DICK’S Sporting Goods (DKS) Q4 2018 earnings summary

Executive summary

• FY2017 net sales rose 8.4% to $8.59B, while comparable sales fell 0.3% on a 52-week basis; diluted EPS was $3.01 versus $2.56 in FY2016.

• Private brands exceeded $1B in sales with double-digit comparable growth and expanded margins; eCommerce sales grew ~13% on a comparable-week basis to 12.4% of net sales.

• Results reflected promotional pressure, higher fulfillment costs and weak hunting demand, partly offset by store growth, private-brand gains and lower SG&A as a share of sales.

Financial highlights

• Net sales were $8,590.5M versus $7,922.0M; the 53rd week added $105.4M, while comparable-sales declines reduced sales by $23.0M.

• Gross profit increased 5.2% to $2,489.1M; operating income was $477.6M versus $449.9M, and net income was $323.4M versus $287.4M.

• Diluted EPS rose to $3.01 from $2.56; FY2017 included several one-time items, including a $12.0M contract termination receipt, $8.1M sales-tax refund and loyalty-program costs.

• Cash from operations was $746.3M; capital expenditures were $474.3M gross and $372.6M net of landlord tenant allowances.

Outlook and guidance

• FY2018 capital expenditures expected at $280M gross and $250M net; planned store openings reduced to ~19, with no new Golf Galaxy or Field & Stream stores planned.

• Private-brand sales were seen as capable of reaching $2B in a relatively short period; investment priorities include supply chain, digital capabilities, stores and product differentiation.

• A stronger 2018 innovation pipeline and better inventory alignment were expected, while promotional pressure and weak firearms and hunting demand could persist.

• Firearms-policy changes were expected to reduce hunting-business sales; this impact was contemplated in the FY2018 outlook.