Dick’s Sporting Goods again raised its outlook for the year after reporting third-quarter earnings that blew past Wall Street targets.
Highlights of the quarter included:
- Consolidated same-store sales for the third quarter increased 12.2 percent on top of a 23.2 percent increase in the third quarter of 2020 and a 6.0 percent increase in the third quarter of 2019;
- The company delivered third-quarter 2021 earnings per diluted share of $2.78 and non-GAAP earnings per diluted share of $3.19, up 51 percent and 59 percent respectively versus earnings per diluted share of $1.84 and non-GAAP earnings per diluted share of $2.01 during the third quarter of 2020; and
- The company raised its full-year 2021 earnings per diluted share guidance to $12.88 to 13.06 and raised its full-year 2021 non-GAAP earnings per diluted share guidance to $14.60 to 14.80.
Adjusted EPS of $3.19 were well ahead of Wall Street’s consensus target of $1.97. Sales of $2.75 billion topped Wall Street’s consensus estimate of $2.51 billion.
Third Quarter Results
Net sales for the third quarter of 2021 were $2.75 billion, an increase of 13.9 percent compared to the third quarter of 2020 and a 40.0 percent increase compared to the third quarter of 2019. Consolidated same-store sales for the third quarter of 2021 increased 12.2 percent, which followed consolidated same-store sales increases of 23.2 percent in the third quarter of 2020 and 6.0 percent in the third quarter of 2019. E-commerce sales increased 97 percent compared to the third quarter of 2019 and one percent compared to the third quarter of 2020. E-commerce penetration has grown from 13 percent of total net sales in the third quarter of 2019 to 19 percent for the third quarter of 2021. E-commerce penetration was approximately 21 percent in the third quarter of 2020.
Driven by strong sales and gross margin rate expansion, the company reported consolidated net income for the third quarter ended October 30, 2021 of $316.5 million, or $2.78 per diluted share. The company reported consolidated net income for the third quarter ended October 31, 2020 of $177.2 million, or $1.84 per diluted share, which included approximately $48 million of pre-tax expenses in response to COVID-19. The company reported consolidated net income for the third quarter ended November 2, 2019 of $57.6 million, or $0.66 per diluted share.
On a non-GAAP basis, the company reported consolidated net income for the quarter ended October 30, 2021 of $322.2 million, or $3.19 per diluted share, compared to consolidated net income of $182.2 million, or $2.01 per diluted share, for the quarter ended October 31, 2020. For the quarters ended October 30, 2021 and October 31, 2020, non-GAAP consolidated net income excluded non-cash amortization of the debt discount associated with the company’s convertible senior notes and included the share impact of the convertible note hedge purchased by the company, which is anti-dilutive for GAAP purposes. For the third quarter ended November 2, 2019, the company reported a non-GAAP consolidated net income of $44.8 million, or $0.52 per diluted share.
“Our strategies continue to work as we reimagine the athlete experience in our core business and with new concepts. As we said before, we believe this will be the most transformational year in our history, and we expect to continue this transformation into 2022. I couldn’t be more excited about the future of Dick’s Sporting Goods,” said Ed Stack, executive chairman.
“We are extremely pleased to announce a record third quarter in which we delivered significant sales and earnings growth over both last year and 2019. Consumer demand remained strong, and our differentiated product assortment continued to drive exceptional sales and merchandise margin momentum. I’d like to thank all of our teammates for their hard work and commitment to Dick’s Sporting Goods, which helped make this performance possible,” said Lauren Hobart, president and CEO . “Our fourth quarter is off to a strong start, and we are pleased to increase our full-year outlook for the third time this year. Looking ahead, we remain very confident in the longer-term prospects of our business.”
Balance Sheet
The company ended the third quarter of 2021 with approximately $1.37 billion in cash and cash equivalents and no outstanding borrowings under its $1.855 billion revolving credit facility.
Total inventory increased 7.3 percent at the end of the third quarter of 2021 compared to the end of the third quarter of 2020.
