Dick’s Sporting Goods reported net income slid 5% in the second quarter ended Aug. 2, to $45.5 million, or 39 cents per diluted share, excluding the impact of costs related to the Golf Galaxy integration. These results exceeded earnings guidance provided on May 22, 2008 of 34 – 38 cents a diluted share. In the year-ago period, Dick’s earned $47.9 million, or 41 cents a share.
Including the after-tax impact of costs related to the Golf Galaxy integration of $4.4 million, or 4 cents per diluted share, the company reported net income for the most recent second quarter of $41.1 million, or 35 per cents share. The results include the operating results of Golf Galaxy and Chick’s Sporting Goods from their respective acquisition dates of Feb. 13, 2007 and November 30, 2007.
Net sales for the quarter increased 7% to $1.09 billion due to the opening of new stores, the inclusion of Chick’s Sporting Goods in this year’s quarterly results and a 3.7% decrease in comparable store sales. The 3.7% comp decline consisted of a 3.7% decrease in Dick’s Sporting Goods stores and a 4.5% decline in the Golf Galaxy stores. Chick’s Sporting Goods was acquired on Nov. 30, 2007 and is excluded from the comparable store sales calculation.
In the second quarter, the company opened nine Dick’s Sporting Goods stores and one Golf Galaxy store.
Golf Galaxy Integration
By the end of this fiscal year, the company expects to integrate Golf Galaxy’s operations. Costs related to the integration are expected to be approximately $11.3 million, which includes $8.7 million of pre-tax costs and $2.6 million for income taxes reflecting the impact of non deductible executive separation costs. Of the approximately $11.3 million, $5.5 million was incurred in the second quarter and the company estimates $2.5 million and $3.3 million will be incurred in the third and fourth quarters of 2008, respectively. Merger and integration costs include the expense of severance, retention, office closure and related taxes.
Year-to-Date Results
The company reported net income for the 26 weeks ended Aug. 2, 2008 of $64.9 million, or 55 cents per diluted share, excluding the proceeds from the sale of the corporate aircraft and costs associated with the integration of Golf Galaxy. For the 26 weeks ended Aug. 4, 2007, net income and earnings per diluted share were $69.6 million and 61 cents, respectively.
Including the impact of the gain on the sale of the corporate aircraft and the integration costs related to Golf Galaxy, which totals $3.0 million, or 3 cents per diluted share, the company reported net income for the 26 weeks ended Aug. 2, 2008 of $61.9 million, or 53 cents per diluted share.
Net sales increased 9% to $2.00 billion primarily due to the opening of new stores, the inclusion of Chick’s Sporting Goods in this year’s results and a comparable store sales decrease of 3.7%. Year-to-date comparable store sales exclude Golf Galaxy and Chick’s Sporting Goods.
Current 2008 Outlook
Full Year 2008
— Based on an estimated 118 million diluted shares outstanding, the currently anticipates reporting consolidated earnings per diluted share of approximately $1.27 – $1.36, excluding costs from the Golf Galaxy integration. The company anticipates reporting earnings per diluted share of approximately $1.20 – 1.29, including the integration costs. Earnings per diluted share for the full year 2007 were $1.33.
— Comparable store sales, which include Dick’s Sporting Goods stores only, are expected to decrease approximately 5 to 3%. The comparable store sales calculation for the full year excludes the Golf Galaxy and Chick’s Sporting Goods stores.
— The company expects to open approximately 43 new Dick’s Sporting Goods stores, ten new Golf Galaxy stores, relocate one Dick’s Sporting Goods store and convert one Chick’s Sporting Goods store to a Dick’s Sporting Goods store in 2008.
Third Quarter 2008
— Based on an estimated 117 million diluted shares outstanding, the company anticipates reporting consolidated earnings per diluted share of approximately $0.04 – 0.08, excluding costs from the Golf Galaxy integration. The company anticipates reporting earnings per diluted share of approximately $0.02 – 0.06, including the integration costs. Earnings per diluted share for the third quarter of 2007 were $0.10.
— Comparable store sales are expected to decrease approximately 5 to 2%, which compares to a 1% decrease in the third quarter last year, as adjusted for the shifted retail calendar. The comparable store sales calculation for the third quarter includes Golf Galaxy stores and excludes the Chick’s Sporting Goods stores.
— The company expects to open approximately 26 new Dick’s Sporting Goods stores and convert one Chick’s Sporting Goods store to a Dick’s Sporting Goods store.
