non-GAAP basis, which excludes approximately $62.5 million of business optimization charges (prior, $11.50 to $12.30)
Comparable store sales
- Positive 0.5 percent to positive 2.0 percent on a 52-week basis (prior, flat to positive 2.0 percent)
- $670 to 720 million on a gross basis (prior, $670 to 720 million on a gross basis)
- $550 to 600 million on a net basis (prior, $550 to 600 million on a net basis)
Photo courtesy DKS