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DICK'S Sporting (DKS) Q4 Earnings & Sales Beat on High Demand
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DICK'S Sporting Goods, Inc. (DKS - Free Report) posted better-than-expected top and bottom lines for fourth-quarter fiscal 2022. The company has been benefiting from the compelling assortment and structural transformation in recent years.
We note that shares of this Zacks Rank #3 (Hold) company have gained 23.1% in the past three months compared with the industry’s 7.3% growth.
Adjusted earnings were $2.93 per share in the fiscal fourth quarter, down 20% from the prior-year figure of $3.64. The metric reflects a 122% surge on a three-year basis. The decline can be attributed to a dismal gross margin and higher operating expenses in the reported quarter. However, adjusted earnings beat the Zacks Consensus Estimate of $2.86 per share and our estimate of $2.66.
Image Source: Zacks Investment Research
Net sales of $3,597 million improved 7.3% year over year and surpassed the Zacks Consensus Estimate of $3,408 million and our estimate of $3,333.1 million. Also, net sales advanced 41% from fourth-quarter fiscal 2019, driven by strength in its core strategies.
Consolidated comparable store sales (comps) grew 5.3%, down from comps growth of 6.6% in the year-ago quarter. Also, DKS witnessed comp growth of 19.3% and 5.3% on a 2-year stack basis and a 3-year basis, respectively, in the fiscal fourth quarter.
The adjusted gross margin contracted 514 basis points year over year to 32.4% in the fiscal fourth quarter due to weak merchandise margin, which partly offset lower supply-chain costs.
In the fiscal fourth quarter, the adjusted SG&A expense rate of 22.9% expanded 48 bps year over year. SG&A expenses, in dollar terms, increased 8.9% to $823.7 million.
Financial Aspects
DICK’S Sporting ended the fiscal fourth quarter with cash and cash equivalents of $1,924 million, and no borrowings under the $1.6-billion revolving credit. Total inventory improved 23% year over year to $2,831 million as of Jan 28, 2023.
The company paid out dividends of $163 million and repurchased 5 million shares for $427 million. It has $1.4 billion remaining under its existing share repurchase authorization. In the fiscal fourth quarter, DICK’s Sporting declared a quarterly dividend of 48.75 cents per share on common stock and class B common stock.
On Mar 6, 2023, DKS’s board approved a quarterly dividend of $1.00 per share on the company's common stock and class B common stock, payable Mar 31, 2023, to stockholders of record at the close of business on Mar 17, 2023. The dividend represents a hike of 105% from the previous quarterly dividend.
As of Jan 28, 2023, net capital expenditure amounted to $328 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, this Zacks Rank #3 (Hold) company issued its fiscal 2023 view. For fiscal 2023, the company expects comps to be flat to up 2%. 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 likely to be 22%.
At the mid-point, the EBT margin is predicted to be 11.7%, driven by better gross margins. This includes potential improvement in merchandise margin and lower supply-chain costs. The company expects the first-quarter fiscal 2023 gross margin to witness sequential improvement but is likely to be down year over year due to lower merchandise margins partly offset by reduced freight costs.
Gross and merchandise margins are expected to sequentially improve throughout the year. SG&A expenses are anticipated to deleverage due to investments to fund its growth strategy. Interest expenses are forecast to be $55 million, suggesting a $40 million year-over-year decline due to the inducement charges incurred in 2022 related to convertible debt and related interest savings.
DICK'S Sporting Goods, Inc. Price, Consensus and EPS Surprise
In the reported quarter, the company announced the exit of the Field & Stream brand. Consequently, DKS closed 12 of the remaining 17 stores for conversion into eight DICK'S House of Sport stores and four expanded DICK'S Sporting Goods stores.
For fiscal 2023, the company is expected to open nine DICK'S House of Sport locations, eight of which are existing DICK'S and Field & Stream combo store conversions, whereas one is a relocation. It also announced the construction of more than 10 DICK'S House of Sport locations that will open throughout 2024. Management revealed plans to expand the footprint of its Golf Galaxy business through the Golf Galaxy Performance Center and convert temporary value chain stores to permanent locations. Also, it is likely to convert more than 100 stores to premium full-service footwear.
Stocks to Consider
Here are some better-ranked stocks you may want to consider, Urban Outfitters (URBN - Free Report) , Arhaus (ARHS - Free Report) and American Eagle Outfitters (AEO - Free Report) .
Urban Outfitters, a leading lifestyle product and services company, currently carries a Zacks Rank #2 (Buy). Its expected EPS growth rate for three to five years is 18%.
The Zacks Consensus Estimate for Urban Outfitters’ current fiscal-year revenues suggests growth of 5% from the year-ago reported figure.
Arhaus, which operates as a lifestyle brand and premium retailer in the home furnishing market, carries a Zacks Rank #2 at present. Its expected EPS growth rate for three to five years is 16.1%.
The Zacks Consensus Estimate for Arhaus’ revenues and EPS suggests growth of 54% and 26.1%, respectively, from the year-ago reported figures. Arhaus has a trailing four-quarter earnings surprise of 112%, on average.
American Eagle Outfitters, a retailer of casual apparel, accessories and footwear, currently carries a Zacks Rank of 2. AEO delivered an earnings surprise of 82.6% in the last reported quarter.
