10 Mar Dick’s Q4 Earnings Beat Targets, To Remove Hunt From 440 Stores
Dick’s Sporting Goods reported fourth-quarter earnings topped Wall Street’s expectations as same-store sales rose 5.3 percent. The retailer also announced it was removing the hunt category from another 440 stores.
Fourth Quarter Results
The company reported consolidated net income for the fourth quarter ended February 1, 2020 of $69.8 million, or $0.81 per diluted share. The company reported consolidated net income for the fourth quarter ended February 2, 2019 of $102.6 million, or $1.07 per diluted share.
On a non-GAAP basis, the company reported consolidated net income for the fourth quarter ended February 1, 2020 of $113.3 million, or $1.32 per diluted share, exceeding Wall Street’s average target of $1.22.
Fourth quarter 2019 non-GAAP results exclude pre-tax hunt restructuring charges of $48.8 million, which included $35.7 million of non-cash impairments related to a trademark and store assets and a $13.1 million write-down of inventory, resulting from the company’s decision to remove the hunt department from approximately 440 additional Dick’s Sporting Goods stores in fiscal 2020.
Net sales for the fourth quarter of 2019 increased 4.7 percent to approximately $2.61 billion, topping 2.57 Wall Street’s consensus estimate of $2.57 billion.
Consolidated same-store sales increased 5.3 percent. Fourth-quarter 2018 consolidated same-store sales decreased 2.2 percent, adjusted for the calendar shift due to the 53rd week in fiscal 2017, which the company believes is the best view of its business.
“We are very pleased with our strong fourth-quarter results. Despite the compressed holiday selling season and the challenging conditions we faced with unseasonably warm weather, we delivered a 5.3 percent comp sales increase, supported by increases in both average ticket and transactions, as well as growth across each of our three primary categories of hardlines, apparel and footwear,” said Edward W. Stack, chairman and chief executive officer. “During 2019, we made meaningful changes across our business, which fueled our strongest annual comp sales gain since 2012 and a 14 percent increase in non-GAAP earnings per diluted share over 2018. I’d like to thank all our teammates for their hard work and commitment to Dick’s Sporting Goods, which made this performance possible.”
Stack continued, “As we enter 2020, we remain enthusiastic about our business and have been pleased with our start to the year. We are excited to continue to focus on and enhance our 2019 strategies, which include optimizing our inventory and floor space, delivering differentiated merchandising and driving athlete engagement across all channels. Our outlook balances this enthusiasm with a degree of caution over the coronavirus and how it may impact our business.”
Lauren R. Hobart, president, added, “In 2019, we developed strong momentum in our stores and online. Our efforts demonstrate that when we focus on serving our athletes, we can drive a meaningful impact on sales. We remain focused on driving positive results through improved service and selling culture while continuing to improve our omni-channel experience through faster and more reliable delivery as well as improved functionality and performance of our website.
E-commerce sales for the fourth quarter of 2019 increased 15 percent. E-commerce penetration for the fourth quarter of 2019 was approximately 25 percent of total net sales, compared to approximately 23 percent during the fourth quarter of 2018.
In the fourth quarter, the company closed seven Dick’s Sporting Goods stores and one Golf Galaxy store. As of February 1, 2020, the company operated 726 Dick’s Sporting Goods stores in 47 states, with approximately 38.5 million square feet, 94 Golf Galaxy stores in 32 states, with approximately 2.0 million square feet and 27 Field & Stream stores in 16 states, with approximately 1.2 million square feet.
The company ended the fourth quarter of 2019 with approximately $69 million in cash and cash equivalents and approximately $224 million in outstanding borrowings under its $1.6 billion revolving credit facility. Over the course of the last 12 months, the company continued to invest in omni-channel growth, while returning over $500 million to shareholders through share repurchases and quarterly dividends.
Total inventory increased 21 percent at the end of the fourth quarter of 2019 as compared to the end of the fourth quarter of 2018. This planned increase was due primarily to strategic investments to support key growth categories.
Full Year Results
The company reported consolidated net income for the 52 weeks ended February 1, 2020 of $297.5 million, or $3.34 per diluted share. For the 52 weeks ended February 2, 2019, the company reported consolidated net income of $319.9 million, or $3.24 per diluted share.
On a non-GAAP basis, the company reported consolidated net income for the 52 weeks ended February 1, 2020 of $329.1 million, or $3.69 per diluted share, which excludes hunt restructuring charges, a gain on the sale of subsidiaries, non-cash asset impairments and the favorable settlement of a litigation contingency.
Net sales for the 52 weeks ended February 1, 2020 increased 3.7 percent to approximately $8.75 billion. Consolidated same-store sales also increased 3.7 percent. Consolidated same-store sales decreased 3.1 percent for the 52 weeks ended February 2, 2019, adjusted for the calendar shift due to the 53rd week in 2017, which the company believes is the best view of its business.
On March 6, 2020, the company’s Board of Directors authorized and declared a quarterly dividend in the amount of $0.3125 per share on the company’s Common Stock and Class B Common Stock. The dividend is payable in cash on March 27, 2020 to stockholders of record at the close of business on March 20, 2020. This dividend represents an increase of 13.6 percent over the company’s previous quarterly per share amount and is equivalent to an annualized dividend of $1.25 per share.
During the fourth quarter of 2019, the company repurchased approximately 759,000 shares of its common stock at an average cost of $47.53 per share, for a total cost of $36.1 million. Throughout fiscal 2019, the company repurchased approximately 11.1 million shares of its common stock at an average cost of $36.40 per share, for a total cost of $402.2 million. Under the five-year share repurchase program authorized by the Board of Directors in March 2016, the company has repurchased approximately $969 million of common stock and has approximately $31 million remaining under the program. On June 12, 2019, the company’s Board of Directors authorized an additional five-year share repurchase program of up to $1 billion of the company’s common stock. The company plans to continue to purchase under the 2016 program until it is exhausted or expired.
Full Year 2020 Outlook
The company’s outlook balances the enthusiasm it has for its business with the rapidly evolving coronavirus situation. Accordingly, the low-end of the company’s outlook includes some caution related to supply chain disruption potentially impacting its results beginning in the second quarter.
Based on an estimated 85.5 million diluted shares outstanding, the company currently projects earnings per diluted share to be approximately $3.60 to 4.00. The company’s earnings per diluted share guidance only includes the expectation of share repurchases to fully offset dilution in 2020. The company reported earnings per diluted share of $3.34 for the 52 weeks ended February 1, 2020. On a non-GAAP basis, the company reported earnings per diluted share of $3.69 for the 52 weeks ended February 1, 2020. Dick’s guidance is in line Wall Street’s consensus estimate of $3.85.
Consolidated same-store sales are currently expected to be approximately flat to an increase of 2 percent, compared to a 3.7 percent increase in 2019.
The company expects to open nine new Dick’s Sporting Goods stores and six new Golf Galaxy stores in 2020. The company also expects to relocate 14 Dick’s Sporting Goods stores and relocate three Golf Galaxy stores in 2020.
In 2020, the company anticipates capital expenditures to be in the range of $330 to 390 million on a gross basis and in the range of $235 to 295 million on a net basis. In 2019, capital expenditures were $217 million on a gross basis and $180 million on a net basis.