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DICK'S Sporting Goods, Inc. (DKS - Free Report) posted better-than-expected second-quarter fiscal 2022 top and bottom lines. However, earnings and sales declined year over year. On a two-year basis, DKS witnessed 38% sales growth, driven by strength in its core strategies. The company is also gaining from the favorable shift in consumer behavior to a healthy lifestyle. Also, the company has been benefiting from its structural transformation in recent years.
Shares of the Zacks Rank #3 (Hold) company have rallied 42.2% in the past three months, outperforming the industry’s 10.7% growth.
Adjusted earnings were $3.68 per share in the fiscal second quarter, down 27.6% from the prior-year figure of $5.08. The decline can be attributed to lower sales, dismal gross margins and higher operating expenses in the reported quarter. However, adjusted earnings beat the Zacks Consensus Estimate of $3.53 per share.
Image Source: Zacks Investment Research
Net sales of $3,112.4 million declined 5% year over year but surpassed the Zacks Consensus Estimate of $3,074 million. However, net sales advanced 38% from second-quarter fiscal 2019, driven by strength in its core strategies.
Consolidated comparable store sales (comps) declined 5.1% from comps growth of 20.2% in the year-ago quarter. However, comps for the quarter reflected a sequential improvement from the first quarter of fiscal 2022. In the fiscal second quarter, transactions declined 8.4%, while the average ticket rose 3.3%. Also, comps improved 40% on a 2-year stack basis in the fiscal second quarter.
The gross margin contracted 388 basis points (bps) year over year to 36.03% in the fiscal second quarter due to a decline in merchandise margin rate from last year, higher supply-chain-related costs and deleverage in fixed occupancy costs. The merchandise margin rate declined 197 bps year over year in the fiscal second quarter.
However, the company’s merchandise margin rate improved 439 bps from the second-quarter fiscal 2019 level on differentiated product assortments, disciplined pricing strategies and a favorable product mix. The company’s favorable product mix was a result of its shift to higher-margin categories, including the reduction of its exposure to the hunting business. The hunt business had margins of 1,700 bps below the company average in 2019.
In the fiscal second quarter, the SG&A expense rate of 21.12% increased 157 bps year over year due to lower sales. SG&A expenses, in dollar terms, increased 2.7% to $657.4 million, driven by continued investment in hourly wage rates and talent to support its growth strategies.
DICK'S Sporting Goods, Inc. Price, Consensus and EPS Surprise
DICK’S Sporting ended the fiscal second quarter with cash and cash equivalents of $1,895.5 million, and no borrowings under the $1.6-billion revolving credit. Total inventory improved 49% year over year to $2,996 million as of Jul 30, 2022.
In the reported quarter, net capital expenditure amounted to $84.5 million. The company paid out dividends of $36.9 million and repurchased 3.9 million shares for $319 million at an average price of $80.84.
DICK’S Sporting projects capital expenditure of $400-$425 million on a gross basis and $340-$365 million on a net basis for fiscal 2022.
On Aug 22, DICK’s Sporting declared a quarterly dividend of 48.75 cents per share on common stock and Class B common stock, which is payable on Sep 30 to its shareholders of record as of Sep 9.
Guidance
Management remains confident about the strength of its core strategies, which have been aiding DICK’S Sporting’s quarterly performances. It notes that DKS’ inventory is healthy and well-positioned, with improved in-stock levels in key categories at the end of the fiscal second quarter. It expects to benefit from its assortments for the back-to-school season.
As a result of its robust first half fiscal 2022 performance and improved inventory position for the back-to-school season, the company raised the guidance for fiscal 2022. However, the company remains cautious of the macroeconomic environment and the dynamic global supply chain.
For fiscal 2022, the company expects comps between negative 6% and negative 2% compared with the negative 8% to negative 2% stated earlier. It envisions adjusted earnings of $10.00-$12.00 per share versus the prior mentioned $9.15-$11.70. The adjusted earnings view assumes 88 million shares outstanding as of fiscal 2022. The earnings guidance is based on an effective tax rate of 24%.
