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Category: Stock Market and Dicks Sporting Goods
Date: 3 June 2020 Stock Price: $37.80 We take a look at the 1st quarter of their 2020 fiscal year earnings report of Dick's Sporting Goods a retailer offering an extensive assortment of quality sports equipment, apparel, footwear and accessories from 733 stores across the United States. The group's earnings has been hit hard by the coronavirus pandemic with revenues declining -31% compared to the prior year.
We believe coming out of the current crisis, health and fitness will become even more important to the consumer" |
About Dick's Sporting Goods
Founded in 1948, DICK'S Sporting Goods, Inc. is a leading omni-channel sporting goods retailer offering an extensive assortment of authentic, high-quality sports equipment, apparel, footwear and accessories. As of November 2, 2019, the Company operated 733 DICK'S Sporting Goods locations across the United States, serving and inspiring athletes and outdoor enthusiasts to achieve their personal best through a blend of dedicated teammates, in-store services and unique specialty shop-in-shops dedicated to Team Sports, Athletic Apparel, Golf, Lodge/Outdoor, Fitness and Footwear.
Headquartered in Pittsburgh, PA, DICK'S also owns and operates Golf Galaxy and Field & Stream specialty stores, as well as GameChanger, a youth sports mobile app for scheduling, communications and live scorekeeping. DICK'S offers its products through a content-rich eCommerce platform that is integrated with its store network and provides customers with the convenience and expertise of a 24-hour storefront.
Headquartered in Pittsburgh, PA, DICK'S also owns and operates Golf Galaxy and Field & Stream specialty stores, as well as GameChanger, a youth sports mobile app for scheduling, communications and live scorekeeping. DICK'S offers its products through a content-rich eCommerce platform that is integrated with its store network and provides customers with the convenience and expertise of a 24-hour storefront.
Overview of Dick's Sporting Goods' 1st quarter 2020 earnings report
The data below refers to the latest quarter unless specified otherwise:
- Net sales: $1.333 billion (up from $1.920 billion for the same quarter in the previous year)
- Net sales decreased by -31% over the last 12 months
- Cost of sales: $1.381 billion (up from $1.333 billion for the same quarter in the previous year)
- Cost of sales increased by 3.6% over the last 12 months
- Net earnings: $57.584 million (up from $37.827 million for the same quarter in the previous year)
- Diluted earnings per share: $0.66 (up from $0.39 for the same quarter in the previous year)
- PE ratio of Dick’s Sporting Goods: 15.9
- Diluted number of shares in issue: 90.130 million (down from 99.878 million for the same quarter of the previous year)
- Cash and equivalents: $87.622 million
- Cash and equivalents per share: $0.97
- Cash and equivalents makes up 1.2% of Dick’s Sporting Goods' current market capital
- Cash and equivalents makes up 3.04% of Dick’s Sporting Goods' total assets
- Inventories: $2.573 billion
- Inventories makes up 35.7% of Dick’s Sporting Goods' total assets
- Dick’s Sporting Goods' inventories increased by 17.1% over the last 12 months
- Stockholders equity in Dick's Sporting Goods: $1.708 billion
- Stockholders equity per share in Dick's Sporting Goods: $18.95
- Dick's Sporting Goods is trading at 2.43 times its stockholders equity per share which is within the expected range of between 2 and 4 times that most firms tend to trade at
Dick's Sporting Goods' management commentary on their 1st quarter 2020 earnings
PITTSBURGH, June 2, 2020 - DICK'S Sporting Goods, Inc. (NYSE: DKS), the largest U.S. based full-line omnichannel sporting goods retailer, today reported sales and earnings results for the first quarter ended May 2, 2020.
