Dick’s SG’s Again Tops Expectations In Q4

Dick’s Sporting Goods reported earnings on an adjusted basis grew 50 percent in the fourth quarter ended January 29 on a 5.9 percent same-store sales gain. Both earnings and sales topped Wall Street’s guidance, with the period marking Dick’s largest sales quarter. Earnings are expected to decline in the current year, with anticipated comps in the range of negative 4 percent to flat, but EPS guidance was ahead of Wall Street targets.

“Our exceptionally strong 2021 reflects another positive step forward in our multi-year transformational journey,” said Ed Stack, executive chairman. “Our strategies are driving sustainable sales and profitability growth, and we have set our business on a new trajectory. I want to thank all our teammates for their hard work and unwavering dedication to our business.”

“We are extremely pleased that our team delivered the largest sales quarter in our company’s history,” said Lauren Hobart, president and CEO. “Our diverse category and brand portfolio, world-class omnichannel platform and strong execution continue to help us meet robust consumer demand. We are a growth company with a strong balance sheet and incredible momentum and confidence in our business. Our 2022 sales and earnings outlook establishes a new foundation for us to build on in the future.”

Fourth Quarter Results
Net sales for the fourth quarter of 2021 were $3.35 billion, an increase of 7.3 percent compared to the fourth quarter of 2020 and a 28.5 percent increase compared to the fourth quarter of 2019. Consolidated same-store sales for the fourth quarter of 2021 increased 5.9 percent, followed by consolidated same-store sales increases of 19.3 percent in the fourth quarter of 2020 and 5.3 percent in the fourth quarter of 2019. The current quarter’s same-store sales increase included a 14 percent increase in brick-and-mortar stores and an 11 percent decrease in eCommerce sales, followed by a 57 percent increase in eCommerce sales in the fourth quarter of 2020. eCommerce penetration has grown from 25 percent of total net sales in the fourth quarter of 2019 to 27 percent for the fourth quarter of 2021, and eCommerce penetration was approximately 32 percent in the fourth quarter of 2020.

Driven by strong sales and merchandise margin rate expansion, the company reported consolidated net income for the fourth quarter ended January 29, 2022 of $346.1 million, or $3.16 per diluted share, an increase of 43 percent compared to the fourth quarter of 2020 and an increase of 290 percent compared to the fourth quarter of 2019. 

The company reported consolidated net income for the fourth quarter ended January 30, 2021 of $219.6 million, or $2.21 per diluted share, which included approximately $51 million of pre-tax expenses in response to COVID-19. The company reported consolidated net income for the fourth quarter ended February 1, 2020 of $69.8 million, or $0.81 per diluted share.

On a non-GAAP basis, the company reported consolidated net income for the fourth quarter ended January 29, 2022 of $352.1 million, or $3.64 per diluted share, an increase of 50 percent compared to the fourth quarter of 2020 and an increase of 176 percent compared to the fourth quarter of 2019. 

The company reported consolidated net income of $225.0 million, or $2.43 per diluted share, for the quarter ended January 30, 2021. For the quarters ended January 29, 2022 and January 30, 2021, non-GAAP consolidated net income and earnings per diluted share 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 fourth quarter ended February 1, 2020, the company reported a non-GAAP consolidated net income of $113.3 million, or $1.32 per diluted share.

Non-GAAP earnings of $3.64 topped Wall Street’s consensus estimate of $3.43. Sales at $3.35 billion were just ahead of the consensus target of $3.31 billion.

Balance Sheet
In January 2022, the company further strengthened its financial position, raising $1.5 billion of cash from the issuance of its senior unsecured notes, of which $750 million is due in 2032 and 2052, respectively.

The company ended the year with approximately $2.6 billion in cash and cash equivalents and no outstanding borrowings under its new $1.6 billion unsecured revolving credit facility.

Total inventory increased 17.6 percent at the end of the fourth quarter of 2021 compared to the end of the fourth quarter of 2020.

Full Year Results
Net sales were $12.29 billion in fiscal 2021, an increase of 28.3 percent compared to fiscal 2020 and a 40.5 percent increase compared to fiscal 2019. Consolidated same-store sales increased 26.5 percent in fiscal 2021, followed by consolidated same-store sales increases of 9.9 percent in fiscal 2020 and 3.7 percent in fiscal 2019. The fiscal 2021 same-store sales increase included a 42 percent increase in brick-and-mortar stores and an expected 9 percent decrease in eCommerce sales, which included a period of temporary store closures, following a 100 percent increase in eCommerce sales in fiscal 2020. eCommerce penetration has grown from 16 percent of total net sales in fiscal 2019 to 21 percent in fiscal 2021, and eCommerce penetration was approximately 30 percent in fiscal 2020.

