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Dick’s Sporting Goods ‘Bent the Curve’ On Q2 Sales, Raises Annual Outlook

Dick’s Sporting Goods released its second-quarter financial results Wednesday, showcasing strong performance over the last few months and spurring a reappraisal of its annual earnings guidance after it was raised in the first quarter.

In a Nutshell: Dick’s said it has continued to invest in omnichannel growth throughout the year after making it a priority for FY19. In its Q2 report, the retailer said its current earnings guidance assumes an additional $30 million in net investment to that end, as a part of its ongoing business transformation initiatives.

This transformation will likely include the end of Dick’s assessment of its hunting business, which has been under review for several quarters after political and economic pressure led the retailer to question the ongoing viability of the category.

Dick’s also reported the sale of two in-house technology companies, Blue Sombrero and Affinity Sports, to Stack Sports (no affiliation with chairman and CEO, Edward Stack) for $45 million, which will be accounted for in the third quarter.

Additionally, the retailer increased its inventory by 19 percent at the end of the quarter compared to the comparable period, a result of what Dick’s calls “strategic investments to support key growth categories.” Dick’s also said its current guidance includes all impacts associated with existing tariffs and the expected 10 percent increase in tariffs on additional goods from China, set to roll out in waves, starting in September and then again in December.

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Sales: Same-store sales at Dick’s Sporting Goods increased by 3.2 percent over the comparable period for a total of $2.26 billion in Q2 revenue, a result the retailer attributes to increases in both purchase averages and transaction rate. Overall, its second-quarter performance gave Dick’s its best quarterly comp sales gain in three years, handily beating Wall Street expectations of $2.21 billion. Net sales were also up 3.8 percent over the previous year at $2.26 billion.

“During the second quarter, we made great progress in executing against our strategic priorities and investments,” Dick’s Sporting Goods president, Lauren R. Hobart, added in a statement. “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, Dick’s increased its e-commerce sales in the second quarter by 21 percent, boosting the overall penetration of the category by 1 percentage point over the comparable period, now totaling 12 percent of all sales. The retailer also said it would be opening two new fulfillment centers over the next week to further boost its e-commerce capabilities and grow out its digital sales.

Dick’s Sporting Goods still expects its annual same-store sales to grow by low single-digits.

Earnings: Beating Street expectations once again, Dick’s turned in earnings per diluted share of $1.26, 6 cents higher than the comparable period and comfortably above analyst expectations of $1.21. Consolidated net income reached $112.5 million.

Due to its strong performance in the first half of the year, Dick’s raised its annual earnings expectations once again, now resting in the range of $3.30 to $3.45 from the previous mark of $3.20 to $3.40.

CEO’s Take: Pleased with the company’s performance amid a retail environment that has taken a toll on most of its peers, Dick’s Sporting Good’s chairman and CEO, Edward Stack, praised his team’s ability to adapt to the changing circumstances of the industry and remarked that they had “bent the curve” when it comes to sales.

“We are very pleased with our second-quarter results, as we delivered a 3.2 percent comp sales increase and earnings per diluted share above last year. 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%,” Stack explained. “Our key strategies and investments are working, our major headwinds are behind us and we’ve bent the curve on sales. We are very enthusiastic about our business and are pleased to increase our full-year sales and earnings outlook.”