Dick’s Cuts Guidance on Weak 2014 Outlook

Dick's Cuts Guidance on Weak 2014
A Dick's Sporting Goods location

Shares of Dick’s Sporting Goods Inc. slipped more than 16 percent in morning trading after weakness in its golf and hunting divisions hurt first-quarter results and forced the company to downgrade its guidance for the full year.

Following the disappointing quarter, the company now expects full-year earnings of between $2.70 and $2.85 a diluted share, down from its previous guidance of between $3.03 and $3.08.

Dick’s reported a 7.9 percent increase in revenue for the period to $1.4 billion, missing analysts’ consensus estimate of $1.46 billion, according to Thomson Reuters.

Net income for the quarter rose 8 percent to $70 million, or 57 cents a diluted share, versus $64.8 million, or 52 cents, a year earlier.

Excluding a gain on the sale of assets in the latest period and other items, earnings per share were 50 cents, up from 48 cents. Dick’s had projected EPS of 51 cents to 53 cents.

Camilo Lyon, an analyst at Canaccord Genuity, said in a note to clients, “While footwear and apparel did well, it was not enough to offset the sharp weakness in golf and hunting that was exacerbated by the extended winter season.” 

He added, “The major source of the guidance reduction looks to be significant second-quarter gross margin contraction as EPS is now expected to be [in the range of] 62 cents to 67 cents, versus our estimate of 83 cents.”

Sterne Agee analyst Sam Poser downgraded his recommendation on the stock to “neutral” from “buy,” on the back of the result.

“Weakness in golf and hunting is expected to continue throughout the year,” Poser said in a note to clients.

“We had, in error, expected the strength of footwear and apparel sales to more than offset the weakness in golf and hunting sales,” he added.

Edward Stack, chairman and CEO, said in a statement, “After a very challenging first quarter in golf last year, we expected some further headwinds and only modest improvement, but instead we saw a continued significant decline. In the case of hunting, we planned the business down based on last year’s catalysts, but it was even weaker than expected.”

Dick’s shares fell 15.6 percent, or $8.30, to $44.86 in morning trading.