DICK’S Revenue Jumps on Higher Merchandise Sales

Retailer’s net sales jumped 7.9% to approximately $2.0 billion during Q2 FY16

d1Sports goods retailer DICK’S Sporting Goods Inc. (NYSE: DKS) announced its Q2 FY16 financial results on August 16th, 2016.

The Coraopolis, Pennsylvania-based Company is a full line omni-channel sporting goods retailer offering an assortment of sports equipment, apparel, footwear and accessories in its specialty retail stores in the eastern part of the U.S. The Company also owns and operates Golf Galaxy, Field & Stream and other specialty concept stores, as well as e-commerce websites at www.DICKS.com, www.golfgalaxy.com, www.fieldandstreamshop.com and www.caliastudio.com.

The Company operates approximately 640 Dick’s Sporting Goods stores in over 50 states; approximately 70 Golf Galaxy stores in over 30 states, and about 20 Field & Stream stores in over nine states. Each of its Dick’s Sporting Goods stores contains specialty shops such as footwear, team sports, outdoor lodge, golf, fitness and athletic apparel. Read more about DICK’S Sporting Goods’ financial results below.

Q2 FY16 financial highlights

Source: Company's Website
Source: Company’s Website

During Q2 FY16, DICK’S Sporting Goods’ net sales jumped 7.9% to approximately $2.0 billion. The revenue growth can be attributed to higher merchandise sales spurred by sports championships won by the Pittsburgh Penguins professional ice hockey team and the Cleveland Cavaliers. DICK’S also benefitted from a retail environment that favored sporty clothes and the retailer’s casual-sportswear lines. Consolidated same store sales rose 2.8% during the reporting quarter. Same store sales for DICK’S Sporting Goods increased 3.0%, while Golf Galaxy decreased 4.3%. Online sales accounted for 8.5% of total sales during the reporting quarter, compared with 7.3% in the year-ago quarter.

The Company had earlier forecasted a sales decline on the grounds that stores in the vicinity of rival Sports Authority Inc.’s locations would be negatively impacted by closeout sale of the latter. Sport Authority filed for bankruptcy in March 2016 and was liquidating its stocks through the summer. However, DICK’S benefited later during the quarter owing to depleting stocks at its competitor’s stores.

As a result, DICK’S posted a quarterly profit of $91.4 million, or $0.82 per share, compared with $90.8 million, or $0.77 per share, in the year-ago period.

Other highlights

Source: Company's Website
Source: Company’s Website

Store Update: During Q2 FY16, DICK’S opened five new DICK’S Sporting Goods stores. Store count increased to 709 stores from 747 stores in the year-ago period. Square footage also increased marginally to 37.1 million square feet from 37 million square feet in the year-ago period.

The Company also relocated two DICK’S Sporting Goods stores. Additionally, the Company closed three DICK’S Sporting Goods stores and one Golf Galaxy store. As of July 30th, 2016, the Company operated 649 DICK’S Sporting Goods stores in 47 states, with approximately 34.6 million square feet, 72 Golf Galaxy stores in 29 states, with approximately 1.3 million square feet, and 21 Field & Stream stores in ten states, with approximately 1.1 million square feet. Furthermore, the company plans to open 36 new stores and relocate 9 stores in 2016, the majority of which is expected to occur in Q3 FY16.

Cash flow: The Company ended Q2 FY16 with approximately $112 million in cash and cash equivalents and approximately $152 million in outstanding borrowings under its revolving credit facility.

Inventory: As of July 30th, 2016, total inventory increased 6.2% as compared to the end of Q2 FY15. This increase includes the impact of cold-weather merchandise from FY15 being held for the FY16 winter season.

CFO quits: On August 12th, 2016, DICK’S announced that Ms. Teri List-Stoll is no longer chief financial officer and that André Hawaux, the company’s chief operating officer, will fill the role on an interim basis until a successor is found.

Wins Sports Authority brand name in bankruptcy auction: DICK’S prevailed at the auction for Sports Authority Holdings Inc.’s brand name and other intellectual property with a bid of $15 million, beating British retailer Sports Direct International PLC, as announced on June 30th, 2016. The Company plans to convert some former The Sports Authority locations to Dick’s Sporting Goods stores, although it has not yet fully determined which leases to extend and which to let expire. Sports Authority closed all of its 450 locations in May 2016 enabling DICK’S to capitalize on a larger market share.

Dividend and Share repurchases

d4On August 11th, 2016, DICK’S Board of Directors authorized and declared a quarterly dividend in the amount of $0.15125 per share on the Company’s Common Stock and Class B Common Stock. The dividend is payable in cash on September 30th, 2016, to stockholders of record at the close of business on September 9th, 2016.

Over the past year, DICK’S continued to invest in omni-channel growth, while returning over $380 million to shareholders through share repurchases and quarterly dividends.

During Q2 FY16, DICK’S repurchased approximately 1.3 million shares of its common stock at an average cost of $42.60 per share, for a total cost of $57 million. So far during FY16, DICK’S has repurchased approximately 2.4 million shares of its common stock at an average cost of $44.47 per share, for a total cost of $107 million. Since the beginning of FY13, DICK’S has repurchased approximately $920 million of its common stock, and has $1.1 billion remaining under its authorizations that extend through 2021.

Guidance for Q3 FY16 and full year FY16

For Q3 FY16, DICK’S expects earnings of $0.39 to $0.42 per share. Same-store sales are expected to rise between 2% to 3%. For the full year FY16, DICK’S predicts earnings of $2.90 to $3.05 per share, compared with the previously forecast range of $2.60 to $2.90.

The retail sector at large is facing intense competition from online retailers and discounts stores; however, DICK’S offers a unique experience since trying out a baseball glove or bicycle cannot be done through the online medium. Moreover, DICK’S is poised for further growth since consumers continue to become more health-conscious and drive the need for sportswear and sporting goods in general.

Stock Performance

d5DICK’S Sporting Goods’ stock ended the day at $58.72, gaining 0.20%, at the close on Thursday, August 25th, 2016, having vacillated between an intraday high of $58.93 and a low of $58.45 during the session. The stock’s trading volume was at 1,242,884 for the day. The Company’s market cap was at $6.65 billion as of Thursday’s close.

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