The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal-year sales and EPS suggests growth of 1.3% and 58.9%, respectively, from the year-ago reported figures.
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DICK'S Sporting (DKS) Q4 Earnings & Sales Beat on High Demand
DICK'S Sporting Goods, Inc. (DKS - Free Report) posted better-than-expected top and bottom lines for fourth-quarter fiscal 2022. The company has been benefiting from the compelling assortment and structural transformation in recent years.
We note that shares of this Zacks Rank #3 (Hold) company have gained 23.1% in the past three months compared with the industry’s 7.3% growth.
Adjusted earnings were $2.93 per share in the fiscal fourth quarter, down 20% from the prior-year figure of $3.64. The metric reflects a 122% surge on a three-year basis. The decline can be attributed to a dismal gross margin and higher operating expenses in the reported quarter. However, adjusted earnings beat the Zacks Consensus Estimate of $2.86 per share and our estimate of $2.66.
Image Source: Zacks Investment Research
Net sales of $3,597 million improved 7.3% year over year and surpassed the Zacks Consensus Estimate of $3,408 million and our estimate of $3,333.1 million. Also, net sales advanced 41% from fourth-quarter fiscal 2019, driven by strength in its core strategies.
Consolidated comparable store sales (comps) grew 5.3%, down from comps growth of 6.6% in the year-ago quarter. Also, DKS witnessed comp growth of 19.3% and 5.3% on a 2-year stack basis and a 3-year basis, respectively, in the fiscal fourth quarter.
The adjusted gross margin contracted 514 basis points year over year to 32.4% in the fiscal fourth quarter due to weak merchandise margin, which partly offset lower supply-chain costs.
In the fiscal fourth quarter, the adjusted SG&A expense rate of 22.9% expanded 48 bps year over year. SG&A expenses, in dollar terms, increased 8.9% to $823.7 million.
Financial Aspects
DICK’S Sporting ended the fiscal fourth quarter with cash and cash equivalents of $1,924 million, and no borrowings under the $1.6-billion revolving credit. Total inventory improved 23% year over year to $2,831 million as of Jan 28, 2023.
The company paid out dividends of $163 million and repurchased 5 million shares for $427 million. It has $1.4 billion remaining under its existing share repurchase authorization. In the fiscal fourth quarter, DICK’s Sporting declared a quarterly dividend of 48.75 cents per share on common stock and class B common stock.
On Mar 6, 2023, DKS’s board approved a quarterly dividend of $1.00 per share on the company's common stock and class B common stock, payable Mar 31, 2023, to stockholders of record at the close of business on Mar 17, 2023. The dividend represents a hike of 105% from the previous quarterly dividend.
As of Jan 28, 2023, net capital expenditure amounted to $328 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, this Zacks Rank #3 (Hold) company issued its fiscal 2023 view. For fiscal 2023, the company expects comps to be flat to up 2%. 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 likely to be 22%.
At the mid-point, the EBT margin is predicted to be 11.7%, driven by better gross margins. This includes potential improvement in merchandise margin and lower supply-chain costs. The company expects the first-quarter fiscal 2023 gross margin to witness sequential improvement but is likely to be down year over year due to lower merchandise margins partly offset by reduced freight costs.
Gross and merchandise margins are expected to sequentially improve throughout the year. SG&A expenses are anticipated to deleverage due to investments to fund its growth strategy. Interest expenses are forecast to be $55 million, suggesting a $40 million year-over-year decline due to the inducement charges incurred in 2022 related to convertible debt and related interest savings.
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 announced the exit of the Field & Stream brand. Consequently, DKS closed 12 of the remaining 17 stores for conversion into eight DICK'S House of Sport stores and four expanded DICK'S Sporting Goods stores.
For fiscal 2023, the company is expected to open nine DICK'S House of Sport locations, eight of which are existing DICK'S and Field & Stream combo store conversions, whereas one is a relocation. It also announced the construction of more than 10 DICK'S House of Sport locations that will open throughout 2024. Management revealed plans to expand the footprint of its Golf Galaxy business through the Golf Galaxy Performance Center and convert temporary value chain stores to permanent locations. Also, it is likely to convert more than 100 stores to premium full-service footwear.
Stocks to Consider
Here are some better-ranked stocks you may want to consider, Urban Outfitters (URBN - Free Report) , Arhaus (ARHS - Free Report) and American Eagle Outfitters (AEO - Free Report) .
Urban Outfitters, a leading lifestyle product and services company, currently carries a Zacks Rank #2 (Buy). Its expected EPS growth rate for three to five years is 18%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Urban Outfitters’ current fiscal-year revenues suggests growth of 5% from the year-ago reported figure.
Arhaus, which operates as a lifestyle brand and premium retailer in the home furnishing market, carries a Zacks Rank #2 at present. Its expected EPS growth rate for three to five years is 16.1%.
The Zacks Consensus Estimate for Arhaus’ revenues and EPS suggests growth of 54% and 26.1%, respectively, from the year-ago reported figures. Arhaus has a trailing four-quarter earnings surprise of 112%, on average.
American Eagle Outfitters, a retailer of casual apparel, accessories and footwear, currently carries a Zacks Rank of 2. AEO delivered an earnings surprise of 82.6% in the last reported quarter.
The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal-year sales and EPS suggests growth of 1.3% and 58.9%, respectively, from the year-ago reported figures.