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DICK'S Sporting (DKS) Stock Dips as Q2 Earnings Miss Estimates
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Shares of DICK'S Sporting Goods, Inc. (DKS - Free Report) declined more than 19% following the second-quarter fiscal 2023 results, wherein the top line beat the Zacks Consensus Estimate, while the bottom line lagged the same. The company has been benefiting from robust transaction growth and continued market share gains.
The company is on track with business optimization to streamline the overall cost structure. As part of this, it eliminated certain positions at its customer support center on Aug 21, 2023. This is likely to results in $20 million of severance expenses in the third quarter of fiscal 2023. This business-optimization initiative is expected to be completed in fiscal 2023 and is likely to result in additional one-time charges of $25-$50 million.
Shares of this Zacks Rank #3 (Hold) company have gained 16.4% in the past three months against the industry’s 0.8% decline.
Image Source: Zacks Investment Research
Q2 Details
Adjusted earnings were $2.82 per share in the fiscal second quarter, down 23% from the prior-year figure of $3.68 due to the impacts of elevated inventory shrink, which affected many retailers. Also, adjusted earnings lagged the Zacks Consensus Estimate of $3.76 per share.
Net sales of $3,224 million improved 3.6% year over year and surpassed the Zacks Consensus Estimate of $3,222 million. The upside can be attributable to strong comps and healthy transaction growth.
Consolidated comparable store sales (comps) grew 1.8% against comps decline of 5.1% in the year-ago quarter. The figure also lagged our estimate of 2.1% growth. This was driven by a 2.8% increase in transactions and solid market share gains.
Gross profit fell 1.1% year over year to $1,109.5 million and lagged our estimate of $1,163.8 million. Meanwhile, the margin contracted 161 basis points (bps) year over year to 34% in the fiscal second quarter.
In the fiscal second quarter, the SG&A expense rate of 24.1% expanded 300 bps year over year. SG&A expenses, in dollar terms, increased 18% to $775.6 million and beat our estimate of $714.3 million.
Financial Aspects
DICK’S Sporting ended the fiscal second quarter with cash and cash equivalents of $1,901.9 million, and no borrowings under the $1.6-billion revolving credit. Total inventory improved 4.8% year over year to $2,851.4 million as of Jul 29, 2023.
On Aug 21, 2023, the board authorized and declared a quarterly dividend of $1.00 per share on the company's common stock and Class B common stock. The dividend is payable on Sep 29, 2023, to stockholders of record at the close of business on Sep 15, 2023.
The company repurchased 2 million shares of its common stock for $260.4 million under its share repurchase program. As of Jul 29, 2023, it has $1.2 billion remaining under its authorization.
As of Apr 29, 2023, net capital expenditure amounted to $248.6 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 has 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% growth. It envisions adjusted earnings of $11.33-$12.13 per share, including 20 cents for the 53rd week. The adjusted earnings view assumes 87 million shares outstanding as of fiscal 2023. Also, the effective tax rate is expected to be 21%.
DICK'S Sporting Goods, Inc. Price, Consensus and EPS Surprise
In the reported quarter, the company opened seven DICK'S House of Sport stores. The total store count came in at 860, including 97 Golf Galaxy stores, seven Public Lands stores and 16 Going Going Gone! Stores, as of Jul 29, 2023.
The Zacks Consensus Estimate for BJRI’s 2023 sales and EPS indicates 5.6% and 405.9% growth, respectively, from the year-ago period’s reported levels. The company has a trailing four-quarter earnings surprise of 121.2%, on average.
Urban Outfitters, which engages in the retail and wholesale of general consumer products, currently sports a Zacks Rank #1. The expected EPS growth rate for three to five years is 18%.
The Zacks Consensus Estimate for Urban Outfitters’ current fiscal-year earnings suggests growth of 57.1% from the year-ago reported number. URBN has a trailing four-quarter earnings surprise of 12.2%, on average.
Walmart, which operates a chain of hypermarkets, discount department stores and grocery stores, currently carries a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 5.5%.
The Zacks Consensus Estimate for Walmart’s current financial-year sales suggests growth of 4.2% from the year-ago period’s actual. WMT has a trailing four-quarter earnings surprise of 12%, on average.
