Full-line sporting goods retailer,
Dick's Sporting Goods Inc.
) third-quarter 2012 earnings per share jumped 25% from the
year-ago level to 40 cents a share, moving past the company's
guidance of 36 cents per share. Earnings per share also beat the
Zacks Consensus Estimate of 37 cents. The results exceeded the
Zacks Consensus Estimates for the fourth straight quarter.
The strong quarterly performance boosted investor sentiments,
which reflected on the company's share price. The company's share
price closed 4.66% higher at $50.97 on November 13, 2012, from
the previous day's closing price of $48.70.
During the quarter, net sales grew 11.2% to $1.312 billion
driven by a 5.1% rise in consolidated comparable-store sales
(comps) and opening of new stores. Total revenue also surpassed
the Zacks Consensus Estimate of $1.296 billion.
The increase in comps was aided by a 3.9% rise in Dick's
Sporting Goods store sales, 2.3% increase in Golf Galaxy store
sales and a 46.7% growth in the e-commerce business. Increase in
comps at the company's Dick's Sporting Goods stores were
primarily driven by a 2.9% increase in sales per transaction and
a 1% increase in customer traffic.
Third quarter gross profit came in at $406.1 billion, up 15.8%
year over year, with gross margin expanding 123 basis points
(bps) to 30.95%. A strong top-line growth along with better
merchandise mix and flat occupancy and distribution costs
resulted in improved gross profit as well as gross margin for the
Adjusted EBITDA in the quarter increased 18% year over year to
$113.8 million, with EBITDA margin expanding 53 bps to 8.68%. The
year-over-year improvement in adjusted EBITDA margin was
primarily driven by expansion in gross profit margin, which was
partially offset by increased selling, general and administrative
(SG&A) expenses as a percentage of net sales.
We believe that the robust performance reflects the company's
sustained focus on enhancing its store network base and
e-commerce capabilities while strategically partnering with
brands and executing marketing plans.
Dick's Sporting ended the third quarter of fiscal 2012 with
cash and cash equivalents of $294.5 million, shareholders' equity
of $1.705.0 billion and no outstanding borrowings under its $500
million credit facility. The company incurred net capital
expenditures of $157.4 million in the first nine months of fiscal
2012. Inventory per square foot, during the quarter, climbed 4%
compared to the year-ago quarter.
Dick's Sporting has always been creating value for its
shareholders by returning capital in the form of dividends. To
improve shareholders' wealth, the company recently declared a
quarterly dividend of 12.5 cents per share, payable on December
28, 2012 to shareholders of record as of November 30, 2012.
In the reported quarter, Dick's Sporting opened 21 Dick's
Sporting Goods stores, bringing the total of Dick's Sporting
Goods stores to 511, spread across 44 states. Additionally, the
company operated 81 Golf Galaxy stores in 30 states at the end of
Moreover, through the starting of the fourth quarter, the
company opened 7 new Dick's Sporting Goods stores and relocated 5
Dick's stores and 1 Golf Galaxy store. By inaugurating 7 new
Dick's stores in the current quarter, the company has achieved
its target of opening a total of 38 new Dick's Sporting Goods
stores, relocating 5 Dick's Sporting Goods stores and
repositioning 1 Golf Galaxy store.
For the fourth quarter of fiscal 2012, Dick's Sporting now
expects earnings per share to be between $1.03 and $1.05,
compared with the year-ago earnings of 88 cents and up from the
previously guided range of $1.01-$1.05. Comps for the upcoming
quarter are expected to rise 4% against a 4.1% increases recorded
in the same quarter last year. Moreover, comps for the quarter
are expected to grow by 4% versus 0.1% growth reported in the
same quarter last year.
For fiscal 2012, management expects earnings in the range of
$2.53-$2.55 per share, while comps are expected to increase by
5%. Earlier, the company was expecting earnings of between $2.47
and $2.51 on the back of a 4%-5% increase in consolidated
For 2012, the company expects to incur capital expenditures of
$235 million on a gross basis and $190 million on a net
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 its 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.
Dick's Sporting currently has a Zacks #2 Rank which translates
into a short-term Buy rating. However, citing a sluggish economic
growth, we remain slightly cautious on the stock, and therefore
maintain a long-term 'Neutral' recommendation. Moreover, the
sporting goods market is highly competitive in nature and Dick's
Sporting's failure to compete effectively in terms of price,
quality or product will thwart its growth potential.
The company's peer
Hibbett Sports Inc
) is expected to release its third-quarter 2012 results before
the market opens on November 16, 2012. We are expecting Hibbett's
earnings to grow over 15% to 68 cents per share from the
comparable prior-year period earnings of 59 cents.
DICKS SPRTG GDS (DKS): Free Stock Analysis
HIBBET SPORTS (HIBB): Free Stock Analysis
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