Shrink who?
Sales and profit at Dick’s Sporting Goods bounced back within the fiscal third quarter, leading the retailer to lift its full-year guidance Tuesday after it shocked investors earlier this 12 months when it slashed its outlook over theft concerns.
Dick’s beat Wall Street’s estimates on the highest and bottom lines for the period. In a news release, the corporate said it’s “excited” for the vacation season after seeing strong back-to-school sales, but is remaining “cautious” given the uncertain consumer backdrop.
Dick’s shares opened greater than 9% higher after the news but fell after the corporate’s conference call, when executives repeatedly mentioned their caution headed into the vacation season.
Here’s how the athletic goods retailer performed during its fiscal third quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG, formerly referred to as Refinitiv:
- Earnings per share: $2.85, adjusted, vs. $2.44 expected
- Revenue: $3.04 billion vs. $2.94 billion expected
The corporate’s reported net income for the three-month period that ended Oct. 28 was $201 million, or $2.39 per share, compared with $228 million, or $2.45 per share, a 12 months earlier. Excluding one-time items, Dick’s saw earnings per share of $2.85.
Sales rose to $3.04 billion, up about 2.8% from $2.96 billion a 12 months earlier.
For the total 12 months, the corporate now projects earnings per share to be between $11.45 and $12.05, compared with the $11.27 to $12.39 range that analysts had expected, in line with LSEG. Dick’s raised its guidance from a previous range of $11.33 to $12.13. However it still falls below the unique outlook the corporate set earlier this 12 months, when it said it expected earnings of $12.90 to $13.80.
Dick’s also raised its comparable sales outlook barely and expects them to be up between 0.5% and a couple of%, compared with a previous range of flat to up 2%. Much of that range would top the 0.7% increase that analysts had expected, in line with StreetAccount.
The raised outlook appeared tempered after the strong third-quarter beats. Executives said the corporate is remaining “cautious” ahead of the vacation season, mirroring sentiment from other retailers which might be concerned demand will probably be tepid.
On a call with analysts, President and CEO Lauren Hobart said the corporate tried to model “an appropriate level of caution” into the guidance due to “uncertain macroeconomic environment.”
“We’re being conservative on the low end of our guidance,” Hobart said. “We compete with everyone on the planet in the course of the fourth quarter, and in addition the patron goes through an awful lot, and we’re just attempting to be cautious.”
Throughout the decision, executives repeatedly said they were optimistic in regards to the holiday, but just for the things “inside our control” — corresponding to product assortment, stores and staff. The veiled concern underscored the retailer’s uncertainty over demand and its efforts to hedge its bets and never overpromise.
When Dick’s reported fiscal second-quarter earnings over the summer, its stock plummeted 24% after it blamed theft and aggressive markdowns for a staggering 23% drop in profits. Upticks in “organized retail crime and theft generally” – plus aggressive markdowns to filter out excess inventory – contributed to the profit loss. The corporate said it could impact its guidance for the 12 months.
Through the third quarter, shrink remained a challenge for the corporate and cut into its gross margin by 0.5 percentage points, finance chief Navdeep Gupta told analysts.
“To be clear, absent the shrink headwind, our merchandise margin would have increased over 70 basis points,” said Gupta. “Combating theft stays a top priority, and we proceed to take a position in efforts to maintain our stores, teammates and athletes protected.”
While earnings guidance at Dick’s remains to be below the range it originally set for itself, strong sales in the course of the back-to-school months and a core consumer that is held up higher than expected led the corporate to lift its outlook.
“We’re pleased with how our consumer is holding up inside the sporting goods industry after which particularly, that they are selecting Dick’s increasingly to fulfill their needs,” Hobart said. “We felt on this past quarter particularly pleased with a rise in transaction and ticket and the indisputable fact that our consumers will not be trading down, that our consumer has held up very, thoroughly.”
Read the total earnings release here.
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