Dick's Sporting Goods Inc.
), a full-line sporting goods retailer, first-quarter 2012 adjusted
earnings per share jumped 50% to 45 cents a share from the year-ago
level of 30 cents a share, surpassing the company's guidance range
of 36 - 38 cents per share. Earnings per share also topped the
Zacks Consensus Estimate by 7 cents per share.
Solid results in the quarter were mainly driven by increased
sales resulting from opening of new stores, better-than-expected
comps and improved margins.
An increase of 8.4% in consolidated comparable-store sales
(comps) and opening of new stores aided the 15.1% growth in net
sales during the quarter. Net sales jumped to $1,281.7 million from
$1,113.8 million in the year-ago quarter. Total revenue also
surpassed the Zacks Consensus Estimate of $1,232.0 million.
The 8.4% comps growth in the quarter spiked substantially from
the company's March 2012 guidance range of 3%-4%. The increase in
comps was driven by a 7.3% rise in Dick's Sporting Goods store
sales, 12.6% increase in Golf Galaxy store sales and a 33.4% growth
in e-commerce business.
First quarter gross profit came in at $394.6 million, up 19.4%
year over year, with gross margin expanding 110 basis points to
30.8%. Adjusted EBITDA in the quarter increased 34.7% year over
year to $125.3 million, with EBITDA margin expanding 150 basis
points to 9.8%.
Dick's ended the first quarter of fiscal 2012 with cash and cash
equivalents of $521.0 million, shareholders' equity of $1,596.2
million and no borrowing outstanding under its credit facility. The
company incurred net capital expenditures of $41.3 million in the
first quarter of fiscal 2012. Inventory per square foot during the
quarter spiked 6.6% compared to the year-ago quarter.
Dividend and Share Repurchase
Dick's Sporting has always been committed to create value to its
shareholders by returning capital in the form of dividends. To
improve shareholders' wealth, the company has recently declared a
quarterly dividend of 1.25 cents per share, payable on June 29,
2012 to shareholders of record as of June 1, 2012.
In January 2012, Dick's approved a $200 million share repurchase
program spanning over the next 12 months. With this program, the
company aims to reduce the number of shares outstanding in 2012,
which is expected to rise from the exercise of a substantial number
of stock options issued following the company's 2002 initial public
offering. These stocks options, which are set to expire in 2013,
carry an option to be exercised in 2012, resulting in the issuance
of additional shares.
During the first quarter of 2012, the company bought back nearly
2.1 million shares, at an average price of $49.39 per share. This
brings the company's total share repurchase cost for the period to
about $104 million.
Subsequent to the first quarter, the company bought back the
remaining authorization available under the $200 million program on
May 14, 2012. Therefore, the company bought back a total of nearly
4.1 million shares at an average price of $49.33 per share, for
total company cost of $200 million. The company fully funded the
repurchase from its available cash on hand.
In the reported quarter, Dick's opened six Dick's Sporting Goods
stores, bringing the Dick's Sporting Goods stores total to 486
stores in 44 states. Additionally, the company operated 81 Golf
Galaxy stores in 30 states at quarter end.
For the second quarter of fiscal 2012, Dick's expects earnings
per share to be between 62 cents and 63 cents and comps to rise in
the band of 2%-3%. In the second quarter, Dick's plans to further
expand its stores network by opening four more Dick's Sporting
For fiscal 2012, management expects earnings in the range of
$2.45 to $2.48 per share, while comps are expected to increase in
the 3%-4% range. Store openings for fiscal 2012 are expected to be
approximately 40 Dick's Sporting Goods stores. Moreover, the
company also plans to relocate about five Dick's Sporting Goods
stores and two Golf Galaxy stores in 2012.
For 2012, the company expects to incur capital expenditures of
$241 million on a gross basis and $190 million on a net basis.
Pittsburgh-based Dick's Sporting Goods remains the dominant
player in the industry with significant store expansion and
potential share gain opportunities in the U.S. The company's
outlook for 2012 looks bright given the company's continued
investments in new stores and e-commerce business as well as in
practices that drive margin expansion including inventory
management, private brands, and product mix shift.
However, the sporting goods market is highly competitive in
nature and Dick's failure to compete effectively in terms of price,
quality or product will thwart its growth potential. The company
faces stiff competition from
Foot Locker Inc.
Wal-Mart Stores Inc.
). Moreover, a weak economy will likely continue to weigh on the
company's profitability in the long term.
Dick's Sporting Goods currently has a short-term Zacks #2 Rank
(Buy). We maintain our long-term 'Neutral' recommendation on the
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