Dick’s stock falls after earnings miss expectations

By Alex Valentine

Shares of Dick’s Sporting Goods Inc. dropped 10 percent Tuesday after the company posted earnings that missed analysts’ expectations and lowered its outlook for the final quarter of the year.

Morningstar downgraded its outlook for Dick’s shares because of “slow-moving cold weather gear,” according to Paul Swinand, equity research analyst.

The largest U.S. sporting goods retail company said profit fell 4 percent to $47.2 million, or 41 cents per share, from $49.2 million, or 41 cents per share a year ago. Analysts had forecast earnings of 46 cents per share.

Dick’s total sales increased 7.6 percent to $1.64 billion from $1.53 billion in the same period a year ago, but fell just short of Wall Street expectations.

Dick's Quarterly Earnings

The Coraopolis, Pennsylvania-based company reduced its fourth quarter earnings estimate to a range of $1.10-$1.25 per share, compared with $1.30 in the quarter last year and well below the analysts’ consensus estimate of $1.40.

Shares of Dick’s fell 9 percent last week as skepticism grew about the company’s quarterly earnings, and then tumbled another 17 percent to a four-year low of $33.52 Tuesday morning, before rebounding to $36.96 at close.

“Through back-to-school season, our sales were strong. However, as the quarter progressed, record warm weather in the majority of our markets put pressure on our sales and traffic,” said CEO Edward Stack in a conference call with analysts Tuesday.

Stack said sales in winter categories, especially hunting gear, were disappointing, but Teri List-Stoll, chief financial officer, said the company plans to increase marketing and will mark down much of its apparel for the holiday season to help offset “elevated inventory levels.”

After several questions during the conference call about the slow sale of seasonal apparel, USB Research Analyst Michael Lasser challenged the company’s assertion that weather had slowed sales.

“Over the last three years, you’ve grown your store base by about one-third, but your operating income has only grown by about 7.5 percent. Is that three years of funky weather, or do you think part of three-year sluggishness is a shift toward online shopping and increased competition?” asked Lasser.

Stack acknowledged that conditions in retailing have been more difficult as shoppers shift to online purchases. But he said that Dick’s has the “balance sheet and mettle to succeed.”

“Longer term, we see store growth continuing productively,” said Swinand. “Competitors will find it hard to compete with Dick’s national store base and scalable e-commerce business, in our view, strengthening the firm’s competitive position in the long run.”

Dick’s opened seven new Field and Stream stores in the quarter, and launched the first e-commerce website for the hunting and fishing subsidiary. Stack said most future Field and Stream stores would be built as a combination with a Dick’s Sporting Goods next door.

Photo at top: Dick’s missed analyst expectations, but management is confident that the company can bounce back.(Mike Mozart/Creative Commons)
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