Dick’s Sporting Goods Inc. reported that an abundance of cold weather in the fourth quarter slowed comp store sales to 2.7% for the period, cutting the golf season short.  The same weather pattern is expected to cause first quarter same-store sales to decline due to a delayed spring sports season, according to DKS management.

In a conference call with analysts, Dick’s SG said that comps for the fourth quarter ended Feb. 2 rose 3.4% after adjusting for the shift in the retail calendar.  Lower Super Bowl related sales of licensed NFL product and cannibalization by new stores each shaved a point off comp sales growth, the company estimated.

At Golf Galaxy, which DKS acquired in February 2007, comp store sales on a 13-week to 13-week pro-forma basis decreased 8.8%, or 9.8% after adjusting for the calendar. Chairman and CEO Ed Stack said golf sales fell at about the same rate as at Dick’s stores, and attributed the decline to colder weather rather than any fundamental changes in the golf market.

Golf margins held fairly steady, except for markets where the company competes with Golfsmith and PGA Superstores, where there was some margin pressure.  DKS was able to prop up Golf Galaxy margins by moving some of the Dick’s private-label product through those stores, Stack said.  DKS will stop breaking out Golf Galaxy’s comp store sales in their next quarterly report.

Company-wide net sales increased 18% to $1.21 billion for the 13 weeks, thanks to the opening of new stores and the inclusion of Golf Galaxy and Chick’s Sports Goods, the Southern California retailer acquired by DKS in November 2007.  Athletic apparel, outerwear and boots, casual footwear and athletic shoes drove the growth, which was offset by lower sales of NFL licensed merchandise, table games and golf products. Treadmill and elliptical trainer sales were also strong, while strength fitness sales were weak. 

Store traffic was down 1.3%, while the average ticket rose 1.7% during the quarter as Dick’s continued to move up its price points and absorb pricier Golf Galaxy and Chick’s SG inventory, which also pushed inventory per square foot up 3.5% at year-end. Inventories were actually down at Golf Galaxy. “We don't have any inventory that's built up that we have concerns about,” said Stack. “We don't see any markdowns coming at us.”

Still, DKS will push delivery dates out 30 to 60 days on some spring merchandise depending on when spring sports seasons kick in.

The company’s gross margins for the quarter fell 20 basis points to 31.0% of sales, while SG&A rose 80 points to 20.7% – largely because there was one less week of sales to leverage store costs.  Merchandise margins, however, improved, although that’s unlikely to carry over into 2008 as the company absorbs the costs of a new distribution center in Atlanta and new stores amid declining comps sales.

Net income for the quarter met expectations by rising 8.1% to $73.2 million, or 62 cents per diluted share, from $67.7 million, or 60 cents per diluted share, for the year-ago  quarter. The 2006 quarter included a 14th week and a better bump in sales from the Super Bowl, which together added 5 cents to earnings.  The operating results included results for Chick's. 

Stack said Foot Locker’s plans to sell Under Armour at its 1,000 stores should not cut into sales, since Foot Locker will have a much narrower assortment.  

He expects the marketing dollars UA and Nike will pump into launching new athletic shoes in 2008 will stimulate sales.

Stack said Dick’s private branding strategy, in which it secures exclusive rights to branded merchandise, is yielding margins comparable to its private label business.

Looking ahead, the likelihood of a late spring and a weaker economy prompted DKS to estimate that its comp stores sales –  including Golf Galaxy but excluding Chick’s – would decline by 1% to 4% in the first quarter and be flat to up 1% for the fiscal year. Earnings are expected to grow 12% to 16% to the $1.49 to $1.54 range for the year, but will come in at 16 cents to 19 cents per share in the first quarter, compared to 19 cents in Q1 2007.

DKS ended the fourth quarter with 340 Dick's Sporting Goods stores with 19 million square feet, 79 Golf Galaxy stores with 1.3 million square feet, and 15 Chick's stores with approximately 800,000 square feet. DKS does not plan to convert the Chick’s stores to Dick’s until late in the year at the earliest, when it expects to get a better feel for the California market.

DKS expects to open 46 new Dick’s SG stores, 10 new Golf Galaxy stores this year, including eight and four respectively in the first quarter. The new Dick’s stores will be concentrated in Texas, Arizona and Florida and Golf Galaxy is also looking south where people are playing golf “nine to 12 months out of the year.“