Year-To-Date Results
Net sales for the 39 weeks ended October 30, 2021 were $8.94 billion, an increase of 38.4 percent compared to the 39 weeks ended October 31, 2020 and a 45.6 percent increase compared to the 39 weeks ended November 2, 2019. Consolidated same-store sales for the 39 weeks ended October 30, 2021 increased 36.6 percent compared to the 2020 period, which followed a consolidated same-store sales increase of 5.8 percent for the 2020 period and a 3.1 percent increase for the 2019 period. E-commerce sales increased 115 percent compared to the 39 weeks ended November 2, 2019, and as expected, eCommerce sales decreased 8 percent compared to the 39 weeks ended October 31, 2020, which included a period of temporary store closures in March, April and May. E-commerce penetration has grown from 13 percent of total net sales in the 2019 period to 19 percent in the 2021 period. E-commerce penetration was approximately 28 percent in the 39 weeks ended October 31, 2020.
Driven by strong sales and gross margin rate expansion, the company reported consolidated net income for the 39 weeks ended October 30, 2021 of $1.17 billion, or $10.70 per diluted share, compared to consolidated net income for the 39 weeks ended October 31, 2020 of $310.6 million, or $3.44 per diluted share. The company incurred approximately $15 million of pre-tax incremental safety costs in response to COVID-19 during the 39 weeks ended October 30, 2021. During last year’s period, the company incurred approximately $124 million of pre-tax expenses in response to COVID-19. The company reported consolidated net income for the 39 weeks ended November 2, 2019 of $227.6 million, or $2.53 per diluted share.
On a non-GAAP basis, the company reported consolidated net income of $1.19 billion, or $12.06 per diluted share, for the 39 weeks ended October 30, 2021, and consolidated net income of $321.3 million, or $3.65 per diluted share, for the 39 weeks ended October 31, 2020. For the periods ended October 30, 2021 and October 31, 2020, non-GAAP consolidated net income excluded non-cash amortization of the debt discount associated with the company’s convertible senior notes and included the share impact of the convertible note hedge purchased by the company, which is anti-dilutive for GAAP purposes. For the 39 weeks ended November 2, 2019, the company reported non-GAAP consolidated net income of $215.8 million, or $2.39 per diluted share. The GAAP to non-GAAP reconciliations is included in a table later in the release under the heading “GAAP to Non-GAAP Reconciliations.”
Capital Allocation
On November 22, 2021, the company’s Board of Directors authorized and declared a quarterly dividend in the amount of $0.4375 per share on the company’s Common Stock and Class B Common Stock. The dividend is payable in cash on December 29, 2021 to stockholders of record at the close of business on December 10, 2021.
The company paid over $500 million in dividends to stockholders during the 13 weeks ended October 30, 2021, which included the previously announced special dividend of $5.50 per share on the company’s Common Stock and Class B Common Stock.
During the third quarter of 2021, the company repurchased 2.17 million shares of its common stock at an average price of $125.80 per share, for a total cost of $273.4 million, under its share repurchase program. For the 39 weeks ended October 30, 2021, the company repurchased 4.0 million shares of common stock at an average price of $106.21 per share, for a total cost of $426.1 million. The company has $605.1 million remaining under its authorization that extends through June 2024.
For the 39 weeks ended October 30, 2021, capital expenditures totaled $231.1 million on a gross basis, or $203.4 million net of construction allowances provided by landlords. For the 39 weeks ended October 31, 2020, capital expenditures totaled $156.4 million on a gross basis, or $114.1 million net of construction allowances provided by landlords.
Full Year 2021 Outlook
Looking ahead, updated guidance calls for :
- Sales in the range of $12.12 billion and $12.19 billion, up 39 percent versus 2019 and 27 percent versus 2020. Previously, sales were expected in the range of $11,520-$11,720 million, up 33 percent versus 2019 and 21 percent versus 2020;
- Same-store sales in the range of 24.0 percent to 25.0 percent, up from 18.0 percent and 20.0 percent previously;
- EPS in the range of $12.88 to $13.06, up 288 percent versus 2019 and 127 percent versus 2020. Previously, EPS was expected in the range of $11.00 to $11.45, up 120 percent versus 2019 and 29 percent versus 2020, up 236 percent versus 2019 and 96 percent versus 2020; and
- EPS on a non-GAAP basis in the range of $14.60 and $$14.80, up 298 percent versus 2019 and 140 percent versus 2020. Previously, adjusted EPS was expected in the range of $12.45 to $12.95, up 244 percent versus 2019 and 108 percent versus 2020.
Photo courtesy Dick’s Sporting Goods