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Will DICK'S Sporting's (DKS) Upside Story Continue Despite Woes?

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DICK’S Sporting Goods, Inc. (DKS - Free Report) looks well-positioned, courtesy of favorable customer demand and improved product assortment. The sporting goods retailer has been benefitting from its solid digital business. Such upsides have aided the company’s third-quarter fiscal 2021 results, wherein the top and bottom lines improved year over year and surpassed the Zacks Consensus Estimates.

In the fiscal third quarter, adjusted earnings grew 59% year over year, owing to solid sales and improved gross margin. Adjusted earnings also surged more than six-fold from third-quarter fiscal 2019.

Net sales grew 13.9% year over year, driven by improved store sales and a robust online show. The metric also advanced 40% from third-quarter fiscal 2019. Consolidated same-store sales (comps) increased 12.2% compared with comps growth of 23.2% and 6% in third-quarter fiscal 2020 and third-quarter fiscal 2019, respectively.

Speaking of its online business, the company’s continued focus to generate greater sales via significant investments bodes well. It has been witnessing a strong online show, driven by strong demand and improved omni-channel capabilities, including curbside pickup services and BOPIS.

E-commerce sales surged 97% from third-quarter fiscal 2019 and rose 1% year over year. E-commerce accounted for nearly 19% of net sales for the reported quarter, up from 13% in third-quarter fiscal 2019 and roughly 21% from third-quarter fiscal 2020. The online unit benefited from services like in-store and curbside pickup, reduced promotions, faster delivery and a better checkout experience. Its mobile platform also remains a key growth driver.

On the store-front, DICK’S Sporting remains on track with plans to expand outlet stores. Its first two DICK’s House of Sport stores in Rochester, NY, and Knoxville, TN, have been receiving positive customer responses. The two Golf Galaxy performance centers, featuring TrackMan and BioMech golf technologies, are also performing well. The company launched two Public Lands stores in Pittsburgh and Columbus.

Consequently, store sales grew 31% from third-quarter fiscal 2019 and store comps rose 15% year over year. DKS earlier revealed plans to open six DICK’S Sporting Goods stores and eight specialty concept stores in fiscal 2021.

Management raised its fiscal 2021 view. Fiscal 2021 sales are expected to be $12,120-$12,190 million, up from the previously mentioned $11,520-$11,720 million. Same-store sales are likely to grow 24-25%, up from the earlier stated 18-20%. Adjusted earnings are envisioned to be $14.6-$14.8, reflecting a sharp improvement from $12.45-$12.95 per share mentioned earlier.

For fiscal 2021, the gross margin is estimated to be higher than that reported in fiscal 2020 and 2019 on the back of improved merchandise margins and lower fixed expenses. SG&A expenses are likely to decline from the figures reported in fiscal 2020 and 2019 due to higher sales. Adjusted EBT is expected to be $1.89-$1.92, up from the previously mentioned $1.61-$1.67.

Consequently, shares of the Zacks Rank #3 (Hold) company have surged 95.6% year to date against the industry’s decline of 1.3%.

 

Zacks Investment ResearchImage Source: Zacks Investment Research

 

However, DICK’S Sporting has been witnessing higher compensation and safety expenses associated with the COVID-19 crisis. In the fiscal third quarter, SG&A included $15 million of COVID-related safety costs. It also predicts elevated freight expenses and supply-chain issues to linger in the fiscal fourth quarter.

Wrapping Up

The company’s growing online sales, solid demand and store initiatives are likely to keep its stellar show on. The Zacks Consensus Estimate for its fiscal 2021 earnings is pegged at $14.48 per share, indicating an increase of 0.2% in the past seven days. Also, a VGM Score of A and a long-term earnings growth rate of 12.8 % raise optimism in the stock.

Here’s How Other Stocks Fared

We have highlighted three better-ranked stocks in the Retail - Wholesale sector, namely Boot Barn Holdings (BOOT - Free Report) , Tractor Supply Company (TSCO - Free Report) and Capri Holdings (CPRI - Free Report) .

Boot Barn Holdings, the lifestyle retailer of western and work-related footwear, apparel, and accessories, currently sports a Zacks Rank #1 (Strong Buy). Shares of BOOT have skyrocketed 159% year to date. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Boot Barn Holdings’ sales and earnings per share (EPS) for the current financial year suggests growth of 54.4% and 183.3%, respectively, from the year-ago period’s reported figures. BOOT has a trailing four-quarter earnings surprise of 35.3%, on average.

Tractor Supply, a rural lifestyle retailer in the United States, currently flaunts a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 22.8%, on average. Shares of TSCO have surged 62.9% year to date.

The Zacks Consensus Estimate for Tractor Supply’s sales and EPS for the current financial year suggests growth of 19% and 23.9%, respectively, from the year-ago period’s reported numbers. TSCO has an expected EPS growth rate of 9.6% for three-five years.

Capri Holdings, which operates membership warehouses, presently carries a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 1024.9%, on average. Shares of CPRI have rallied 46.4% year to date.

The Zacks Consensus Estimate for Capri Holdings’ sales and EPS for the current financial year suggests respective growth of 12.6% and 1.2% from the year-ago period’s reported figures. CPRI has an expected EPS growth rate of 56.4% for three-five years.