Dick’s Sporting Goods released its full-year and Q4 financial statements Tuesday, revealing poor same-store sales and sending the company’s stock down more than 10 percent to $34.88 once trading began.
In a Nutshell: Despite lower-than-predicted sales, Dick’s Sporting Goods gave its investments in omnichannel and in-store customer experience top billing in its financial review. In its FY18 conference call, the company announced “critical investments” for long-term growth over the next year, including a new multi-day footwear training program for its employees.
Dick’s will also begin working with Google and Facebook to increase its e-commerce penetration after its online sales increased by 17 percent in FY18. New in-store technology investments, specifically giving employees the ability to instantly check available stock, will be added in FY19 to complement this success. Additionally, the company will open two new e-commerce fulfillment centers in Q3 of FY19 located in California and New York.
Dick’s also announced that it would be ending the sale of firearms at 125 additional locations in 2019. The company based this decision on the success of the 10 stores that were part of a pilot program conducted prior to the announcement. During its conference call, Dick’s stated that, once its “Hunt” section was replaced with a “more compelling assortment,” affected stores boasted strong comparable sales and better margins. Using that data, Dick’s then selected a large collection of stores that fit the same profile as the test group.
Sales: Net sales for the company decreased by 6.5 percent in Q4 to approximately $2.49 billion. Consolidated same-store sales also decreased by 2 percent in the quarter. Analyst estimates had sales slightly lower at $2.48 billion for the quarter.
For the full year, Dick’s reported a 3.1 percent decrease in same-store sales and $8.44 billion in total sales. Total sales for the year also came in just above analyst estimates of $8.43 billion and markedly below the $8.59 billion earned in 2017. E-commerce penetration represented approximately 23 percent of total sales for the company during the year, up from 19 percent at the end of FY17.
Dick’s expects to see anywhere from flat to a 2 percent increase in consolidated same-store sales in FY19, with gains beginning in the second quarter.
Earnings: The company reported fourth-quarter EPS of $1.07, compared to $1.11 in Q4 of FY17 and the $1.06 gain expected by analysts. During this time the company earned $102.5 million in net income, lower than the $115.9 million it received last year.
For all of FY18, Dick’s reported EPS was $3.24, an 8 percent increase over the $3.01 mark set in FY17. It also reported annual net income of $319.9 million for the year, down from $323.4 in the comparable timeframe. Analysts projected an EPS of $3.23 for the year.
Dick’s expects to earn between $3.15 and $3.35 per share in FY19, including approximately $30 million in investments—equivalent to an impact of 23 cents per share. The company currently has $433 million authorized for share repurchases, which it expects to fully offset this cost.
CEO’s Take: Edward W. Stack, chairman and CEO of Dick’s Sporting Goods, referenced a higher annual EPS and exciting new initiatives as reasons for investors to be excited for the future of the retail chain in his annual earnings statement.
“We are pleased with our fourth quarter results. Our core business performed quite well, as our athletes have responded positively to many of our initiatives, resulting in comp sales gains across key categories and double-digit percentage increases in eCommerce and private brand sales,” Stack said. “For 2018, we delivered earnings near the high end of our expectations, which represents an 8% increase over last year. This achievement is the direct result of the hard work and commitment from our over 40,000 talented teammates.”