Dicks Sporting Goods beat Wall Streets estimates for third quarter earnings and raised guidance for the full year. The analysts consensus estimate for DKS was 16 cents a share on revenue of $334.3 million. The quarter included a non-cash expense of $1.3 million related to the closing of the two Ativa womens format test stores, which was more than offset by an after-tax gain of $1.4 million related to the sale of a portion of its non-cash investment in GSI Commerce, the companys e-commerce provider. Pro forma EPS increased 38% to 18 cents compared to 13 cents last year.
Always playing their cards very close to the vest, Dicks provided very little specific color on its Q3 results, but did provide some general statements about the health of certain categories. DKS saw “favorable results” in the women's apparel, team sports, licensed products, and water sports categories, but those positive results were “generally offset” by continued weakness in in-line skates, fishing tackle, and some “aspects of the hunting business”.
The 2.5% same-store sales increase came on top of a 5.1% gain in the third quarter last year.
They did not give monthly color, but said they were “pleased through the Back-to-School season”, but October got “tougher” due to the warm weather issues. The month got better as weather cooled off.
DKS said the average ticket was “about $50”, up about 3.0% from LY.
The company said that the Private Label business “continues to contribute to the growth of our gross margin”, reporting sales of $31.3 million, or 9.2% of sales in the period versus 5.4% of total sales in the year-ago period. Private Label — targeted to become 15% of the business — carries margins about 500 basis points higher than total sales, according to earlier statements from management.
The gross profit line also saw a benefit of approximately $2.0 million from co-op funds that were reclassified from SG&A, which was more than offset by $2.2 million in charges from the closure of the Ativa stores. The increase in GM came primarily from improved merchandise margins, improved productivity at the DC, and lower shrink expense.
Private Label had one seemingly negative effect, an increase in inventory. Total inventory increased 7.0% on a per square foot basis due in large part to the fact the company must take possession of the goods earlier in the period. Adjusting for the PL inventory, the per square foot number increased 4.8% from last year.
The balance of the inventory increase was explained as an “acceleration of certain receipts” to support the growing Under Armour business and strength in the paintball, and licensed apparel categories.
As weve reported in past issues, Dicks has targeted its Private Label toward second-tier vendors, where they feel they can “bring a better quality product at a better price”. They reiterated last week they do not plan to “displace market share” of Nike, or adidas or TaylorMade in the golf category. They also said they work with the “premium vendors” on exclusive special make-up programs.
The 163-store chain is finished adding stores for the year and now estimates fourth quarter earnings of $23.5 million to $23.7 million, or 91 cents to 92 cents a share, with a 1% to 2% increase in same-store sales. Analysts expected to see 91 cents a share on revenue of $459.9 million in Q4, compared to 82 cents a share on sales of $395.2 million in Q4 last year.
DKS raised its full-year earnings outlook to between $50.2 million and $50.4 million, or $1.99 and $2.00 a share, from its previous forecast of $49.0 million, or $1.95 a share. Analysts were looking for $1.96 EPS for the year versus last years EPS of $1.87 on sales of $1.27 billion.
