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DICK'S Sporting's (DKS) Beats on Q3 Earnings & Sales, Ups View

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DICK'S Sporting Goods, Inc. (DKS - Free Report) has posted better-than-expected top and bottom lines for third-quarter fiscal 2022. The company has been benefiting from compelling assortment and its structural transformation in recent years.

Adjusted earnings were $2.60 per share in the fiscal third quarter, down 18% from the prior-year figure of $3.19. The decline can be attributed to a dismal gross margin and higher operating expenses in the reported quarter. However, adjusted earnings beat the Zacks Consensus Estimate of $2.24 per share.

Net sales of $2,959 million improved 7.7% year over year and surpassed the Zacks Consensus Estimate of $2,701 million. Also, net sales advanced 50.8% from third-quarter fiscal 2019, driven by strength in its core strategies.

Consolidated comparable store sales (comps) grew 6.5%, down from comps growth of 12.8% in the year-ago quarter. Also, DKS witnessed comps growth of 23.2% and 6% on a 2-year stack basis and a 3-year basis, respectively, in the fiscal third quarter.

DICK'S Sporting Goods, Inc. Price, Consensus and EPS Surprise

 

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

The gross margin contracted 423 basis points year over year to 34.2% in the fiscal third quarter due to high promotional activity.

In the fiscal third quarter, the SG&A expense rate of 23% remained almost flat year over year. SG&A expenses, in dollar terms, increased 7.6% to $679.7 million, driven by continued investment in hourly wage rates and talent to support its growth strategies.

Financial Aspects

DICK’S Sporting ended the fiscal third quarter with cash and cash equivalents of $1,4378 million, and no borrowings under the $1.6-billion revolving credit. Total inventory improved 35% year over year to $3,361.1 million as of Jul 30, 2022.

The company paid out dividends of $124 million and repurchased 4.4 million shares for $361 million. On Nov 21, DICK’s Sporting declared a quarterly dividend of 48.75 cents per share on common stock and Class B common stock, payable Dec 30, to its shareholders of record as of Dec 9.

In the nine months ending Oct 29, 2022, net capital expenditure amounted to $274.3 million. 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.

Guidance

Driven by the impressive quarterly results, this Zacks Rank #3 (Hold) company has raised its fiscal 2022 view. For fiscal 2022, the company expects a comp to be negative 1.5-3%, which compares favorably with the earlier mentioned range between negative 6% and negative 2%. The company envisions adjusted earnings of $11.50-$12.10 per share versus the prior mentioned $10.00-$12.00. The adjusted earnings view assumes 88 million shares outstanding as of fiscal 2022.

DICK’s Sporting anticipates GAAP earnings per share of $10.5-$11.1 for fiscal 2022 compared with the $8.85-$10.55 mentioned earlier. The revised view assumes shares outstanding of 99 million as of fiscal 2022. The company’s GAAP earnings view does not include share repurchases beyond that worth $360 million repurchased in the first nine months ending Oct 29.

Price Performance

 

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Image Source: Zacks Investment Research

 

Shares of DKS have lost 3.4% in the past three months against the industry’s 5% growth.

Stocks to Consider

Here are three better-ranked stocks to consider — Wingstop (WING - Free Report) , Dollar General (DG - Free Report) and Chipotle Mexican Grill (CMG - Free Report) .

Wingstop currently sports a Zacks Rank #1 (Strong Buy). WING has a long-term earnings growth rate of 11%. Shares of WING have declined 9.2% in the past year.

You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Wingstop’s 2023 sales and EPS suggests growth of 18.1% and 16.4%, respectively, from the year-ago period’s reported levels.

Dollar General, a discount retailer, currently carries a Zacks Rank #2 (Buy). DG has an expected EPS growth rate of 11.1% for three to five years.

The Zacks Consensus Estimate for Dollar General’s current financial-year revenues and EPS suggests growth of 10.8% and 13.8%, respectively, from the year-ago reported figures. Dollar General has a trailing four-quarter earnings surprise of 2.2%, on average.

Chipotle Mexican Grill, an operator of fast-casual restaurants, currently carries a Zacks Rank #2. The company’s expected EPS growth rate for three to five years is 23.4%.

The Zacks Consensus Estimate for Chipotle Mexican Grill’s current financial-year revenues and EPS suggests growth of 15.2% and 30.8%, respectively, from the year-ago reported figures. CMG has a trailing four-quarter earnings surprise of 4.1%, on average.

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