12/03/2013

Business news : Dick's SG Hits Low End of Q4 Profit Guidance on Weaker DSG Comps

Dick's Sporting Goods, Inc. reported consolidated net income for the 14 weeks ended Feb. 2, 2013 of $129.7 million, or $1.03 per diluted share, compared to the company's expectations provided on November 13, 2012 of $1.03 to $1.05 per diluted share. The fourth quarter includes approximately 3 cents per diluted share for the 14th week. For the fourth quarter ended January 28, 2012, the company reported consolidated net income of $111.1 million, or 88 cents per diluted share. 

Net sales for the 14-week quarter increased 12.0 percent to $1.8 billion, driven by the growth of retailer's store network, a 1.2 percent increase in consolidated same-store sales on a 13-week to 13-week basis, and the inclusion of the 14th week of sales. The 1.2 percent consolidated same-store sales increase consisted of a 2.2 percent decrease at Dick's Sporting Goods stores, a 1.3 percent increase at Golf Galaxy and a 54.2 percent increase in the e-commerce business.  By chain, including eCommerce business, Dick's Sporting Goods same-store sales increased 1.2 percent and Golf Galaxy same-store sales increased 1.3 percent. "In the fourth quarter, we experienced continued momentum in athletic footwear and apparel along with strong sales in hunting that exceeded our expectations. These increases were partially offset by lower-than-anticipated sales in outerwear and cold weather accessories, as well as a significant decline in the fitness category," said Edward W. Stack, Chairman and CEO. "As a result of the unusually warm weather conditions, including during peak selling periods in December, we significantly reduced our inventory levels of cold weather merchandise to align with lower consumer demand and avoid carrying over excess inventory after a second year in a row of warm weather. While this was a prudent move that enabled us to effectively manage inventory and protect our margins, it did limit our ability to capture sales in January when temperatures dropped and snowfall increased."

4Mr. Stack continued, "In fitness, the significant comp decline was a result of lower large-equipment sales like treadmills and ellipticals. We understand the issues that contributed to the sales decline and are taking action to correct them."

New Stores
In the fourth quarter, the company opened seven new Dick's Sporting Goods stores, relocated one Dick's Sporting Goods store and repositioned one Golf Galaxy store. These stores are listed in a table later in the release under the heading "Store Count and Square Footage."
As of the end of the fourth quarter, the company operated 518 Dick's Sporting Goods stores in 44 states, with approximately 28.2 million square feet and 81 Golf Galaxy stores in 30 states, with approximately 1.4 million square feet.

Balance Sheet
The company ended fiscal 2012 with $345 million in cash and cash equivalents as compared to $734 million at the end of fiscal 2011, and did not have any outstanding borrowings under its $500 million revolving credit facility. Over the course of the past twelve months, the company utilized capital to fund its $200 million share repurchase program, pay quarterly dividends, purchase its store support center, invest in JJB Sports, acquire intellectual property rights to the Top-Flite and Field & Stream brands,  build a distribution center and fund its $246 million special dividend.
Inventory per square foot was 0.7 percent higher at the end of the fourth quarter of 2012 as compared to the end of the fourth quarter of 2011.

Full Year 2012 Results (53 weeks compared to 52 weeks last year)
The company reported consolidated non-GAAP net income for the 53 weeks ended February 2, 2013 of $318.3 million, or $2.53 per diluted share, excluding an impairment charge and including approximately $0.03 per diluted share for the 53rd week.  For the 52 weeks ended January 28, 2012, the company reported consolidated non-GAAP net income of $253.9 million, or $2.02 per diluted share. 

On a GAAP basis, the company reported consolidated net income for the 53 weeks ended February 2, 2013 of $290.7 million, or $2.31 per diluted share. For the 52 weeks ended January 28, 2012, the company reported consolidated net income of $263.9 million, or $2.10 per diluted share.  The GAAP to non-GAAP reconciliation is included in a table later in the release under the heading "Non-GAAP Net Income and Earnings Per Share Reconciliation."

