A profitable 2019 lead to earnings and sales beats for Dick’s Sporting Goods, but looming supply chain issues related to the coronavirus (COVID-19) have dropped the low end of the retailer’s projections for next year.
In a Nutshell: Continuing down the path it set out last year, Dick’s will be removing the “Hunt” category from 440 additional stores in 2020 so that firearms will not be available to purchase in the majority of its 850 stores by the end of the year.
The retailer also warned that the coronavirus outbreak has the potential to cause supply chain disruption and limit results in the second quarter of fiscal 2020. Due to this possible impact, Dick’s said it has adjusted the low end of its outlook to reflect caution regarding the effect the virus may have on sales and inventory.
After Dick’s saw 6 percent growth in Q3 same-store sales due to continued work integrating omnichannel services like BOPIS into its business, company president Lauren R. Hobart remained positive about achieving growth over the next year.
“We remain focused on driving positive results through an improved service and selling culture, while continuing to improve our omnichannel experience through faster and more reliable delivery as well as improved functionality and performance of our website,” Hobart said in a statement.
Sales: In Q4, Dick’s generated sales of $2.61 billion, an increase of 4.7 percent and above the $2.57 billion projected by Wall Street analysts. This result came on top of a 5.3 percent increase in consolidated same-store sales, compared to a decrease of 2.2 percent in 2018.
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“We are very pleased with our strong fourth-quarter results,” Dick’s Sporting Goods CEO Edward R. Stack said. “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.”
E-commerce sales continue to grow for the sporting goods retailer, up 15 percent in the fourth quarter and penetrating approximately 25 percent of Dick’s net sales—growing 2 percent over the comparable period.
For the full year, Dick’s recorded net sales of $8.75 billion, growing by 3.7 percent over the comparable period and beating the average Wall Street estimate of $8.7 billion. Same-store sales rose by 3.7 percent during the year, above Dick’s initial guidance of a 2.5 percent to 3 percent increase and the strongest comp gain since 2012, according to Stack.
Dick’s expects same-store sales to be flat to up around 2 percent in fiscal 2020, a reflection of its caution regarding coronavirus impacts.
Earnings: In Q4, Dick’s earned $113.3 million in non-GAAP net income for earnings per share (EPS) of $1.32 compared to Wall Street estimates of $1.22.
Dick’s recorded non-GAAP earnings of $3.69 in fiscal 2019, up 14 percent over the EPS achieved in 2018 and above the $3.60 estimated by Wall Street analysts. The company expects to earn approximately $3.60 to $4.00 per diluted share in fiscal 2020.
CEO’s Take: Stack said Dick’s would be working to reimagine the customer experience within its stores in order to help differentiate the business as retail faces yet another headwind.
“As we enter 2020, we remain enthusiastic about our business and have been pleased with our start to the year,” Stack said. “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,” he added.