Driven by strong sales and merchandise margin rate expansion, the company reported consolidated net income of $1.52 billion in fiscal 2021, or $13.87 per diluted share, an increase of 142 percent compared to fiscal 2020 and an increase of 315 percent compared to fiscal 2019. The company reported a consolidated net income of $530.3 million in fiscal 2020 or $5.72 per diluted share. The company incurred approximately $15 million of pre-tax incremental safety costs in response to COVID-19 during fiscal 2021, compared to roughly $175 million of related compensation and safety costs during fiscal 2020. During the current year, the company transitioned its hourly employees to compensation programs with a longer-term focus, partially reinvesting these costs. In fiscal 2019, the company reported a consolidated net income of $297.5 million, or $3.34 per diluted share.

On a non-GAAP basis, the company reported consolidated net income of $1.54 billion in fiscal 2021, or $15.70 per diluted share, an increase of 157 percent compared to fiscal 2020 and an increase of 325 percent compared to fiscal 2019. The company reported a consolidated net income of $546.2 million in fiscal 2020 or $6.12 per diluted share. In fiscal 2021 and 2020, non-GAAP consolidated net income and earnings per diluted share 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. In fiscal 2019, the company reported a non-GAAP consolidated net income of $329.1 million, or $3.69 per diluted share.

Results topped Dick’s full-year guidance. Dick’s had guided sales for the year to come in between $12.1 billion and $12.2 million. Same-store sales were projected to increase between 24 percent to 25 percent. Earnings on a non-GAAP basis are expected in the range of $14.60 to $14.80.

Capital Allocation
On March 7, 2022, the company’s Board of Directors authorized and declared a quarterly dividend of $0.4875 per share on the company’s Common Stock and Class B Common Stock. The dividend is payable in cash on March 25, 2022 to stockholders of record at the close of business on March 18, 2022. This dividend represents 11 percent over the company’s previous quarterly per-share amount and is equivalent to an annualized dividend of $1.95 per share.

The company paid $603 million in dividends to stockholders in fiscal 2021, which included a special dividend of $5.50 per share on the company’s Common Stock and Class B Common Stock.

During the fourth quarter of 2021, the company repurchased 6.78 million shares of its common stock at an average price of $110.72 per share, for a total cost of $750.3 million, under its share repurchase program. In fiscal 2021, the company repurchased 10.79 million shares of common stock at an average price of $109.04 per share for a total cost of $1.18 billion. On December 16, 2021, the company’s Board of Directors authorized a new five-year share repurchase program of up to $2 billion of the company’s common stock, under which the company has $1.855 billion remaining at January 29, 2022.

In fiscal 2021, capital expenditures totaled $308 million on a gross basis, or $268 million net of construction allowances provided by landlords. In fiscal 2020, capital expenditures totaled $224 million on a gross basis, or $167 million net of construction allowances provided by landlords.

Full Year 2022 Outlook
Coming off two consecutive record years in 2020 and 2021, its fiscal 2022 outlook provides a new foundation upon which it will build in the years ahead.

Based on an estimated 112 million diluted shares outstanding, the company currently projects earnings per diluted share to be approximately $9.96 to 11.13. The company’s earnings per diluted share guidance include $55 million of pre-tax interest expense associated with its new $1.5 billion long-term debt issuance as well as the expectation to repurchase a minimum of $200 million of its common shares in 2022. The company reported earnings per diluted share of $13.87 in fiscal 2021.

After adjusting for interest expense and share dilution relating to its senior convertible notes, the company currently projects non-GAAP earnings per diluted share to be approximately $11.70 to 13.10. The company reported non-GAAP earnings per diluted share of $15.70 in fiscal 2021.

Analyst estimates for 2022 had ranged between $4.03 and $14.39, with the average estimate at 11.31.

Consolidated same-store sales are expected to be in the range of negative 4 percent to flat.

In 2022, the company anticipates capital expenditures in the range of $400 to 425 million on a gross basis and in the range of $340 to 365 million on a net basis. In fiscal 2021, capital expenditures were $308 million on a gross basis and $268 million on a net basis.

Photo courtesy Dick’s Sporting Goods