Analysts don’t often offer up genuine praise on earnings conference calls, but Dick’s stellar second-quarter performance truly wowed Wall Street.
Shares were up more than 15% at market close today after the company blew past estimates and indicated that momentum was continuing.
“I really don’t have a word for a quarter like this. It’s pretty unbelievable,” said Robert Ohmes, an analyst at Bank of America Merrill Lynch, during the Q&A portion of Dick’s second-quarter conference call today.
Executives outlined several key reasons why Dick’s is firing on all cylinders — starting with the 20 million active users engaged with the retailer’s ScoreCard loyalty program. These customers accounted for more than 70% of sales during Q2.
“The data from this program drives our digital and direct marketing efforts, which we continued to enhance, enabling more personalized communications with athletes,” said chairman and CEO Ed Stack. “We also maintained a strong voice through several compelling marketing initiatives,” he noted, adding that the “See You Out There” campaign encouraged athletes to get outside during the pandemic.
President Lauren Hobart said that the retailer has an intense focus on attracting new consumers and also retaining them.
“Every time we get a new athlete, it’s an opportunity to try to personalize and customize. The main change in what we’re doing versus what might have done in the past is that it’s not just a promotional basket offer,” she explained. “It’s a targeted incentive for people to come into the store. We also have a ton of brand marketing out there to drive brand’s health.”
Like many other major retailers across the fashion space, including Nordstrom and Target, Dick’s is seeing its stores drive its burgeoning digital business. Stack said more than 75% of online sales — which grew 194% — were fulfilled by stores. Curbside pickup has been a key driver during the pandemic — and executives expect the boom to continue.
“It’s been a fundamental shift in consumer behavior, and we anticipated originally that we would see a large drop off when the stores reopened, but that is not the case,” said Hobart. “Curbside remains very strongly penetrated and very high percentage of the mix. It’s just an added element to a store, so that the store becomes the omni hub of the whole ecosystem.”
Another big part of the winning formula at Dick’s is the multi-pronged brand strategy. The retailer is bolstering ties with key vendors, namely Nike — which simultaneously is cutting ties with some other big names. At the same time, it is seeing momentum in its private label business.
“We’ve been particularly pleased with CALIA and DSG, which represented our second and third largest women’s athletic apparel brands during the quarter,” Hobart said. “And in total, across all categories after only one year following its launch, DSG has surpassed Field & Stream to become our largest private brand.”
While some insiders have been worried that the Q2 bounce across much of the retail sector could be short lived, Stack shrugged off those concerns in the call.
“The favorable shifts in consumer demand that drove our strong comps during Q2 have continued into Q3, partially offset by softness in the key back-to-school categories. With the significant part of back-to-school already behind us, through the first three weeks of Q3, our consolidated comp sales have increased 11% with continued margin rate expansion,” he noted.
For the three months ended Aug. 1, the retailer’s profits were $281.7 million, or $3.21 per share, on an adjusted basis, compared with market watchers’ forecast of earnings of $1.30 per share. Revenues also climbed 20.1% to $2.71 billion, versus analysts’ bets of $2.46 billion.
According to the company, same-store sales rose 20.7%, even as about 15% of its brick-and-mortar outposts were closed on average during the period. E-commerce sales — including those made through its contactless curbside pickup service — surged 194%. (Digital penetration was approximately 30% of Dick’s total net sales, compared with 12% in the prior year quarter.)