Summary
- 2017 and 2018 were challenging years for Dick's, with same-store sales in negative territory (-0.3% and -3.2%, respectively).
- However, the Company seems to be at an inflection point. Q2 2019 was an outstanding quarter for Dick's, achieving the strongest quarterly comp sales gain since 2016 (3.2% increase).
- In addition, Dick's is repurchasing shares hand over fist under its current $1bn program (repurchased $159.3M of common stock in Q2 2019).
- What's more, the Company authorized an new 5-year share repurchase program of up to $1 bn, versus a current market cap of $3.7bn. That's substantial and long-term shareholders stand to benefit.
- At the mid-point of FY 2019 diluted EPS guidance ($3.375/share) DKS is trading at less than 12 times earnings, which is low multiple for a company poised for rapid EPS growth.
DICK'S Sporting Goods, Inc (DKS) is a leading omni-channel sporting goods retailer. As of August 3, 2019, the Company operated:
- 727 DICK'S Sporting Goods locations across the U.S in 47 states, totalling ~38.6M SF
- 95 Golf Galaxy stores in 32 states, totaling ~2.0M SF
- 35 Field & Stream specialty stores in 16 states, totaling ~1.7M SF
- GameChanger, a youth sports mobile app for scheduling, communications, and live scorekeeping
Solid Q2 2019 results - raising FY 2019 guidance
Q2 2019 was an outstanding quarter for DKS, achieving the strongest quarterly comp sales gain since 2016. Key highlights of Q2 2019 earnings include, among others:
- 3.2% increase in same-store sales, driven by increases in both average ticket and transactions
- 3.8% increase in net sales to ~$2.26bn
- growth across each of the 3 primary categories of hardlines, apparel and footwear
- brick-and-mortar stores comped positively and eCommerce remained strong, increasing 21%
- repurchased $159.3M of common stock (4.5M common shares at an average cost of $35.52)
- delivered diluted EPS of $1.26 compared to $1.20 in the prior year
- raised FY 2019 guidance: new diluted EPS range of $3.30 to 3.45, up from $3.20 to 3.40
As Edward Stack, Chairman and CEO commented:
Our key strategies and investments are working, our major headwinds are behind us and we've bent the curve on sales. We are very enthusiastic about our business and are pleased to increase our full year sales and earnings outlook
Substantial long-term progress for the period 2009-2018
Compared to 2009, DKS has been firing on all cylinders:
| (In Millions of USD except per share items) | 2009 | 2018 | % Change |
| Gross Profit | $1,216.9 | $2,437.8 | 100% |
| Operating Income | $235.7 | $444.7 | 89% |
| Net Income | $135.4 | $319.9 | 136% |
| EBITDA | $336.6 | $688.6 | 105% |
| Cash from Operations | $401.3 | $712.8 | 78% |
| Diluted EPS - Continuing Operations | $1.15 | $3.24 | 182% |
| Diluted Weighted Average Shares Outstanding | 118.0 | 98.8 | -16% |
Source: Seeking Alpha, SEC filings, Author's own calculations
During the fiscal period 2009-2018, Gross Profit, Net Income, EBITDA and diluted EPS all more than doubled (i.e. all up more than 100% or more than 12.5% annualized rate). Also, operating cash flow increased by almost 80% and the share count fell by ~16%. Note until 2013/2014 the Company was a net issuer of shares, as show in the graph below. Buybacks aggressively commenced in 2015 and, since then, the Company has been a buyback machine (more on this below).
