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Why Is Dick's (DKS) Up 10.2% Since Last Earnings Report?
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It has been about a month since the last earnings report for Dick's Sporting Goods (DKS - Free Report) . Shares have added about 10.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Dick's due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
DICK'S Sporting posted better-than-expected top and bottom lines for first-quarter fiscal 2023. The company has been benefiting from the compelling assortment and structural transformation in recent years.
Adjusted earnings were $3.40 per share in the fiscal first quarter, up 19% from the prior-year figure of $2.85. Also, adjusted earnings beat the Zacks Consensus Estimate of $3.22 per share.
Net sales of $2,842 million improved 5.3% year over year and surpassed the Zacks Consensus Estimate of $2,817 million. The upside can be attributable to strong comps and healthy transaction growth.
Consolidated comparable store sales (comps) grew 3.4%, up from comps decline of 8.4% in the year-ago quarter. The figure also came ahead of our estimate of 3.1% growth. This was driven by a 2.7% increase in transactions and higher average tickets.
Gross profit grew 4.5% year over year to $1,028.6 million and came ahead of our estimate of $982.4 million. Meanwhile, the margin contracted 28 basis points (bps) year over year to 36.2% in the fiscal first quarter.
In the fiscal first quarter, the SG&A expense rate of 24.4% expanded 162 bps year over year. SG&A expenses, in dollar terms, increased 12.8% to $693.9 million and came ahead of our estimate of $631.1 million.
Financial Aspects
DICK’S Sporting ended the fiscal first quarter with cash and cash equivalents of $1,642.7 million, and no borrowings under the $1.6-billion revolving credit. Total inventory improved 7.4% year over year to $3,034.2 million as of Apr 29, 2023.
The company paid out dividends worth $105 million and repurchased 0.4 million shares for $57.7 million. It has $1.4 billion remaining under its existing share repurchase authorization. On May 22, DICK’s Sporting declared a quarterly dividend of $1 per share on common stock and class B common stock, to be payable on Jun 30 to shareholders of record at the close of business on Jun 16.
As of Apr 29, 2023, net capital expenditure amounted to a loss of $84.5 million. DICK’S Sporting projects capital expenditure of $670-$720 million on a gross basis and $550-$600 million on a net basis for fiscal 2023.
Guidance
Driven by the impressive quarterly results, management issued its fiscal 2023 view. For fiscal 2023, the company expects comps to be flat to up 2%, in sync with our estimate of 1.1% growth. It envisions adjusted earnings of $12.9-$13.8 per share, including 20 cents for the 53rd week. The adjusted earnings view assumes 88 million shares outstanding as of fiscal 2023. Also, the effective tax rate is expected to be 21%.
Store Update
In the reported quarter, the company closed two stores, acquired 12 stores and relocated one. The total store count came in at 863, including three DICK'S House of Sport stores, 97 Golf Galaxy stores, seven Public Lands stores and 15 Going Going Gone! Stores, as of Apr 29, 2023.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, Dick's has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Dick's has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Dick's (DKS) Up 10.2% Since Last Earnings Report?
It has been about a month since the last earnings report for Dick's Sporting Goods (DKS - Free Report) . Shares have added about 10.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Dick's due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
DICK'S Sporting's Q1 Earnings & Sales Beat Estimates
DICK'S Sporting posted better-than-expected top and bottom lines for first-quarter fiscal 2023. The company has been benefiting from the compelling assortment and structural transformation in recent years.
Adjusted earnings were $3.40 per share in the fiscal first quarter, up 19% from the prior-year figure of $2.85. Also, adjusted earnings beat the Zacks Consensus Estimate of $3.22 per share.
Net sales of $2,842 million improved 5.3% year over year and surpassed the Zacks Consensus Estimate of $2,817 million. The upside can be attributable to strong comps and healthy transaction growth.
Consolidated comparable store sales (comps) grew 3.4%, up from comps decline of 8.4% in the year-ago quarter. The figure also came ahead of our estimate of 3.1% growth. This was driven by a 2.7% increase in transactions and higher average tickets.
Gross profit grew 4.5% year over year to $1,028.6 million and came ahead of our estimate of $982.4 million. Meanwhile, the margin contracted 28 basis points (bps) year over year to 36.2% in the fiscal first quarter.
In the fiscal first quarter, the SG&A expense rate of 24.4% expanded 162 bps year over year. SG&A expenses, in dollar terms, increased 12.8% to $693.9 million and came ahead of our estimate of $631.1 million.
Financial Aspects
DICK’S Sporting ended the fiscal first quarter with cash and cash equivalents of $1,642.7 million, and no borrowings under the $1.6-billion revolving credit. Total inventory improved 7.4% year over year to $3,034.2 million as of Apr 29, 2023.
The company paid out dividends worth $105 million and repurchased 0.4 million shares for $57.7 million. It has $1.4 billion remaining under its existing share repurchase authorization. On May 22, DICK’s Sporting declared a quarterly dividend of $1 per share on common stock and class B common stock, to be payable on Jun 30 to shareholders of record at the close of business on Jun 16.
As of Apr 29, 2023, net capital expenditure amounted to a loss of $84.5 million. DICK’S Sporting projects capital expenditure of $670-$720 million on a gross basis and $550-$600 million on a net basis for fiscal 2023.
Guidance
Driven by the impressive quarterly results, management issued its fiscal 2023 view. For fiscal 2023, the company expects comps to be flat to up 2%, in sync with our estimate of 1.1% growth. It envisions adjusted earnings of $12.9-$13.8 per share, including 20 cents for the 53rd week. The adjusted earnings view assumes 88 million shares outstanding as of fiscal 2023. Also, the effective tax rate is expected to be 21%.
Store Update
In the reported quarter, the company closed two stores, acquired 12 stores and relocated one. The total store count came in at 863, including three DICK'S House of Sport stores, 97 Golf Galaxy stores, seven Public Lands stores and 15 Going Going Gone! Stores, as of Apr 29, 2023.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, Dick's has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Dick's has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.