The company anticipates GAAP earnings per share of $8.85-$10.55 for fiscal 2022 compared with the $7.95-$10.15 mentioned earlier. The revised view assumes shares outstanding of 102 million shares as of fiscal 2022. The company’s GAAP earnings view does not include share repurchases beyond the $360 million repurchased in the first half of fiscal 2022.
The company expects an EBT (pre-tax income) margin of 10.7%, at the mid-point, for fiscal 2022, suggesting double the 2019 rate. Going forward, the company expects the merchandise margin rate to be meaningfully higher than pre-COVID levels on an annual basis.
The Zacks Consensus Estimate for Ulta Beauty’s current financial-year sales suggests growth of 10.6% from the year-ago period’s reported figure. ULTA has an expected EPS growth rate of 10.7% for three-five years.
Dollar Tree is an operator of discount variety stores offering merchandise and other assortments. DLTR presently carries a Zacks Rank of 2. It delivered a trailing four-quarter earnings surprise of 13.1%, on average.
The Zacks Consensus Estimate for Dollar Tree’s current financial-year sales and earnings suggests growth of 6.7% and 40.7%, respectively, from the year-ago period’s reported numbers. DLTR has an expected EPS growth rate of 15.5% for three-five years.
Costco Wholesale, which sells high volumes of foods and general merchandise at discounted prices through membership warehouses, currently carries a Zacks Rank #2. COST has a trailing four-quarter earnings surprise of 9.7%, on average.
The Zacks Consensus Estimate for Costco Wholesale’s current financial-year sales and EPS suggests growth of 15.4% and 18.2%, respectively, from the year-ago period’s reported figures. COST has an expected EPS growth rate of 9.2% for three-five years.
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DICK'S Sporting (DKS) Tops on Q2 Earnings & Sales, Raises View
DICK'S Sporting Goods, Inc. (DKS - Free Report) posted better-than-expected second-quarter fiscal 2022 top and bottom lines. However, earnings and sales declined year over year. On a two-year basis, DKS witnessed 38% sales growth, driven by strength in its core strategies. The company is also gaining from the favorable shift in consumer behavior to a healthy lifestyle. Also, the company has been benefiting from its structural transformation in recent years.
Shares of the Zacks Rank #3 (Hold) company have rallied 42.2% in the past three months, outperforming the industry’s 10.7% growth.
Adjusted earnings were $3.68 per share in the fiscal second quarter, down 27.6% from the prior-year figure of $5.08. The decline can be attributed to lower sales, dismal gross margins and higher operating expenses in the reported quarter. However, adjusted earnings beat the Zacks Consensus Estimate of $3.53 per share.
Image Source: Zacks Investment Research
Net sales of $3,112.4 million declined 5% year over year but surpassed the Zacks Consensus Estimate of $3,074 million. However, net sales advanced 38% from second-quarter fiscal 2019, driven by strength in its core strategies.
Consolidated comparable store sales (comps) declined 5.1% from comps growth of 20.2% in the year-ago quarter. However, comps for the quarter reflected a sequential improvement from the first quarter of fiscal 2022. In the fiscal second quarter, transactions declined 8.4%, while the average ticket rose 3.3%. Also, comps improved 40% on a 2-year stack basis in the fiscal second quarter.
The gross margin contracted 388 basis points (bps) year over year to 36.03% in the fiscal second quarter due to a decline in merchandise margin rate from last year, higher supply-chain-related costs and deleverage in fixed occupancy costs. The merchandise margin rate declined 197 bps year over year in the fiscal second quarter.
However, the company’s merchandise margin rate improved 439 bps from the second-quarter fiscal 2019 level on differentiated product assortments, disciplined pricing strategies and a favorable product mix. The company’s favorable product mix was a result of its shift to higher-margin categories, including the reduction of its exposure to the hunting business. The hunt business had margins of 1,700 bps below the company average in 2019.
In the fiscal second quarter, the SG&A expense rate of 21.12% increased 157 bps year over year due to lower sales. SG&A expenses, in dollar terms, increased 2.7% to $657.4 million, driven by continued investment in hourly wage rates and talent to support its growth strategies.
