Dick's Sporting Goods, Inc. reported net income for the first quarter ended April 30, 2005, excluding merger integration and store closing costs, of $12.2 million, or 23 cents per share, as compared to earnings guidance provided on March 7, 2005 of 18 cents to 20 cents per share excluding merger integration and store closing costs. This compares to GAAP net income and earnings per share of $10.6 million and 20 cents, respectively, and proforma, combined company net income and earnings per share of $5.0 million and 10 cents, respectively, for the first quarter ended May 1, 2004.
Including after tax merger integration and store closing costs of $19.5 million, or 36 cents per share, the Company reported a net loss for the first quarter ended April 30, 2005 of $7.3 million, or a loss of 15 cents per share as compared to earnings guidance of a loss of 19 cents to 21 cents per share including merger integration and store closing costs.
Total sales for the quarter increased 57% over last year to $570.8 million due to a comparable store sales increase of 3.2%, the opening of new stores, and the inclusion of the former Galyan's operations in this year's quarterly results. We are planning to include the converted Galyan's stores in the comparable store base beginning in the second quarter of fiscal 2006, as the re-branding and re-merchandising effort of all converted Galyan's stores has been substantially completed as of the end of the first quarter of 2005.
During the first quarter, the Company opened seven stores, and closed five stores as previously announced (four Dick's stores and one Galyan's store all of which were stores in overlapping trade areas due to the Galyan's acquisition). The stores that opened in the first quarter include: Greensburg, PA; Canton, CT; Seekonk, MA; Hamilton, OH; Bloomington, IN; Jacksonville, FL and Hadley, MA. Of the seven stores that opened in the first quarter, two stores were the two-level prototypes (Jacksonville, FL and Canton, CT).
As of April 30, 2005, the Company operated 236 stores, with approximately 13.6 million square feet, in 34 states.
“A terrific job was done by our information systems group, merchants and store operations in completing the conversion of systems, the re-merchandising of the assortment and reconfiguring the stores. We have completed the Galyan's conversion three months earlier than planned. All of the former Galyan's stores have the look and feel of a Dick's Sporting Goods store. All departments throughout the Company worked tirelessly to complete this conversion while delivering on their core responsibilities,” said Edward W. Stack, Chairman & CEO.
The conversion, re-merchandising, and grand re-opening of the former Galyan's stores to Dick's stores is essentially complete. We expect to be operating the former Galyan's stores with the same merchandise assortments, financial discipline and customer service expectations as we have for the rest of our stores. Since the conversion is completed, the former Galyan's stores will be included in the comp store sales base beginning in the second quarter of fiscal 2006.
The Company anticipates closing the final store due to the conversion in the second quarter of 2005.
The Company continues to expect total merger integration and store closing costs of approximately $70 million, of which $20 million was incurred in 2004. The Company estimates future merger costs of $5.5 million in the second quarter, and $39 million pre-tax for fiscal 2005, of which $32.5 million was incurred in the first quarter of 2005. The balance of the costs, which relate to future lease payments on closed stores, will be incurred in 2006 and beyond. Merger integration and store closing costs primarily include the expense of closing Dick's stores, advertising the re-branding of Galyan's stores, recruiting, system conversion costs, and duplicative costs such as corporate occupancy.
2005 Outlook
The Company's current outlook for 2005 is based on current expectations and includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act as described later in this release. Although the Company believes that comments reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct.
Full Year 2005
Based on an estimated 55 million shares outstanding, the Company anticipates reporting EPS for the full year of $1.82 – $1.87 per share, excluding merger integration and store closing costs, an increase of three cents from prior guidance due to the first quarter results, or $1.39 – $1.44 per share, including merger integration and store closing costs.
This compares to full year 2004 EPS of $1.41, excluding merger integration and store closing costs and gain on sale of investment.
Proforma, combined Company EPS for full year 2004 was $1.17, excluding merger integration and store closing costs and gain on sale of investment.
Comparable store sales are expected to increase approximately 1% to 2%.
The converted Galyan's stores will be included in the comparable store sales base beginning in the second quarter of fiscal 2006, as the re-branding and re-merchandising effort of all converted Galyan's stores has been substantially completed as of the end of the first quarter 2005.
The Company expects to open 25 new stores in 2005 while closing six stores (five Dick's stores and one Galyan's store) due to overlap.
2005 full-year EPS guidance excludes the impact of expensing stock options as the SEC has amended the compliance date for SFAS 123R. Dick's plans to implement the provisions of SFAS 123R beginning in fiscal 2006.
Second Quarter 2005
Based on an estimated 54 million shares outstanding, the Company anticipates reporting EPS for the second quarter of 43 cents to 45 cents per share, excluding after-tax merger integration and store closing costs of approximately $3.3 million, or 37 cents to 39 cents per share, including merger integration and store closing costs.
This compares to second quarter 2004 GAAP EPS of 34 cents, which includes only the results of Dick's Sporting Goods and not Galyan's. Proforma, combined Company EPS for the second quarter of 2004 was 21 cents.
Comparable store sales are expected to increase approximately 1% to 2%.
The Company expects to open four new stores in the second quarter, and close the last store as a result of the conversion.
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(In thousands, except per share data)
13 Weeks Ended
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April 30, May 1,
2005 2004
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Net sales $570,843 $364,207
Cost of goods sold, including
occupancy and distribution costs 418,871 261,449
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GROSS PROFIT 151,972 102,758
Selling, general and administrative
expenses 126,269 82,167
Pre-opening expenses 2,645 3,269
Merger integration and store closing
costs 32,481 -
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(LOSS) INCOME FROM OPERATIONS (9,423) 17,322
Interest expense, net 2,795 642
Other income - 1,000
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(LOSS) INCOME BEFORE INCOME TAXES (12,218) 17,680
(Benefit) provision for income taxes (4,887) 7,072
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NET (LOSS) INCOME $(7,331) $10,608
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(LOSS) EARNINGS PER COMMON SHARE:
Basic $(0.15) $0.22
Diluted $(0.15) $0.20
