Dick’s Sporting Goods Beats Revenue Expectations After Robust Holiday Season
Dick’s Sporting Goods has an aggressive rollout plan for its experiential format — Dick’s House of Sport — with the number of units seen expanding from three to as many as 100 over the next five years.
In reporting stronger-than-expected holiday sales Tuesday morning, Navdeep Gupta, executive vice president and chief financial officer, said House of Sport “will be the primary driver” of square footage growth for the company going forward.
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Lauren Hobart, president and chief executive officer, added that since House of Sport launched in 2021, the results in the three locations have exceeded expectations and delivered higher-than-expected sales and profits on a per-square-foot basis.
As a result, about 20 additional units will open over the next two years, including downtown Boston, Pittsburgh and Binghamton, New York. Within five years, she said, as many as 75 to 100 House of Sport locations are expected to be operating around the country.
Dick’s House of Sport units feature turf fields and tracks, climbing walls, batting cages, golf simulators and other bells and whistles to augment the apparel, footwear and gear that it sells in its traditional stores.
The news about House of Sport came as the retailer managed to buck the weak retail trends by posting a stronger-than-expected holiday season, leading the Pittsburgh-based merchant to raise its projections for fiscal 2023.
On Tuesday morning, the retailer surpassed analysts’ expectations for its fourth-quarter sales and earnings. Revenues hit $3.6 billion, a quarterly record for the company, ahead of the $3.45 billion expected.
Adjusted earnings per diluted share were $2.93, compared to analyst expectations of $2.88. Net income was $236 million and same-store sales increased 5.3 percent.
In a call with analysts Tuesday morning, Hobart pointed out that the comparable-sales increase in the fourth quarter were on top of a 6.6 percent gain last year, a 19.3 percent jump on 2020 and a 5.3 percent rise in 2019.
Despite inflation and excess inventory issues of late, the company has consistently cited strong consumer demand that has allowed it to capitalize on heightened demand during crucial shopping holidays such as back-to-school, Thanksgiving and Christmas.
“Our fourth quarter was a strong ending to another strong year,” Hobart said, adding that the retailer has addressed “targeted inventory overages,” which has put it in a strong position to enter 2023.
Like other retailers, Dick’s took measures to clear excess apparel inventory in the third quarter, which it managed to do through different markdown concepts online and in stores.
“On inventory, there is still some excess to work through, but this is relatively minimal, and Dick’s is having success clearing this through its traditional stores and its own discount Going, Going, Gone concept,” Neil Saunders, managing director of GlobalData, said in a note.
On the call, Gupta said approximately 80 percent of Dick’s growth last year was driven by sales in “our priority categories of footwear, athletic apparel, team sports and golf, where we gained considerable market share.”
Dick’s, which is celebrating its 75th anniversary in 2023, is already the country’s largest sporting goods retailer and is looking to further expand its reach this year.
“In 2023, we will grow both our sales and earnings through positive comps, a return to square footage growth and higher merchandise margin,” Hobart told analysts. “We will continue to create and define our future and as the largest U.S. sporting goods retailer, we are well-positioned to extend our lead and continue gaining share in a fragmented $140 billion industry.
On the call, Gupta said the company will exit the Field & Stream brand by 2024 by converting the remaining 17 stores to either Dick’s House of Sport or a larger-format Dick’s store. The company closed 12 Field & Stream stores during the fourth quarter, which incurred pre-tax charges of $30.1 million.
Gupta said eight of the existing Dick’s and Field & Stream combo locations will open this year followed by 10 new House of Sport locations will open in 2024.
The company’s Golf Galaxy division will also expand this year, Gupta said, by growing the Golf Galaxy Performance Center concept and converting temporary “value chain” stores to permanent locations.
While Field & Stream may be exiting the scene, Gupta said Dick’s will continue to “pursue acquisitions to amplify our growth and add new capabilities for the future.” At the end of February, the company made a deal to acquire Moosejaw, an e-commerce platform for outdoors brands, from Walmart. That deal is expected to close sometime this month.
Hobart also singled out Dick’s experience in omnichannel with GameChanger, a scoring and statistics mobile app for youth sports that it acquired at the end of 2016. The app delivered a compounded annual growth rate of 35 percent over the past five years and allows youth athletes to connect with their teammates and coaches, keep score and livestream.
Hobart also said Dick’s will increase its marketing efforts by relaunching its Sports Matter campaign during the upcoming NCAA basketball tournament. The company has also committed to fund 75 youth sports organizations with a $75,000 grant for each.
For the full year, net sales were $12.37 billion, up 0.6 percent compared to 2021.
Dick’s now expects earnings per share of between $12.90 and $13.80 for the full year of 2023, up from $10.78 per share in fiscal 2022. Same-store sales are expected to be between flat and up 2 percent. Comps are expected to be stronger in the first half than the second, Hobart said during the call.
While this outlook is softer than current results, it does not predict sales declines, which Saunders said is “a very clear win and something that sets it apart from many other retailers.”
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