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Dick's (DKS) Up 0.7% Since Last Earnings Report: Can It Continue?
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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 0.7% 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 the most recent earnings report in order to get a better handle on the important catalysts.
DICK'S Sporting posted 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.
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 Jul 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%.
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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -11.09% due to these changes.
VGM Scores
At this time, Dick's has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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. It's no surprise Dick's has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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Dick's (DKS) Up 0.7% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Dick's Sporting Goods (DKS - Free Report) . Shares have added about 0.7% 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 the most recent earnings report in order to get a better handle on the important catalysts.
DICK'S Sporting Misses Q2 Earnings Estimates, Sales Beat
DICK'S Sporting posted 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.
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 Jul 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%.
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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -11.09% due to these changes.
VGM Scores
At this time, Dick's has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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. It's no surprise Dick's has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.