Dick's Sporting Goods
Dick’s Sporting Goods, the largest sporting goods retailer in the United States, posted its strongest fiscal third-quarter earnings ever topping Wall Street estimates. The company also raised its guidance for the full year.
Revenue in Q3 increased 14% y-o-y to $2.75 billion. Same-store sales, at stores open for at least 12 months, climbed 12.2%, beating analyst forecasts for a gain of only 1.9%. Online sales rose just 1% year-on-year. However, on a two-year basis online shopping is up 97% and now makes up 19% of revenues, from 13% in 2019.
Dicks announced a tie-up with its biggest brand vendor, Nike, in the quarter to allow customers to shop for exclusive Nike shoes and apparel on Dick’s website. Net income rose 79% to $316.5 million, or $2.78 per share, from the same period a year earlier. Excluding once-off items, Dick’s earned $3.19 per share, ahead of the $1.97 that analysts had been expecting.
Dick’s launched its own men’s athleisure brand, VRST this year, which it says, along with other own brands, performed well in the quarter. Dick’s also this year opened its largest store in Rochester, New York, (to attract walk-in shoppers) called the House of Sport, which comes complete with an indoor rock-climbing wall, putting green, health and wellness shop, and an astroturf and athletics track outside. Shares are up over 125% year-to-date giving the retailer a market cap of $11.28 bn.
Dick’s Chief Executive Officer Lauren Hobart said that consumer demand has remained strong after the back-to-school rush and summer season. Dick’s now expects sales of between $12.12 billion and $12.19 billion for the full-year. Previously, the sports goods retailer was expecting sales of $11.52 billion to $11.72 billion. Dick’s is now forecasting earnings in the region of $12.88 to $13.06 per share. After adjusting for Covid-19-related expenses, that would put earnings between $14.60 and $14.80 per share. Previously Dicks had estimated full-year adjusted earnings to be between $12.45 and $12.95 per share.
Dicks is trading on price earnings multiple of 9.8x which is in line with that of the US specialty retail average of 10.2x. The company has grown earnings 30.3% annually over the past 5 years but earnings are expected to come under pressure in the coming years. The company has low debt and reasonable free cash flows. Most metrics indicate it is a well-run business. Dick’s is on a dividend yield of 1.37%, however, it has an unstable dividend track record. And it is also concerning that insiders have been sellers of the stock over the past 9 months. We are instead owners of Amazon.com in the retail space but will keep an eye on this counter for any possible opportunities.