Dick’s SG’s Q3 Earnings Surge On 23 Percent Comp Gain

Article From：SGB Media

 

Dick’s Sporting Goods reported earnings in the third quarter ended October 31 jumped more than four-fold as same-store sales climbed 23.2 percent. Brick & mortar same-store sales increased double-digits, the best performance since going public nearly two decades ago, while e-commerce sales expanded 95 percent.

 

Third Quarter Results

The company reported consolidated net income for the third quarter ended October 31, 2020, of $177.2 million, or $1.84 per diluted share. As a result of actions taken to prioritize the health and well-being of its teammates and athletes, the company incurred approximately $48 million of pre-tax incremental teammate compensation and safety costs in response to COVID-19, or $0.37 per diluted share, net of tax, during the current quarter. The company reported consolidated net income for the third quarter ended November 2, 2019, of $57.6 million, or $0.66 per diluted share.

 

On a non-GAAP basis, the company reported consolidated net income for the quarter ended October 31, 2020, of $182.2 million, or $2.01 per diluted share, which excluded non-cash amortization of the debt discount associated with the company’s convertible senior notes and included the share impact of the convertible note hedge purchased by the company, which is anti-dilutive for GAAP purposes. For the third quarter ended November 2, 2019, the company reported consolidated net income on a non-GAAP basis of $44.8 million, or $0.52 per diluted share. Third-quarter 2019 results exclude the gain on sale of subsidiaries, charges related to the exit of eight Field & Stream stores, and non-cash asset impairment.

 

The adjusted EPS of $2.01 was well ahead of Wall Street’s consensus estimate of 87 cents.

 

Net sales for the third quarter of 2020 were $2.41 billion, an increase of 22.9 percent compared to the third quarter of 2019. Wall Street’s consensus estimate had been $2.23 billion.

 

This increase was driven by a 23.2 percent increase in consolidated same-store sales and included an increase in e-commerce sales of 95 percent. e-commerce penetration for the third quarter of 2020 was approximately 21 percent of total net sales, compared to approximately 13 percent during the third quarter of 2019. Third-quarter 2019 consolidated same-store sales increased 6.0 percent.

 

“We had another exceptionally strong quarter from both a sales and a profitability perspective. The strength of our diverse category portfolio once again helped us capitalize on the favorable shifts in consumer demand, as the positive trends across golf, outdoor activities, home fitness and active lifestyle continued throughout Q3,” said Edward W. Stack, chairman and CEO. “Our performance in the quarter was driven by our 45,000 dedicated teammates who continued to work hard every day to safely serve our athletes and communities.”

 

Lauren R. Hobart, president, added, “Our stores continue to be the hub of our industry-leading omnichannel platform and were the key to our unprecedented third-quarter growth. Brick & mortar store comps grew double-digits, and our stores fulfilled approximately 70 percent of our online sales, which increased nearly 100 percent for the quarter. In fact, our stores drove 90 percent of our total Q3 sales growth, whether an athlete purchased at the register, picked up curbside, or had their order delivered through ship-from-store. Data science and technology will continue to play an important role in creating a personalized, one-to-one relationship with our athletes, enabling us to serve them in the most convenient way possible.”

 

Stack concluded, “Overall, the favorable trends in our business have continued into Q4. These strong sales results have been partially offset by warmer weather that has negatively impacted sales in important cold-weather categories. Taken together, through the first three weeks of Q4, our consolidated comp sales have increased in the high-teens.”

 

Balance Sheet

The company ended the third quarter of 2020 with nearly $1.1 billion in cash and cash equivalents and no outstanding borrowings under its $1.855 billion revolving credit facility. In April, the company issued $575 million aggregate principal amount of 3.25 percent Convertible Senior Notes, which added over $500 million of net proceeds to its cash position.

 

Total inventory decreased 9.8 percent at the end of the third quarter of 2020 as compared to the end of the third quarter of 2019.

 

Year-to-Date Results

The company reported consolidated net income for the 39 weeks ended October 31, 2020 of $310.6 million, or $3.44 per diluted share. As a result of actions taken to prioritize the health and well-being of its employees and athletes in response to COVID-19, the company incurred approximately $124 million of pre-tax incremental teammate compensation and safety costs, or $1.01 per diluted share, net of tax, during the 39 weeks ended October 31, 2020. For the 39 weeks ended November 2, 2019, the company reported a consolidated net income of $227.6 million, or $2.53 per diluted share.

 

On a non-GAAP basis, the company reported consolidated net income for the 39 weeks ended October 31, 2020 of $321.3 million, or $3.65 per diluted share, which excluded non-cash amortization of the debt discount associated with the company’s convertible senior notes and included the share impact of the convertible note hedge purchased by the company, which is anti-dilutive for GAAP purposes. For the 39 weeks ended November 2, 2019, the company reported consolidated net income on a non-GAAP basis of $215.8 million, or $2.39 per diluted share, which excludes the gain on sale of subsidiaries, non-cash asset impairments, charges related to the exit of eight Field & Stream stores, and the favorable settlement of a litigation contingency.

 

Net sales for the 39 weeks ended October 31, 2020 increased 5.2 percent to approximately $6.46 billion. Despite temporary store closures during March, April and May to help prevent the spread of COVID-19, consolidated same-store sales increased 5.8 percent. E-commerce sales increased 135 percent. E-commerce penetration for the 39 weeks ended October 31, 2020 was approximately 28 percent of total net sales, compared to approximately 13 percent during the 39 weeks ended November 2, 2019. Consolidated same-store sales increased 3.1 percent for the 39 weeks ended November 2, 2019

 

Capital Allocation

On November 20, 2020, the company’s Board of Directors authorized and declared a quarterly dividend in the amount of $0.3125 per share on the company’s Common Stock and Class B Common Stock. The dividend is payable in cash on December 29, 2020 to stockholders of record at the close of business on December 11, 2020.

 

For the 39 weeks ended October 31, 2020, capital expenditures totaled $156.4 million on a gross basis, or $114.1 million net of deferred construction allowances provided by landlords. For the 39 weeks ended November 2, 2019, capital expenditures totaled $165.7 million on a gross basis, or $140.1 million net of deferred construction allowances provided by landlords.

 

Full Year 2020 Outlook

As previously announced on March 19, 2020, the company withdrew its fiscal 2020 outlook. The company is not providing an updated outlook at this time.