It has been about a month since the last earnings report for Dick's Sporting Goods (DKS - Free Report) . Shares have added about 10.5% 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 Reports Wider-Than-Expected Q1 Loss
DICK'S Sporting posted first-quarter fiscal 2020 results, wherein adjusted loss per share was wider than the Zacks Consensus Estimate, while sales were in line with the same. Further, both metrics declined year over year. Moreover, management withdrew fiscal 2020 view citing unprecedented impacts of COVID-19.
Q1 in Detail
In the fiscal first quarter, DICK'S Sporting reported adjusted loss of $1.21 per share against earnings of 62 cents in the prior-year quarter. The figure came in wider than the Zacks Consensus Estimate of a loss of 50 cents.
Net sales of $1,333.2 million declined 30.6% year over year. However, it came in line with the Zacks Consensus Estimate of $1,333 million. Consolidated same-store sales slumped 29.5% due to temporary store closures (beginning Mar 18) implemented to curb the spread of this deadly virus. Consolidated same-store sales rose 7.9% in the quarter till Mar 10, prior to the store closures. Sluggish transactions to the tune of 38.7%, somewhat offset by a rise of 9.2% in average ticket, hurt same-store sales. Also, hardlines, apparel and footwear categories delivered dismal performances.
E-commerce sales surged 110% year over year, which was nearly 39% of net sales in the reported quarter compared with 13% in the prior-year quarter. Apart from these, the company noted that e-commerce spiked 210% post the store closures till the first-quarter end.
Adjusted gross margin contracted roughly 1,290 basis points (bps) to 16.5% in the quarter under review. This was due to a 475-bps fall in merchandise margins and a 526-bps deleverage on occupancy costs.
Adjusted SG&A expenses, as a percentage of sales, increased 488 bps year over year to 30.2% due to a sales decline.
The company has reopened few stores since mid-April in sync with the CDC and local health guidelines. In this regard, roughly 80% of its stores are now open as of the end of May. Going ahead, it remains on track to reopen more stores in the second and third quarters of fiscal 2020.
DICK'S Sporting ended fiscal 2020 with cash and cash equivalents of $1,484 million, $1.4 billion in outstanding borrowings under its $1.6-billion revolving credit facility and total stockholders' equity of $1,672 million. Moreover, it added $255 million to its revolving credit facility, bringing the total to roughly $1.9 billion. Further, total inventory rose 2.1% year over year as of May 2, 2020.
In the reported quarter, cash provided by operating activities was $214.9 million. Moreover, total capital expenditure amounted to $59.6 million (on a gross basis) and $51 million (on a net basis).
Dividend Payments and Share Repurchases
The company has suspended its share repurchase plan and quarterly dividend payout during the quarter under review. As of May 2, it had $1,031 million in its existing share repurchase program. Earlier, management approved a dividend of 31.25 cents to be payable on Mar 27 to shareholders on record as of Mar 20.
The company highlighted that consolidated same-store sales have fallen 4% in the first four weeks of the second quarter compared with a 29.5% decline in the fiscal first quarter. This suggests that the reopening of stores is aiding sales in the said quarter. Also, e-commerce sales remained strong in the aforementioned period, rising more than 250%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
At this time, Dick's has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
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.