Dick’s SG Posts First Billion Dollar Quarter; Exceeds Q4 Earnings Estimates…

Dick's Sporting Goods, Inc. shrugged off the impact of weather on their fourth quarter results, posting earnings in excess of previous guidance and racking up quarterly sales of more than $1 billion for the first time and passing the $3 billion mark for the year. The retailer said they saw strength in men’s and women’s apparel, athletic and other categories, and the Lodge outdoor business.

DKS saw positive results in licensed apparel from the Super Bowl runs for both the Indianapolis Colts and Chicago Bears, apparently offsetting the strong performance from the Steelers in the prior year. Some cold weather categories, boots and fitness equipment experienced challenges for the period. In snow sports, management said that the number of stores involved in the alpine business will stay pretty flat to last year, but they will increase the number of stores carrying snowboard product to about 75 stores from roughly 35 to 40 stores last year. In fitness, the ellipticals business was said to be strong, but treadmills, strength equipment and infomercial product was weaker.

The 2006 fourth quarter ended February 3, 2007 had 14 weeks of sales versus 13 weeks in the previous year quarter. Comp store sales for the 13-week period were up 2% for Q4. The average ticket was up about one percent to $60 and traffic was said to be up by about the same percentage. Golf Galaxy, which was acquired in mid-February, posted flat comps for the 2006 fiscal year.

Net sales for the quarter increased 20.8% to $1.03 billion from $849.5 million in the prior year period. Net income increased 25.3% to $67.7 million, or $1.20 per diluted share, compared to $54.0 million, or $1.00 per diluted share, in the prior year period. On a pro forma basis, net income improved 33.4% when including stock option expenses from the prior year quarter.

Private label represented 13.2% of sales in the fourth quarter versus 11.7% of sales in Q4 2005. For the year, private label represented 14.1% of sales, compared to 11.9% of sales for the previous year.

Gross margins improved 90 basis points to 31.2% of sales, compared to 30.3% of sales in the prior year quarter, due to expanding merchandise margins and the leveraging of store occupancy, freight and distribution expenses.

DKS is rolling out golf club fitting to all Dick’s Sporting Goods stores over the next few weeks. Management said that approximately 72% of consumers getting fitted converted into sales. Golf represents about 15% of DSG sales.

Management said they had less cold weather merchandise on the floor at the end of February this year than they did at the end of the same month last year.

Advertising expenses for the year were basically flat to last year as a percentage of sales, but the retailer shifted dollars from Sunday circulars to ESPN and the Golf Channel.

Looking ahead, DKS does see some challenges to the comp store sales figures, particularly in the back half of this year and more specifically in the third quarter.

DKS anticipates reporting earnings per share of approximately $2.37 to $2.40 for the year, including about two cents per share attributed to Golf Galaxy, on a 2% increase in comps at the DSG stores. The company plans to open 45 new DSG stores, 17 new Golf Galaxy stores, and relocate one DSG store in 2007.

For the first quarter, DKS sees earnings per share in the range of 35 cents to 38 cents on a 4% to 6% increase in comps for the DSG stores. Adjusting for the shift in the retail calendar, comps would be up about 3% for the quarter. The company expects to open 11 new DSG stores and 10 new Golf Galaxy stores in the first quarter.

DKS expects to enter the Northwest with a store in Portland, Ore. in Q1 2008, but will focus most of its attention this year on backfilling current markets. The Minneapolis market will grow from three stores to six by year-end, while Chicago will expand to 13 stores from the current six stores and Atlanta will get three or four new stores in addition to the current three stores there. Florida, which currently has three stores, will get five to six more doors this year.