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DICK'S Sporting (DKS) Stock Dips as Q2 Earnings Miss Estimates
Shares of DICK'S Sporting Goods, Inc. (DKS - Free Report) declined more than 19% following the second-quarter fiscal 2023 results, wherein the top line beat the Zacks Consensus Estimate, while the bottom line lagged the same. The company has been benefiting from robust transaction growth and continued market share gains.
The company is on track with business optimization to streamline the overall cost structure. As part of this, it eliminated certain positions at its customer support center on Aug 21, 2023. This is likely to results in $20 million of severance expenses in the third quarter of fiscal 2023. This business-optimization initiative is expected to be completed in fiscal 2023 and is likely to result in additional one-time charges of $25-$50 million.
Shares of this Zacks Rank #3 (Hold) company have gained 16.4% in the past three months against the industry’s 0.8% decline.
Image Source: Zacks Investment Research
Q2 Details
Adjusted earnings were $2.82 per share in the fiscal second quarter, down 23% from the prior-year figure of $3.68 due to the impacts of elevated inventory shrink, which affected many retailers. Also, adjusted earnings lagged the Zacks Consensus Estimate of $3.76 per share.
Net sales of $3,224 million improved 3.6% year over year and surpassed the Zacks Consensus Estimate of $3,222 million. The upside can be attributable to strong comps and healthy transaction growth.
Consolidated comparable store sales (comps) grew 1.8% against comps decline of 5.1% in the year-ago quarter. The figure also lagged our estimate of 2.1% growth. This was driven by a 2.8% increase in transactions and solid market share gains.
Gross profit fell 1.1% year over year to $1,109.5 million and lagged our estimate of $1,163.8 million. Meanwhile, the margin contracted 161 basis points (bps) year over year to 34% in the fiscal second quarter.
In the fiscal second quarter, the SG&A expense rate of 24.1% expanded 300 bps year over year. SG&A expenses, in dollar terms, increased 18% to $775.6 million and beat our estimate of $714.3 million.
Financial Aspects
DICK’S Sporting ended the fiscal second quarter with cash and cash equivalents of $1,901.9 million, and no borrowings under the $1.6-billion revolving credit. Total inventory improved 4.8% year over year to $2,851.4 million as of Jul 29, 2023.
On Aug 21, 2023, the board authorized and declared a quarterly dividend of $1.00 per share on the company's common stock and Class B common stock. The dividend is payable on Sep 29, 2023, to stockholders of record at the close of business on
Sep 15, 2023.
The company repurchased 2 million shares of its common stock for $260.4 million under its share repurchase program. As of Jul 29, 2023, it has $1.2 billion remaining under its authorization.
As of Apr 29, 2023, net capital expenditure amounted to $248.6 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 has 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% growth. It envisions adjusted earnings of $11.33-$12.13 per share, including 20 cents for the 53rd week. The adjusted earnings view assumes 87 million shares outstanding as of fiscal 2023. Also, the effective tax rate is expected to be 21%.
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
Store Update
In the reported quarter, the company opened seven DICK'S House of Sport stores. The total store count came in at 860, including 97 Golf Galaxy stores, seven Public Lands stores and 16 Going Going Gone! Stores, as of Jul 29, 2023.
Stocks to Consider
Some better-ranked companies are BJ's Restaurants (BJRI - Free Report) , Urban Outfitters (URBN - Free Report) and Walmart (WMT - Free Report) .
BJ's Restaurants, which operates a chain of high-end casual dining restaurants in the United States, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for BJRI’s 2023 sales and EPS indicates 5.6% and 405.9% growth, respectively, from the year-ago period’s reported levels. The company has a trailing four-quarter earnings surprise of 121.2%, on average.
Urban Outfitters, which engages in the retail and wholesale of general consumer products, currently sports a Zacks Rank #1. The expected EPS growth rate for three to five years is 18%.
The Zacks Consensus Estimate for Urban Outfitters’ current fiscal-year earnings suggests growth of 57.1% from the year-ago reported number. URBN has a trailing four-quarter earnings surprise of 12.2%, on average.
Walmart, which operates a chain of hypermarkets, discount department stores and grocery stores, currently carries a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 5.5%.
The Zacks Consensus Estimate for Walmart’s current financial-year sales suggests growth of 4.2% from the year-ago period’s actual. WMT has a trailing four-quarter earnings surprise of 12%, on average.