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DICK'S Sporting (DKS) Rides on Store Expansion Spree Amid Risks
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DICK’S Sporting Goods Inc. (DKS - Free Report) currently boasts solid prospects based on strength across its business, store expansion initiatives and strong operational execution. However, the company has been subject to rising operating costs and expenses amid a high inflationary environment.
This Zacks Rank #3 (Hold) company has a market capitalization of $11.6 billion. In the past six months, it has gained 22.5% compared with the industry’s 2.2% growth.
Image Source: Zacks Investment Research
Let’s delve deeper.
Factors Favoring DICK'S Sporting
DICK'S Sporting’s performance has been impressive on the store front, from its previously launched DICK'S House of Sport, Golf Galaxy Performance Center, Public Lands and Going, Going, Gone! The company launched its third House of Sport store in Minnetonka, MN.
Earlier, it also opened two types of concept stores, namely OVERTIME by DICK’S Sporting Goods and DICK’S Sporting Goods Warehouse. It focuses on expanding the presence of its Golf Galaxy business through the Golf Galaxy Performance Center and converting temporary value chain stores to permanent locations. Also, it has been working on the construction of more than 10 DICK'S House of Sport locations that are expected to open in 2024.
The company’s compelling assortment and structural transformation initiatives have been proving beneficial. In first-quarter fiscal 2023, DKS’ net sales came in at $2,842 million, reflecting an increase of 5.3% year over year, driven by strength in its core categories. Consolidated comparable store sales (comps) grew 3.4%, supported by an increase in transactions and higher average tickets.
Driven by the impressive quarterly results, DICK'S Sporting provided an upbeat fiscal 2023 view. For fiscal 2023, the company expects comps to be flat to up 2%. It projects adjusted earnings to be $12.9-$13.8 per share, including 20 cents for the 53rd week.
DKS believes in rewarding shareholders handsomely through dividend payouts and share repurchases. In the first quarter, it paid out dividends worth $105 million and repurchased 0.4 million shares worth $57.7 million. Exiting the first quarter, it had $1.4 billion remaining under its existing share repurchase authorization. Healthy cash flow is likely to support returning more value to shareholders in the quarters ahead.
Factors Affecting the Company
The company is witnessing the adverse impacts of escalating costs and operating expenses. For instance, in the first quarter, its sales cost increased 5.7% on a year-over-year basis, whereas its selling, general and administrative expenses rose 12.8%.
In the quarter, its adjusted gross margin contracted 28 basis points year over year to 36.2% in the first quarter due to a weak merchandise margin. Rising costs and expenses, if not controlled, might continue to impact margins and profitability in the quarters ahead.
BJ's Wholesale offers general merchandise, gasoline, coupon books and other ancillary services. The Zacks Consensus Estimate for BJ’s current financial-year sales suggests 5.4% growth, while earnings per share are expected to rise by 311.8% from the corresponding year-ago reported figures. The company’s average earnings surprise in the last four quarters was 93%.
Arcos Dorados operates as a franchisee of McDonald's restaurants. The Zacks Consensus Estimate for ARCO’s current financial-year sales and earnings per share suggests growth of 13.4% and 4.4%, respectively, from the corresponding year-ago reported figures. The company has a trailing four-quarter earnings surprise of 23.5%, on average.
BARK is engaged in providing products, services and content for dogs. The Zacks Consensus Estimate for BARK’s current financial year sales suggests a decline of 2.4%, while earnings are likely to grow 80.7% from the prior-year reported numbers. It has a trailing four-quarter earnings surprise of 10.4%, on average.
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DICK'S Sporting (DKS) Rides on Store Expansion Spree Amid Risks
DICK’S Sporting Goods Inc. (DKS - Free Report) currently boasts solid prospects based on strength across its business, store expansion initiatives and strong operational execution. However, the company has been subject to rising operating costs and expenses amid a high inflationary environment.
This Zacks Rank #3 (Hold) company has a market capitalization of $11.6 billion. In the past six months, it has gained 22.5% compared with the industry’s 2.2% growth.
Image Source: Zacks Investment Research
Let’s delve deeper.
Factors Favoring DICK'S Sporting
DICK'S Sporting’s performance has been impressive on the store front, from its previously launched DICK'S House of Sport, Golf Galaxy Performance Center, Public Lands and Going, Going, Gone! The company launched its third House of Sport store in Minnetonka, MN.
Earlier, it also opened two types of concept stores, namely OVERTIME by DICK’S Sporting Goods and DICK’S Sporting Goods Warehouse. It focuses on expanding the presence of its Golf Galaxy business through the Golf Galaxy Performance Center and converting temporary value chain stores to permanent locations. Also, it has been working on the construction of more than 10 DICK'S House of Sport locations that are expected to open in 2024.
The company’s compelling assortment and structural transformation initiatives have been proving beneficial. In first-quarter fiscal 2023, DKS’ net sales came in at $2,842 million, reflecting an increase of 5.3% year over year, driven by strength in its core categories. Consolidated comparable store sales (comps) grew 3.4%, supported by an increase in transactions and higher average tickets.
Driven by the impressive quarterly results, DICK'S Sporting provided an upbeat fiscal 2023 view. For fiscal 2023, the company expects comps to be flat to up 2%. It projects adjusted earnings to be $12.9-$13.8 per share, including 20 cents for the 53rd week.
DKS believes in rewarding shareholders handsomely through dividend payouts and share repurchases. In the first quarter, it paid out dividends worth $105 million and repurchased 0.4 million shares worth $57.7 million. Exiting the first quarter, it had $1.4 billion remaining under its existing share repurchase authorization. Healthy cash flow is likely to support returning more value to shareholders in the quarters ahead.
Factors Affecting the Company
The company is witnessing the adverse impacts of escalating costs and operating expenses. For instance, in the first quarter, its sales cost increased 5.7% on a year-over-year basis, whereas its selling, general and administrative expenses rose 12.8%.
In the quarter, its adjusted gross margin contracted 28 basis points year over year to 36.2% in the first quarter due to a weak merchandise margin. Rising costs and expenses, if not controlled, might continue to impact margins and profitability in the quarters ahead.
Stocks to Consider
Some better-ranked stocks are BJ's Wholesale Club Holdings, Inc. (BJ - Free Report) , Arcos Dorados Holdings, Inc. (ARCO - Free Report) and BARK, Inc. (BARK - Free Report) . While BJ sports a Zacks Rank #1 (Strong Buy), ARCO and BARK carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
BJ's Wholesale offers general merchandise, gasoline, coupon books and other ancillary services. The Zacks Consensus Estimate for BJ’s current financial-year sales suggests 5.4% growth, while earnings per share are expected to rise by 311.8% from the corresponding year-ago reported figures. The company’s average earnings surprise in the last four quarters was 93%.
Arcos Dorados operates as a franchisee of McDonald's restaurants. The Zacks Consensus Estimate for ARCO’s current financial-year sales and earnings per share suggests growth of 13.4% and 4.4%, respectively, from the corresponding year-ago reported figures. The company has a trailing four-quarter earnings surprise of 23.5%, on average.
BARK is engaged in providing products, services and content for dogs. The Zacks Consensus Estimate for BARK’s current financial year sales suggests a decline of 2.4%, while earnings are likely to grow 80.7% from the prior-year reported numbers. It has a trailing four-quarter earnings surprise of 10.4%, on average.