Dick's Sporting Goods, Inc. reported net sales for the second quarter increased by 3.7% to $1.13 billion for the period ended August 1, 2009, due primarily to the opening of new stores and the addition of e-commerce sales, partially offset by a 4.1% decrease in comparable store sales. The 4.1% consolidated same-store sales decline consisted of a 3.2% decrease in Dick's Sporting Goods stores and an 11.1% decline in the Golf Galaxy stores.
The retailer reported consolidated non-GAAP net income for the second quarter of $42.4 million, or 36 cents per diluted share, compared to non-GAAP net income of $44.3 million, or 38 cents per diluted share, for the year-ago period. Non-GAAP earnings exclude merger and integration costs. The 2009 second quarter earnings per diluted share exceeded estimated earnings expectations provided on May 19, 2009 of 28 cents to 31 cents per diluted share. For the second quarter ended August 2, 2008, the company reported consolidated
On a GAAP basis, the company reported consolidated net income for the second quarter ended August 1, 2009 of $38.9 million, or $0.33 per diluted share, compared to $39.9 million, or $0.34 per diluted share for the second quarter of 2008. The GAAP to non-GAAP reconciliation is included in a table later in the release under the heading “Non-GAAP Net Income and Earnings Per Share Reconciliation.”
“In the second quarter, we generated higher than anticipated sales, continued to effectively manage inventory, and leveraged operating expenses. As a result, we generated higher earnings from our Dick's Sporting Goods stores this year compared to the same quarter last year, in spite of the challenging economic environment,” said Edward W. Stack, Chairman and CEO. “In addition, with higher sales and better than anticipated operating leverage, Golf Galaxy performed better than originally expected.”
In the second quarter, the company opened four Dick's Sporting Goods stores and converted the remaining Chick's Sporting Goods stores to Dick's Sporting Goods stores. The new stores are listed in a table later in the release under the heading “Store Count and Square Footage.”
In the first two quarters of 2009, the company has opened 13 new Dick's Sporting Goods stores, opened one new Golf Galaxy store, converted the Golf Shop to a Golf Galaxy store, closed two Chick's Sporting Goods stores and converted the remaining Chick's Sporting Goods stores to Dick's Sporting Goods stores.
As of August 1, 2009, the company operated 409 Dick's Sporting Goods stores in 40 states, with approximately 22.7 million square feet and 91 Golf Galaxy stores in 31 states, with approximately 1.5 million square feet.
Long term debt declined by $159.0 million from the end of the second quarter of 2008 to the end of the second 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 5.5% less at the end of the second quarter 2009 as compared to the end of the second quarter 2008.
The company reported consolidated non-GAAP net income for the 26 weeks ended August 1, 2009 of $55.2 million, or $0.47 per diluted share. For the 26 weeks ended August 2, 2008, the company reported consolidated non-GAAP net income of $63.9 million, or $0.55 per diluted share. Non-GAAP earnings exclude merger and integration costs.
On a GAAP basis, the company reported consolidated net income for the 26 weeks ended August 1, 2009 of $49.1 million, or $0.42 per diluted share, compared to $59.5 million, or $0.51 per diluted share for the same period last year. The GAAP to non-GAAP reconciliation is included in a table later in the release under the heading “Non-GAAP Net Income and Earnings Per Share Reconciliation.”
Net sales increased 4.4% to $2,086.4 million primarily due to the opening of new stores and the addition of e-commerce sales, partially offset by a comparable store sales decrease of 5.0%.
Current 2009 Outlook
The company's current outlook for 2009 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.
The company believes that the remainder of the year will continue to be challenging. However, based on the second quarter results and the company's expectations for the second half of the year, it is raising its annual earnings estimates and increasing the expected same store sales for 2009.
Full Year 2009
Based on an estimated 117 million diluted shares outstanding, the company currently anticipates reporting non-GAAP consolidated earnings per diluted share of approximately $1.02 – 1.07, 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 $0.97 – 1.02 in 2009 compared to a net loss of $0.36 per diluted share in 2008.
Comparable store sales are expected to decrease approximately 5 to 4% 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.
Third Quarter 2009
Based on an estimated 117 million diluted shares outstanding, the company anticipates reporting consolidated earnings per diluted share of approximately $0.04 – 0.07 in the third quarter of 2009. In the third quarter of 2008, the company reported non-GAAP earnings per diluted share of $0.07, excluding merger and integration costs, or $0.05 on a GAAP basis.
Comparable store sales are expected to decrease approximately 6 to 4% compared to a 2.8% decrease in the third quarter last year. The comparable store sales calculation for the third quarter in 2008 and 2009 includes Dick's Sporting Goods stores and Golf Galaxy stores. It excludes Chick's Sporting Goods stores converted to Dick's Sporting Goods stores.
The company expects to open approximately 11 new Dick's Sporting Goods stores in the third quarter. The accelerated expansion in the Pacific Northwest is expected to have a negative impact on earnings per diluted share of approximately $0.01 in the third quarter, which has been considered in the earnings expectations.
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 $70 million in 2009 as compared to $115 million in 2008.
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME – UNAUDITED
(In thousands, except per share data)
13 Weeks Ended
————–
August 1, % of August 2, % of
2009 Sales(1) 2008 Sales
—- ——– —- —–
Adjusted
Net sales $1,126,767 100.00% $1,086,294 100.00%
Cost of goods sold, including
occupancy and distribution
costs 816,866 72.50 766,636 70.57
——- —– ——- —–
GROSS PROFIT 309,901 27.50 319,658 29.43
Selling, general and
administrative expenses 238,745 21.19 237,667 21.88
Merger and integration costs 5,760 0.51 2,879 0.27
Pre-opening expenses 1,569 0.14 3,681 0.34
—– —- —– —-
INCOME FROM OPERATIONS 63,827 5.66 75,431 6.94
Interest expense, net 90 0.01 4,390 0.40
— —- —– —-
INCOME BEFORE INCOME TAXES 63,737 5.66 71,041 6.54
Provision for income taxes 24,812 2.20 31,103 2.86
—— —- —— —-
NET INCOME $38,925 3.45% $39,938 3.68%
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EARNINGS PER COMMON SHARE:
Basic $0.35 $0.36
Diluted $0.33 $0.34
