Dick’s Sporting Goods reported a consolidated net loss of $143.4 million, or $1.71 per diluted share, for the first quarter ended May 2, compared to a net income of $57.5 million, or 61 per diluted share, in the year-ago quarter. DKS said in a release that as a result of actions taken to support its employees as well as impacts from its temporary store closures, the company incurred approximately $62 million of pre-tax expenses, or 50 cents per diluted share, during the current quarter, including $34 million of employee compensation and safety costs and $28 million of inventory write-downs.
On a non-GAAP basis, the company reported consolidated net income for the first quarter ended May 4, 2019 of $58.4 million, or 62 cents per diluted share. First-quarter 2019 non-GAAP results exclude non-cash asset impairment and the settlement of a litigation contingency.
Net sales for the first quarter of 2020 decreased 30.6 percent to approximately $1.33 billion. Consolidated same-store sales decreased 29.5 percent, driven by temporary store closures that started on March 18, 2020 to help prevent the spread of COVID-19. First-quarter 2019 consolidated same-store sales were flat.
“Although the business environment of 2020 remains uncertain, Dick’s Sporting Goods is in a position of strength. We believe coming out of the current crisis, health and fitness will become even more important to the consumer. As the leader in the sporting goods retail sector, our relationships with key brands has never been stronger, and we are in a great place to support this demand,” said Edward W. Stack, Chairman and CEO. “Our experienced management team has a history of successfully navigating difficult market cycles and remains fully committed to managing our business with a long-term view. Perhaps most importantly, our balance sheet is strong, and due to the actions taken when the pandemic first hit, we have enhanced liquidity to emerge from this crisis in an even stronger competitive position. Now, with confidence in our liquidity position and our stores re-opening, we can turn our attention to gaining market share for the remainder of 2020 and positioning our business for profitable growth in 2021.”
DKS President Lauren Hobart, added, “Through March 10t our consolidated same-store sales increased 7.9 percent, a clear indication that our strategies were working. Throughout the store closures we continued to serve our athletes online, and our eCommerce sales, including Curbside Contactless Pickup, were tremendous, increasing 210 percent since we temporarily closed our stores through the end of the first quarter.”
Hobart continued, “As we re-open our stores, the health and safety of our teammates and athletes is our highest priority, and we are following the guidelines from the Centers for Disease Control and Prevention as well as federal, state and local authorities. We are pleased with how our athletes have responded to these measures. Through the first four weeks of the second quarter, our consolidated same-store sales have decreased only 4.0 percent, representing a progressive recovery as we re-open our stores and maintain strong sales momentum in our eCommerce business, which has increased over 250 percent.”
eCommerce sales for the first quarter of 2020 increased 110 percent, including Curbside Contactless Pickup. eCommerce penetration for the first quarter of 2020 was approximately 39 percent of total net sales, compared to approximately 13 percent during the first quarter of 2019. Following the company’s temporary store closures through the end of the first quarter of 2020, eCommerce sales increased 210 percent.
In response to COVID-19, DKS said it proactively addressed its liquidity needs during the first quarter of 2020 through two transactions. In March, the company amended its revolving credit facility to add $255 million of borrowing capacity bringing total capacity to $1.855 billion. In April, the company issued $575 million aggregate principal amount of its 3.25 percent convertible senior notes, which added over $500 million of net proceeds to our cash position.
The company ended the first quarter of 2020 with $1.5 billion in cash and cash equivalents and $1.4 billion in outstanding borrowings under its revolving credit facility.
Total inventory decreased 2.1 percent at the end of the first quarter of 2020 as compared to the end of the first quarter of 2019.
As previously announced during the quarter, in response to COVID-19, the company has temporarily suspended its share repurchase program and quarterly dividend program. As its business continues to stabilize, the company may resume opportunistic share repurchases under its existing authorizations of $1,031 million.
The company paid previously declared quarterly dividends of $0.3125 per share on March 27, 2020 to shareholders of record as of the end of business on March 20, 2020.
Full Year 2020 Outlook
As previously announced on March 19, 2020, DKS withdrew its fiscal 2020 outlook. The company is not providing an updated outlook at this time.
Non-GAAP Financial Measures
In addition to reporting the company’s financial results in accordance with generally accepted accounting principles (“GAAP”), the company reports certain financial results that differ from what is reported under GAAP. These non-GAAP financial measures include consolidated non-GAAP net income, non-GAAP earnings per diluted share, and net capital expenditures, which management believes provides investors with useful supplemental information to evaluate the company’s ongoing operations and to compare with past and future periods. Management also uses certain non-GAAP measures internally for forecasting, budgeting, and measuring its operating performance. These measures should be viewed as supplementing, and not as an alternative or substitute for, the company’s financial results prepared in accordance with GAAP. The methods used by the company to calculate its non-GAAP financial measures may differ significantly from methods used by other companies to compute similar measures. As a result, any non-GAAP financial measures presented herein may not be comparable to similar measures provided by other companies. A reconciliation of the company’s non-GAAP measures to the most directly comparable GAAP financial measures are provided here.
Fiscal 2020 Consolidated Same-Store Sales
Consolidated same-store sales include stores that were temporarily closed as a result of COVID-19. The method of calculating consolidated same-store sales varies across the retail industry, including the treatment of temporary store closures as a result of COVID-19. Accordingly, our method of calculating this metric may not be the same as other retailers’ methods.
Photo courtesy DKS