Dick’s Sporting Goods Raises Guidance after Exceeding Q2 Expectations

DKS now anticipates reporting consolidated earnings per diluted share of approximately 4 cents to 7 cents per share in the third quarter of 2009, compared to 5 cents per chare reported in Q3 last year. 

 

Comparable store sales are expected to decrease approximately 6% to 4% on top of a 2.8% decrease in the third quarter last year.

For the full year Dick’s SG now estimates consolidated earnings per diluted share of approximately 97 cents to $1.02 in 2009 compared to a net loss of 36 cents per diluted share in 2008.  Excluding one-time charges and other costs for both years, DKS sees diluted EPS in the range of approximately $1.02 to 1.07 in 2009 compared to earnings per diluted share of $1.15 in the fiscal 2008.

Full year comp store sales are expected to decrease approximately 5% to 4% compared to a 4.8% decrease in 2008.

Dick’s reported net sales increased by 3.7% to $1.13 billion for the second quarter, 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.  Transactions comped down 1.3% and the ticket decline was 1.9%. The increase in e-commerce sales, which were estimated to be “less than 2%” of total sales, was due to the shift from a business model that was run by GSI Commerce to one that is now fully in-house with DKS.

Management said the comp store sales decline at DSG stores was driven in part a 1.3% decline in transactions and 1.9% decline in sales per transactions. Cannibalization impacted comps by less than 1%.
Company Chairman and CEO Ed Stack said the gun and ammunition business continues to be positive and said they were “pleased about the whole outdoor category,” including water sports.  He also said camping also performed well.  The footwear business was described as “better-than-anticipated,” but still was “slightly negative” on a comp basis. Apparel was also described as “slightly negative” but better-than-anticipated.  Surprisngly, the golf business in the DSG stores apparently comped better than the overall DSG store.

Stack said that in 200 stores they have reallocated some additional space to the bike business and have taken some space out of fitness and moved the tennis area over there, there fore giving more space for our team sports area.

When discussing the Chick’s store conversions and the SoCal business in general, Stack said the footwear business has been pretty good and the team sports business has been good. He said they have scaled back some other aspects of the concept, suggesting the “beach business isn't nearly what it was under the Chick's management team.”

Second quarter consolidated gross margins declined 190 basis points to 27.5% of sales, primarily due to a 120 basis point decrease in the merchandise margin and the de-leveraging of fixed costs. The merchandise margin decline was primarily driven by clearance activity at the Golf Galaxy stores and promotions at DSG stores.

The inventory per square foot was down 5.5% at quarter-end as compared to the end of the second quarter 2008. Clearance inventory was said to be down about 7% versus last year at the same time.
At the end of the second quarter, DKS operated 409 Dick's Sporting Goods stores, with 22.7 million-square-feet; and 91 Golf Galaxy stores, with 1.5 million-square-feet. New store productivity for the second quarter was 72.5% — up from 69.4% in Q2 last year — and includes Dick's Sporting Goods stores only.  

 

Asked by an analyst if the established Chick’s Sporting Goods stores converted to DSG formats had a positive impact on the new store productivity, management quipped that “it didn’t hurt.”  DKS also opened two new DSG stores in SoCal in addition to the converted CSG stores.

DKS will open six new DSG stores in former Joe’s Sports & Outdoors locations in Oregon.  Management said they would anticipate at least 31 stores in the Northwest, the number of stores Joe’s had at liquidation.

For 2010, DKS expects to open at least 24 Dick's Sporting Goods stores and approximately five new Golf Galaxy stores. They are also be consolidating our corporate offices into a single new facility that has been under development for approximately two years.