Net sales for the 53 weeks ended February 2, 2013 increased 12.0 percent from last year's 52-week period to $5.8 billion primarily due to a 4.3 percent increase in consolidated same store sales on a 52-week to 52-week comparable basis and the growth of the company's store network.
"In 2012, we made several important investments for the future, including adding locations, acquiring established brands, developing and testing retail concepts, further building omni-channel capabilities, and creating new marketing strategies," said Mr. Stack. "All of these investments have strengthened our foundation and position us for continued growth. We're optimistic about our outlook for the coming year and excited about our long-term prospects for the future."

2013 Growth Investments
The company will make meaningful investments for the long-term benefit of the business and its shareholders. In 2013, these growth investments include:
  • Strengthening its omni-channel platform, including investments in advanced mobile capabilities, the piloting of pick-up in-store, and growth of the eCommerce team,
  • Remodeling existing stores,
  • Implementing new systems, and
  • Developing new concepts.
In total, the company expects these investments to have a $0.12 impact on earnings per diluted share in 2013. The company's guidance takes these investments into consideration.

Current 2013 Outlook
The company's current outlook for 2013 is based on current expectations and includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as described later in this release.  Although the company believes that the expectations and other comments reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations or comments will prove to be correct.
  • Full Year 2013 – (52 Week Year) Comparisons to Fiscal 2012 – (53 Week Year) 
    • Based on an estimated 126 million diluted shares outstanding, the company currently anticipates reporting consolidated earnings per diluted share of approximately $2.84 to 2.86. For the 53 weeks ended February 2, 2013, the company reported consolidated non-GAAP earnings per diluted share of $2.53, excluding an impairment charge and including approximately $0.03 per diluted share for the 53rd week.  On a GAAP basis, the company reported consolidated earnings per diluted share of $2.31 in 2012. 
    • Consolidated same store sales are currently expected to increase approximately 2 to 3 percent on a 52-week to 52-week comparative basis, compared to a 4.3 percent increase in fiscal 2012.
    • The company expects to open approximately 40 new Dick's Sporting Goods stores, relocate one Dick's Sporting Goods store and complete four full and 75 partial remodels of Dick's Sporting Goods stores in 2013. The company also expects to open one new Golf Galaxy store and relocate one Golf Galaxy store in 2013, both of which will be in the new, larger format.
    • The company expects to open approximately two new True Runner stores and approximately two new Field & Stream stores in 2013.
  • First Quarter 2013
    • Based on an estimated 126 million diluted shares outstanding,the company currently anticipates reporting consolidated earnings per diluted share of approximately $0.47 to 0.49 in the first quarter of 2013, compared to first quarter 2012 earnings per diluted share of $0.45.   
    • Consolidated same store sales adjusted for the shifted calendar due to the 53rd week in 2012 are currently expected to be approximately negative 2 percent to negative 1 percent in the first quarter of 2013, or approximately flat to 1 percent not adjusted, as compared to an 8.4 percent increase in the first quarter of 2012. 
    • The company expects to open approximately two Dick's Sporting Goods stores in the first quarter of 2013.    
      
  • Capital Expenditures
    • In 2013, the company anticipates capital expenditures to be approximately $299 million on a gross basis and approximately $258 million on a net basis.     
         
Dividend
As previously announced on February 19, 2013, the company's Board of Directors authorized and declared a quarterly dividend in the amount of $0.125 per share on the company's Common Stock and Class B Common Stock. The dividend is payable in cash on March 29, 2013 to stockholders of record at the close of business on March 8, 2013. 

Share Repurchase Program
The company announced today that its Board of Directors authorized a share repurchase program of up to $1 billion of the company's common stock over the next five years. The company currently expects to finance the repurchases from cash on hand and if necessary, availability under its credit facility. The company's guidance takes into consideration expected share repurchase activity sufficient to at least offset the dilutive effect of the issuance of shares expected from stock-based awards. The repurchases, which may be made in privately-negotiated transactions or in the open market as permitted by Securities Exchange Act Rule 10b-18, including pursuant to a Securities Exchange Act Rule 10b5-1 repurchase plan, could begin immediately and may occur from time-to-time in the future.  The company may suspend or discontinue this repurchase program at any time.

( Sourc e Dick's sporting goods through SportsOneSource )

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