nine-month highs, up today about 24.2%, shares of specialty retailer Dick's
Sporting Goods (DKS 38.86, +8.38,+27.49%) reacts favorably to this morning’s
first quarter report and raised fiscal year guidance.
Simply put, first quarter earnings of $0.54/share, aided in part by higher merchandise margins, easily beat market expectations while revenue growth of 4.6% to $1.91 bln was enough to beat Street views.
As expected, the company’s firearms policy changes impacted its hunt business which saw an accelerated decline in an already challenged category. Its electronics business, which is primarily fitness tracking, was down in the high double digits as the company is essentially exiting that business.
The revenue performance came in the face of some uncertainty as the Street grappled with just how much the company’s exit from selling assault-style rifles would hurt traffic and sales. Overall, it appears that the Street was pleased that the effect of the company’s decision to stop selling certain rifles didn’t impact results as much as anticipated.
Also, adjusted for the calendar shift due to the 53rd week in 2017, consolidated same store sales decreased 2.5% on a 13-week to 13-week comparable basis. Based on an unshifted calendar, consolidated SSS for the first quarter decreased 0.9%. Consolidated SSS were impacted by a continued deceleration in hunt and electronics sales, as well as colder spring weather, which resulted in a delayed start to key outdoor sports and activities.
Adjusted for the calendar shift due to the 53rd week in 2017, eCommerce sales for the first quarter of 2018 were up 24%. eCommerce penetration for the first quarter of 2018 was about 11% of total net sales, compared to about 9% during the first quarter of 2017.
DKS also raised its full year 2018 EPS guidance to $2.92-3.12, compared to the previous range of $2.80-3.00. Consolidated same store sales are currently expected to be in the range of approximately flat to a low single-digit decline on a 52-week to 52-week comparative basis, compared to a decline of 0.3% in 2017. The company also expects to open 19 new DICK'S Sporting Goods stores and relocate four DICK'S Sporting Goods stores in 2018. The Company does not expect to open any new Field & Stream or Golf Galaxy stores in 2018. In 2018, DKS anticipates net capital expenditures to be around $250 mln. In 2017, net capital expenditures were $373 mln.
As previously discussed, due to the calendar shift following the 53 week year last year, DKS expects its sales and earnings to be positively impacted in the first half of the year and negatively impacted in the back half, for a net neutral impact on the year. The company expects the impact on second quarter sales and earnings to be similar to what the company saw in the first quarter. For the third and fourth quarter management expects subsequent negative impacts to offset the gains in the first two quarters.
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