Dick’s Sporting Items (DKS) Q1 earnings prime estimates, outlook reduce

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A Dick’s Sporting Goods store stands in Staten Island on March 09, 2022 in New York City.

Spencer Platt | Getty Images

Dick’s Sporting Goods announced on Wednesday that it is trimming its financial outlook for the year amid uncertain economic conditions, but doesn’t see any dramatic changes in its business just yet.

Speaking to analysts, Chief Executive Officer Lauren Hobart said she has confidence in Dick’s longer-term business strategy and in maintaining profitability. Shares of the company rallied after a sharp sell-off in early trading as it fell to a fresh 52-week low of $63.45.

Shares of Dick ended the day up nearly 10%.

Despite the difficult economic backdrop, Hobart said the company has several advantages that are boosting its business. Its private labels have gained a foothold with customers. She said pressure to reduce excess items remains light. And consumers have embraced outdoor hobbies like hiking and golfing during the Covid pandemic.

“They run. They walk, they play golf,” Hobart said. “The pandemic categories we’ve all been talking about… we think they all have long-term growth potential.”

Still, 40 years of high inflation and ongoing supply chain challenges were enough for Dick’s to provide a “cautious” outlook for the year.

Dick’s now expects to earn between $9.15 and $11.70 per share on an adjusted basis this fiscal year, compared to a prior range of $11.70 to $13.10. Analysts had been expecting adjusted earnings per share of $12.56 based on estimates by Refinitiv.

Dick’s is forecasting a 2% to 8% decline in same-store sales, versus previous expectations that sales would be flat and down 4%. Analysts were calling for a 2.5% year-over-year decline, according to FactSet.

The company’s decision to lower its guidance comes after similar adjustments by Walmart, Target, and Kohl’s as those retailers cope with higher spending that is eating away at their revenue. Clothing retailer Abercrombie & Fitch’s shares fell nearly 30% on Tuesday after the company lowered its outlook for the year.

Here’s how Dick’s fared for the fiscal first quarter versus Wall Street expectations using Refinitiv estimates:

  • earnings per share: $2.85 adjusted versus $2.48 expected
  • revenue: $2.7 billion vs. $2.59 billion expected

Dick’s reported net income for the three months ended April 30 was $260.6 million, or $2.47 per share, compared to net income of $361.8 million, or $3.41 per share last year. Excluding one-time items, the company earned $2.85 per share.

Revenue fell about 8% to $2.7 billion from $2.92 billion a year earlier, but it was enough to beat expectations.

According to Dick’s, its loyalty members accounted for more than 70% of sales. His stores processed over 90% of transactions, including online purchases, as Dick’s made the most of inventory.

The company reported a 40.4% year-over-year increase in inventories as of April 30. But Chief Financial Officer Navdeep Gupta said Dick’s closely controls stock levels so the retailer doesn’t end up with excess merchandise and have to cut prices later in the year.

“We think our stock is actually very healthy at up 40% and we’re very happy with that,” said Hobart.

Dick’s also touted its strong relationships with national brands, including Nike, at a time when some of those labels have withdrawn from third-party channels to focus on selling direct to consumers. Hobart said it was a testament to the company’s investment in its stores and the customer shopping experience.

Joe Feldman, an analyst at Telsey Advisory Group, said Dick’s will continue to be a long-term market share winner, thanks in large part to its mix of national brands and house lines. The locations outside of the malls are also more attractive to customers today, he said.

Shares of Dick are down about 32% year-to-date, including Wednesday’s gains.

— CNBC’s Melissa Repko contributed to this coverage.