Dick’s Sporting Goods Trips on Weak Earnings and Soft Outlook

Andrew Klips |

Dick’s Sporting Goods (DKS) reported Monday that a misgauged lowering cold weather inventory, coupled with a reduction in sales of its fitness category, dampened financial results in the fourth quarter ended February 2, 2013.

The largest U.S.-based full line sports gear retailer reported a 12 percent increase in total revenue to $1.81 billion for the quarter, up from $1.61 billion in the year prior quarter. Profits for the latest quarter were $129.7, or $1.03 per share, versus $1.11 million, or 88 cents per share in the year earlier period. The latest quarter included an extra week of sales compared to the 2011 quarter, which added 3 cents per share to profits.

Both figures were short of Wall Street expectations of $1.86 billion in sales and earnings per share of $1.06.

Earlier Dick’s had predicted earnings per share in the range of $1.03 to $1.05.

Same-store-sales were a bright spot, showing a 1.2 percent increase in a 13-week to 13-week comparison. The increase consisted of a 2.2 percent decrease at Dick's Sporting Goods stores, being offset by a 1.3 percent increase at Golf Galaxy and a 54.2 percent increase in the company’s eCommerce business.

Dick’s admitted that the weather early in the year caught them by surprise.

"As a result of the unusually warm weather conditions, including during peak selling periods in December, we significantly reduced our inventory levels of cold weather merchandise to align with lower consumer demand and avoid carrying over excess inventory after a second year in a row of warm weather. While this was a prudent move that enabled us to effectively manage inventory and protect our margins, it did limit our ability to capture sales in January when temperatures dropped and snowfall increased," said Edward W. Stack, Chairman and CEO in a statement today.

As of the end of the fourth quarter, the company operated 518 Dick's Sporting Goods stores in 44 states and 81 Golf Galaxy stores in 30 states.

For the full year 2012, Dick’s reported $5.84 billion in net sales across 53 weeks, up by 12 percent from the 52-week year of 2011 when it recorded $5.21 billion. Adjusted earnings for the year were $318.3 million, or $2.53 per share, which didn’t include an impairment charge, but did include the extra week. In 2011, Dick’s reported adjusted earnings of $253.9 million, or $2.02 per share.

Looking ahead, Dick’s sees profit during the first quarter in the range of 47 cents to 49 cents per share. For the full year, the company guided earnings per share between $2.84 and $2.86. Again, the EPS figures were short of analyst expectations with the predictions of 50 cents per share for the quarter and $2.93 per share for all of 2013.

Shares of DKS look like they pulled a hamstring with the report, trading down by more than 7 percent in early trading on Monday around $47.00 per share after dropping to as low at $46.00. Across the past 12 months, shares of Dick’s are still ahead about 5 percent, including today’s downward move.

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