Dick’s Sporting Goods Can Do No Wrong, It Seems

August 22, 2019 by Paul Ausick

Dick’s Sporting Goods Inc. (NYSE: DKS) reported second-quarter 2019 results before markets opened Thursday. The retailer reported adjusted diluted earnings per share (EPS) of $1.26 on revenues of $2.26 billion. In the same period a year ago, the company reported EPS of $1.20 on revenue of $2.18 billion. Second-quarter results also compare to consensus estimates for EPS of $1.21 and $2.21 billion in revenue.

Same-store sales for the second quarter jumped by 3.2% compared to the same period last year. Adjusted EPS for the first half of 2019 totaled $1.86 and excludes a noncash impairment charge of $7.6 million and a favorable litigation settlement of $6.4 million. There were no adjustments in the second quarter.

CEO Edward W. Stack said:

Our strong comp sales performance was driven by increases in both average ticket and transactions and represented our strongest quarterly comp since 2016. We saw growth across each of our three primary categories of hardlines, apparel and footwear, our brick-and-mortar stores comped positively and our eCommerce channel remained strong, increasing 21%

Lauren R. Hobart, the company’s president, added:

Our stores have really championed our new service standards, and their efforts are moving the needle by supporting improved conversion rates and our return to positive brick-and-mortar store comps during the second quarter. Additionally, we remain focused on continuously improving our online experience, and the opening of our two new eCommerce fulfillment centers earlier this week will provide our athletes with faster and more reliable delivery.

Dick’s raised full-year EPS guidance from a prior range of $3.20 to $3.40 to a new range of $3.30 to $3.45. Full-year same-store sales are projected to rise by low single-digits, compared with a decline of 3.1% in 2018. The company plans to open eight (one more than last quarter’s guidance) new Dick’s stores and relocate three others this year, and gross capital spending guidance is unchanged at $230 million, up from $198 million in 2018.

For the third quarter, analysts expect EPS of $0.36 and sales of $1.89 billion. For the full year, the consensus estimates call for full-year EPS of $3.31 and sales of $8.57 billion.

There could be two ways of looking at the company’s results. Following the February 2018 school shooting in Parkland, Florida, Dick’s announced that the company would stop selling assault-style weapons. The backlash could have been partly or largely responsible for the company’s weak 2018 same-store sales results and 2019 results are returning same-store sales to the status quo ante. Alternatively, the company’s initiatives in new stores and spending on e-commerce could be driving comparable sales higher despite the sales ban. Two weeks ago, CEO Stack told MSNBC that if Dick’s had a chance to reconsider its decision to stop selling assault-style rifles, “[W]e’d do it all again and we’d do it the same way.”

Dick’s shares traded up more than 12% in Thursday’s premarket, at $36.80 in a 52-week range of $29.69 to $41.21. The 12-month consensus price target was $37.15 before this morning’s announced results.