It’s been a little more than a year since Dick’s Sporting Goods Inc. announced changes to its firearm sales policies in the wake of the deadly shooting at Marjorie Stoneman Douglas High School in Parkland, Fla. — and the retailer is still navigating the impact of its decisions.
For its fiscal fourth quarter ended Feb. 2, the Coraopolis, Pa.-based company reported that revenues fell 6.5 percent to $2.49 billion during the period, and same-store sales also dipped 2.2 percent. On a call today with analysts, executives noted that those declines are primarily related to sluggish sales in the hunt and electronics categories, and tough comparisons for sporting goods.
In regard to the hunt category, in particular, chairman and CEO Edward Stack has been taking action. He told analysts that in late Q3 2018, Dick’s removed hunting products from 10 stores where the category was underperforming, and replaced them with other merchandise, resulting in positive comp sales and strong margins in those locations. As a result, the firm is moving head with a plan to remove hunting gear from 125 more stores in 2019. “It will be replaced with merchandise categories that can drive growth, each based on the needs of that particular market,” he said.
Dick’s announced in February 2018 that it would halt sales of assault-style rifles in its stores and implement a 21-and-over age rule for purchases of firearms. Since making the change, the retailer has faced challenging comparable-store sales comparisons, but its CEO predicted today that the impact should lessen going forward. “We now expect our hunt business to generally follow industry trends,” Stack said on the call.
Meanwhile, the apparel and athletic footwear categories were two top performers for the sportings-goods chain, with both registering low-single-digit gains in the fourth quarter. Many analysts have been carefully watching the tense relationship between Dick’s and the beleaguered Under Armour after Stack blamed the brand for some of the retailer’s lackluster performance in 2018. However, the CEO sounded a more upbeat note in his latest report. “We’re more enthusiastic about Under Armour going forward,” said Stack. “We’ve made some changes to the assortment, and Under Armour’s been very helpful with that, so we see a very different trajectory [for the brand].”
Another bright spot for Dick’s is its e-commerce business, which increased 17 percent during the fourth quarter and represented roughly 23 percent of the top line. Buoyed by that growth, executives said they are investing heavily in Dick’s digital business in the coming year, including replatforming its mobile and tablet apps, and hiring more personnel. And one of the company’s most significant initiatives for this year is the opening of two new fulfillment centers, in New York and California. President Lauren Hobart noted that the centers offer a faster and more reliable option than completing online orders out of the company’s stores. “[These facilities] will enable us to deliver the majority of our online orders within two business days in the near future,” she said.
And like most retailers in today’s competitive climate, Dick’s also said it is working to enhance the customer experience within its 729 brick-and-mortar locations, such as adding HitTrax technology to batting cages to guide consumers in their purchases, and expanding its private-label offerings to drive differentiation and exclusivity in stores.
For full-year 2019, the retailer anticipates comp-store sales to be flat or up 2 percent, with the first positive results to come beginning in the second quarter. Earnings per diluted share are projected to be between $3.15 and $3.35 for the coming year.
Financial experts remain mixed about Dick’s prospects. Leading up to today’s report, Wedbush Securities analyst Christopher Svezia and Jane Hali & Associates LLC analyst Jessica Ramirez maintained their neutral ratings on the stock, while Sam Poser of Susquehanna International Group LLP and Cowen’s John Kernan issued positive ratings. The market, meanwhile, reacted negatively to the results. Share of Dick’s Sporting Goods had dropped 10.5 percent at press time.