Despite its advantageous position in a faltering sporting goods landscape, Dick’s Sporting Goods Inc. did not give investors the outlook they were hoping for when it delivered its fourth-quarter results today.
Although the company had Q4 sales and profit that topped analysts’ expectations, as of 11 a.m., shares remained down nearly 8 percent, to $48.53, as investors reacted to the firm’s softer-than-expected first-quarter guidance.
Dick’s predicted today that its adjusted earnings per share in Q1 will land between 50 cents and 55 cents per share, but analysts were expecting 62 cents per share.
Nevertheless, the company’s fourth-quarter sales advanced 11 percent, to $2.48 billion, a modest beat against estimates for sales of $2.47 billion. Total comps also gained 5 percent in the quarter — with Dick’s Sporting Goods stores rising 5.3 percent and Golf Galaxy stores increasing 13.2 percent.
Net income tumbled 30 percent, to $90.2 million, or 81 cents per diluted share. However, adjusted net income, at $1.32 per diluted share, was better than Wall Street’s bets on diluted EPS of $1.30.
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Dick’s chairman and CEO Edward Stack noted the firm was able to realize “meaningful market share gains” across multiple categories, including footwear, in the wake of industry-wide challenges and bankruptcies.
“In 2016, we capitalized on opportunities in the marketplace, and further solidified our leadership position by enhancing the shopping experience in our stores, building brand equity and successfully relaunching our e-commerce business on our own web platform,” Stack said in a release.
For the full year, Dick’s sales increased 9 percent, to $7.9 billion, while net income shed about 13 percent, to $287.4 million, or $2.56 per diluted share. Adjusted net income was net $349.7 million, or $3.12 per diluted share.
Looking ahead, Stack said the firm would make several changes in order to “evolve” the business. The first is a new merchandising strategy aimed at rationalizing the firm’s vendor base and “optimizing our assortment to deliver a more refined offering for our customers.”
“We are in the process of reviewing our entire vendor base, which will be segmented into strategic partners and transactional vendors, with tertiary vendors being eliminated,” Stack said. “This strategy, combined with our efforts to enhance our digital capabilities, will enable us to stay ahead of consumer trends and differentiate us from the competition.”
In the wake of several sporting goods bankruptcies — the most notable of which was The Sports Authority — Dick’s has been aggressively pursuing hangover market share.
In the fourth quarter, the company opened three former Sports Authority stores as new Dick’s Sporting Goods and 30 Golfsmith stores, which are being converted to the Golf Galaxy brand. (In June 2016, Dick’s successfully bid on Sports Authority’s intellectually property assets and the right to acquire 31 store leases. Golfsmith filed Chapter 11 in September 2016.)
In 2017, Dick’s said it expects to produce diluted EPS of $3.63 to 3.73 and adjusted diluted EPS of $3.65 to $3.75. Consolidated same store sales are currently expected to increase 2 to 3 percent, compared to a gain of 3.5 percent last year.