EmailDICK'S Sporting Goods (DKS 36.50, +0.51, +1.42%) will report
third quarter (October) results tomorrow morning.
DICK's is the largest sporting goods retailer in the country with
729 DICK'S Sporting Goods stores in 47 states, 94 Golf Galaxy stores in 32
states and 35 Field & Stream stores in 16 states.
Dick's has reported negative same store sales four quarters in a
row and missed comp estimates three consecutive quarters. The company stopped
providing quarterly guidance this year, but analysts expect adjusted third
quarter earnings will be down 17% with revenue down 3% and comparable store
sales down 4%.
Last quarter, DICK's reported adjusted EPS up 25% despite a 4%
comp sales decline. The company raised fiscal 2019 EPS guidance to $3.02-3.20
from $2.92-3.12 but lowered fiscal 2019 comp sales guidance to a 3-4% decline
from a flat to low single digit decline.
Chief Executive Edward Stack: "We delivered double digit
growth in eCommerce, private brands, and athletic apparel excluding Under
Armour, however, as expected, sales were impacted by the strategic decisions we
made regarding the slow growth, low margin hunt and electronics businesses,
which accounted for nearly half of our comp decline. In addition, we
experienced continued significant declines in Under Armour sales as a result of
their decision to expand distribution. We are very confident our sales
trajectory will improve next year as these headwinds are expected to
subside."
On the call, management said they were excited about a significant
change in direction for the Under Armor business. Meanwhile, athletic apparel is expected to be a strong point this holiday season.
Clearly, negative comp sales are disappointing when consumer
spending is so strong. Meanwhile, athletic apparel is expected to be a strong
point this holiday season.
On the positive side, getting away from low-margin businesses is
expected to result in 70 basis point gross margin expansion for the quarter.
Some analysts are skeptical about whether the company can
sustainably return to positive comparable store sales.
Last quarter, the company repurchased 2.2 mln shares at an average
cost of $33.27 per share, reducing the shares outstanding by ~2%. Dick's has a
$3.6 bln valuation and trades at ~12x earnings versus the average retail
trading at ~15x earnings. Some 24% of the stock's float is sold short. The
options market implies an ~10% move in the stock by Friday.
The company's results may provide a read-through for
suppliers NIKE (NKE), Under Armour (UA, UA)
and Adidas(ADDYY).
