A full-line sporting goods retailer, Dick's Sporting
Goods Inc. (DKS) hit the bull’s eye with its fourth
quarter and fiscal 2011 earnings, which met the Zacks Consensus
Estimate. The company’s results kept afloat mainly on robust sales
performance benefiting from store expansions and better
margins.
The overall analyst sentiment for Dick’s remains positive,
driven by the company’s consistent performance and a strong
outlook. The current Zacks Consensus Estimate for first-quarter and
fiscal 2012 are 38 cents and $2.41 per share, respectively, which
is at the higher end of the company’s recent earnings guidance
range.
Fourth Quarter Synopsis
Dick's Sporting Goods Inc. delivered fourth quarter and fiscal
2011 results, in line with the Zacks Consensus Estimate. The
results came ahead of the year-ago comparisons, mainly driven by
increased sales resulting from opening of new stores and improved
margins.
Dick’s’ fourth-quarter 2011 adjusted earnings jumped 16% to 88
cents a share from the year-ago level of 76 cents a share, meeting
the high-end of the company’s recently revised guidance range of 87
- 88 cents per share. Dick’s also fully met the Zacks Consensus
Estimate of 88 cents per share.
In fiscal 2011, the company reported adjusted earnings of $2.02
per share, up 24% from last year and at the higher-end of the
company’s guidance range of $2.01 to $2.02 per share. Annual
earnings also met the Zacks Consensus Estimate of $2.02 a
share.
An increase of 0.1% in consolidated comparable-store sales
(comps) and opening of new stores aided an increase of 6.1% year
over year in net sales to $1,611.6 million during the quarter.
However, total revenue fell marginally short of the Zacks Consensus
Estimate of $1,612.0 million.
Net sales at Dick’s spiked 7% to $5,211.8 million for fiscal
2011, mainly driven by a 2.0% consolidated comps growth and opening
of new stores. Fiscal year revenue slightly missed the Zacks
Consensus Estimate of $5,217.0 million.
The 0.1% comps growth in the fourth quarter was in line with the
company’s January 2012 guidance and was driven by a 9.0% increase
in Golf Galaxy store sales and a 52.0% growth in the e-commerce
business, offset by a 2.5% rise in Dick's Sporting Goods store
sales.
(Read our full coverage on this earnings report: Dick’s Meets
Bottom Line)
Agreement of Estimate Revisions
Following the company’s recent quarter performance, estimate
revision trend mostly remained in the positive direction with
majority of analysts raising their estimates and only a few pulling
down estimates. For the first quarter of 2012, 15 out of 22
analysts positively revised their estimates in the last 30 days
whereas none of the analysts lowered their estimates in the same
period.
For fiscal 2012, 15 out of 23 analysts moved up their estimates
in the last 30 days while 2 analysts slashed the same. For fiscal
2013, estimate revisions in the last 30 days include 6 analysts
raising estimates while none moving in the opposite direction.
However, there were no positive or negative revisions by
analysts in the last 7 days for the first quarter of 2012, fiscal
2012 and 2013.
Magnitude of Estimate Revisions
The recent estimate revision trends point to an overall positive
bias on the part of the analysts, which is reflected in the form of
higher earnings estimates for the next quarter, fiscal 2012 and
fiscal 2013 over the last 30 days. Estimates for the three
reporting periods, however, remained stable over the last 7 days
with no estimate revisions.
Driven by the positive revisions for first quarter estimate and
the absence of any negative movement, the Zacks Consensus Estimate
for the first quarter moved up by 2 cents in the last 30 days. The
current first quarter estimate stands at 38 cents per share.
Majority positive estimate revisions for fiscal 2012 were only
slightly offset by the fewer negative revisions in the last 30
days, driving estimates to move up by 3 cents to $2.41 per share.
In the last 30 days, fiscal 2013 estimates rose by 6 cents to $2.76
per share on account of only upward estimate revisions and no
downward revisions.
Our Recommendation
Pittsburgh-based Dick's Sporting Goods remains the dominant
player in the industry with significant store expansion and
potential share gain opportunities in the U.S. We remain optimistic
about the company’s competitive position and consistency of
earnings growth.
Further, we remain impressed by the company’s strategy of
alternatively investing in key strategic areas including new
stores, eCommerce, inventory management systems and private brands.
In 2012, the company expects to spend a gross of $241 million
toward capital expenditures while it expects net spending to reach
$190 million.
We also remain impressed by the company’s solid balance sheet,
which is characterized by strong cash position and no outstanding
borrowing under its credit facility. On the other hand, investors
remain encouraged by Dick’s practice of returning cash to
shareholders in the form of dividend payouts and share
repurchases.
However, the sporting goods market is highly competitive in
nature and Dick’s failure to compete effectively in terms of price,
quality or product will thwart its growth potential. The company
faces stiff competition from Foot Locker Inc. (FL)
and Wal-Mart Stores Inc. (WMT). Moreover, a weak
economy will likely continue to weigh on the company’s
profitability in the long term.
Dick's Sporting Goods currently has a short-term Zacks #2 Rank
(Buy). We maintain our long-term ‘Neutral’ recommendation on the
stock.
About Earnings Estimate Scorecard
As a PhD from MIT, Len Zacks proved over 30 years ago that
earnings estimate revisions are the most powerful force impacting
stock prices. He turned this ground breaking discovery into two of
the most celebrating stock rating systems in use today. The Zacks
Rank for stock trading in a 1 to 3 month time horizon and the Zacks
Recommendation for long-term investing (6+ months). These “Earnings
Estimate Scorecard” articles help analyze the important aspects of
estimate revisions for each stock after their quarterly earnings
announcements. Learn more about earnings estimates and our proven
stock ratings at http://www.zacks.com/education
DICKS SPRTG GDS (DKS): Free Stock Analysis Report
FOOT LOCKER INC (FL): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis Report
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