DICK'S Sporting Updates Fiscal '17 Plans; Stock Down - Analyst Blog

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DICK'S Sporting Goods Inc.DKS declared its fiscal 2017 targets and strategic plans in a Analyst Meet, held yesterday, which are directed toward enhancing sales, operating profit and shareholder returns.

DICK'S Sporting revealed that it expects sales for fiscal 2017 to lie in a band of $8.7-$9.0 billion, which would result in a 3-year compounded annual growth rate (CAGR) of roughly 8%-10% from sales of $6.8 billion recorded in fiscal 2014. This is below the company's previously announced fiscal 2017 sales target of over $10 billion.

Shares of DICK'S Sporting slipped a little over 2% since this pre-market announcement.

The company intends to increase its operating margin by nearly 80-130 basis points to 9%-9.5% by fiscal 2017. DICK'S Sporting plans to achieve this by improving its gross margin and selling, general and administrative expenses. Consequently, earnings per share are projected to escalate at a CAGR of 12%-16% by fiscal 2017.

Alongside, the company provided an insight into its capital allocation plans through fiscal 2017. DICK'S Sporting maintains its practice of allocating capital efficiently via share repurchases, dividend payouts and investments in its businesses.

The company plans to make annual buybacks worth $100-$200 million, going by its $1 billion 5-year share repurchase authorization. Moreover, it will continue paying regular quarterly dividends, underscoring its focus on boosting shareholder value.

DICK'S Sporting is committed to driving growth through expansion. Coming to its business growth endeavors, the company anticipates incurring nearly $850 million as net capital expenditure over the next three years, concentrated on store openings, store remodeling and eCommerce.

Going forward, this Zacks Rank #3 (Hold) company plans to take its store count to about 735-750 by the end of fiscal 2017, compared with 603 at the end of fiscal 2014. This is below the company's previous target of opening 800 stores. Also, it plans to introduce about 9 Field & Stream concept stores in fiscal 2015 and nearly 5-8 of these stores each in fiscal 2016 and fiscal 2017, taking its total Field & Stream concept store count to 30-35 by 2017 end.

Moving to its eCommerce enhancement strategies, the company expects to have its eCommerce site on its own platform in Jan 2017. With the successful launch of its GolfGalaxy.com site in Mar 2015 and the expected launch of its Field & Stream site in Fall 2015, the company aims to augment its eCommerce sales to about $1-$1.2 billion in fiscal 2017 from $628 million recorded in fiscal 2014.

Finally, the company reiterated its first-quarter and fiscal 2015 guidance. For fiscal 2015, the company still expects earnings per share in the range of $3.10-$3.20, with comparable store sales (comps) growth in the band of 1%-3%. For the first quarter, earnings are anticipated in a band of 49-53 cents a share, while comps are expected in a flat-to-positive 2% growth range.

Overall, it is evident that the company is focused on exploiting all possible growth opportunities, in order to capture a sizable market share. We believe that the company's strategic measures of consolidating its store base and the use of technology are likely to effectively promote its products, thereby boosting both top and bottom lines in addition to driving long-term shareholder value.

Stocks to Consider

Better-ranked stocks in the same industry include Build-A-Bear Workshop Inc. BBW , with a Zacks Rank #1 (Strong Buy), and Office Depot, Inc. ODP and Tractor Supply Company TSCO , each carrying a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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