DICK'S Sporting Goods, Inc. Price, Consensus and EPS Surprise
DICK'S Sporting Goods, Inc. price-consensus-eps-surprise-chart | DICK'S Sporting Goods, Inc. Quote
Financial Aspects
DICK’S Sporting ended the fiscal second quarter with cash and cash equivalents of $1,895.5 million, and no borrowings under the $1.6-billion revolving credit. Total inventory improved 49% year over year to $2,996 million as of Jul 30, 2022.
In the reported quarter, net capital expenditure amounted to $84.5 million. The company paid out dividends of $36.9 million and repurchased 3.9 million shares for $319 million at an average price of $80.84.
DICK’S Sporting projects capital expenditure of $400-$425 million on a gross basis and $340-$365 million on a net basis for fiscal 2022.
On Aug 22, DICK’s Sporting declared a quarterly dividend of 48.75 cents per share on common stock and Class B common stock, which is payable on Sep 30 to its shareholders of record as of Sep 9.
Guidance
Management remains confident about the strength of its core strategies, which have been aiding DICK’S Sporting’s quarterly performances. It notes that DKS’ inventory is healthy and well-positioned, with improved in-stock levels in key categories at the end of the fiscal second quarter. It expects to benefit from its assortments for the back-to-school season.
As a result of its robust first half fiscal 2022 performance and improved inventory position for the back-to-school season, the company raised the guidance for fiscal 2022. However, the company remains cautious of the macroeconomic environment and the dynamic global supply chain.
For fiscal 2022, the company expects comps between negative 6% and negative 2% compared with the negative 8% to negative 2% stated earlier. It envisions adjusted earnings of $10.00-$12.00 per share versus the prior mentioned $9.15-$11.70. The adjusted earnings view assumes 88 million shares outstanding as of fiscal 2022. The earnings guidance is based on an effective tax rate of 24%.
The company anticipates GAAP earnings per share of $8.85-$10.55 for fiscal 2022 compared with the $7.95-$10.15 mentioned earlier. The revised view assumes shares outstanding of 102 million shares as of fiscal 2022. The company’s GAAP earnings view does not include share repurchases beyond the $360 million repurchased in the first half of fiscal 2022.
The company expects an EBT (pre-tax income) margin of 10.7%, at the mid-point, for fiscal 2022, suggesting double the 2019 rate. Going forward, the company expects the merchandise margin rate to be meaningfully higher than pre-COVID levels on an annual basis.
Stocks to Consider
Here are three better-ranked stocks to consider, namely Ulta Beauty (ULTA - Free Report) , Dollar Tree (DLTR - Free Report) and Costco Wholesale (COST - Free Report) .
Ulta Beauty, a leading beauty retailer in the United States, currently carries a Zacks Rank #2 (Buy). ULTA has a trailing four-quarter earnings surprise of 49.8%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Ulta Beauty’s current financial-year sales suggests growth of 10.6% from the year-ago period’s reported figure. ULTA has an expected EPS growth rate of 10.7% for three-five years.
Dollar Tree is an operator of discount variety stores offering merchandise and other assortments. DLTR presently carries a Zacks Rank of 2. It delivered a trailing four-quarter earnings surprise of 13.1%, on average.
The Zacks Consensus Estimate for Dollar Tree’s current financial-year sales and earnings suggests growth of 6.7% and 40.7%, respectively, from the year-ago period’s reported numbers. DLTR has an expected EPS growth rate of 15.5% for three-five years.
Costco Wholesale, which sells high volumes of foods and general merchandise at discounted prices through membership warehouses, currently carries a Zacks Rank #2. COST has a trailing four-quarter earnings surprise of 9.7%, on average.
The Zacks Consensus Estimate for Costco Wholesale’s current financial-year sales and EPS suggests growth of 15.4% and 18.2%, respectively, from the year-ago period’s reported figures. COST has an expected EPS growth rate of 9.2% for three-five years.