“Although the business environment of 2020 remains uncertain, DICK’S Sporting Goods is in a position of strength. We believe coming out of the current crisis, health and fitness will become even more important to the consumer. As the leader in the sporting goods retail sector, our relationships with key brands have never been stronger and we are in a great place to support this demand,” said Edward W. Stack, Chairman and Chief Executive Officer. “Our experienced management team has a history of successfully navigating difficult market cycles and remains fully committed to managing our business with a long-term view. Perhaps most importantly, our balance sheet is strong, and due to the actions taken when the pandemic first hit, we have enhanced liquidity to emerge from this crisis in an even stronger competitive position. Now, with confidence in our liquidity position and our stores re-opening, we can turn our attention to gaining market share for the remainder of 2020 and positioning our business for profitable growth in 2021.” Lauren R. Hobart, President, added, “Through March 10th our consolidated same store sales increased 7.9%, a clear indication that our strategies were working. Throughout the store closures we continued to serve our athletes online, and our eCommerce sales, including Curbside Contactless Pickup, were tremendous, increasing 210% since we temporarily closed our stores through the end of the first quarter." Ms. Hobart continued, "As we re-open our stores, the health and safety of our teammates and athletes is our highest priority, and we are following the guidelines from the Centers for Disease Control and Prevention as well as federal, state and local authorities. We are pleased with how our athletes have responded to these measures. Through the first four weeks of the second quarter our consolidated same store sales have decreased only 4.0%, representing a progressive recovery as we re-open our stores and maintain strong sales momentum in our eCommerce business, which has increased over 250%."
“Although the business environment of 2020 remains uncertain, DICK’S Sporting Goods is in a position of strength. We believe coming out of the current crisis, health and fitness will become even more important to the consumer. As the leader in the sporting goods retail sector, our relationships with key brands have never been stronger and we are in a great place to support this demand,” said Edward W. Stack, Chairman and Chief Executive Officer. “Our experienced management team has a history of successfully navigating difficult market cycles and remains fully committed to managing our business with a long-term view. Perhaps most importantly, our balance sheet is strong, and due to the actions taken when the pandemic first hit, we have enhanced liquidity to emerge from this crisis in an even stronger competitive position. Now, with confidence in our liquidity position and our stores re-opening, we can turn our attention to gaining market share for the remainder of 2020 and positioning our business for profitable growth in 2021.” Lauren R. Hobart, President, added, “Through March 10th our consolidated same store sales increased 7.9%, a clear indication that our strategies were working. Throughout the store closures we continued to serve our athletes online, and our eCommerce sales, including Curbside Contactless Pickup, were tremendous, increasing 210% since we temporarily closed our stores through the end of the first quarter." Ms. Hobart continued, "As we re-open our stores, the health and safety of our teammates and athletes is our highest priority, and we are following the guidelines from the Centers for Disease Control and Prevention as well as federal, state and local authorities. We are pleased with how our athletes have responded to these measures. Through the first four weeks of the second quarter our consolidated same store sales have decreased only 4.0%, representing a progressive recovery as we re-open our stores and maintain strong sales momentum in our eCommerce business, which has increased over 250%."
Balance Sheet
In response to the COVID-19 pandemic, the Company proactively addressed its liquidity needs during the first quarter of 2020 through two transactions. In March, the Company amended its revolving credit facility to add $255 million of borrowing capacity, bringing total capacity to $1.855 billion. In April, the Company issued $575 million aggregate principal amount of its 3.25% Convertible Senior Notes, which added over $500 million of net proceeds to our cash position. The Company ended the first quarter of 2020 with $1.5 billion in cash and cash equivalents and $1.4 billion in outstanding borrowings under its revolving credit facility. Total inventory decreased 2.1% at the end of the first quarter of 2020 as compared to the end of the first quarter of 2019.
Capital Allocation
As previously announced during the quarter, in response to the COVID-19 pandemic, the Company has temporarily suspended its share repurchase programs and quarterly dividend program. As its business continues to stabilize, the Company may resume opportunistic share repurchases under its existing authorizations of $1,031 million. The Company paid previously declared quarterly dividends of $0.3125 per share on March 27, 2020 to shareholders of record as of the end of business on March 20, 2020.
Full Year 2020
Outlook As previously announced on March 19, 2020, the Company withdrew its fiscal 2020 outlook. The Company is not providing an updated outlook at this time.
In response to the COVID-19 pandemic, the Company proactively addressed its liquidity needs during the first quarter of 2020 through two transactions. In March, the Company amended its revolving credit facility to add $255 million of borrowing capacity, bringing total capacity to $1.855 billion. In April, the Company issued $575 million aggregate principal amount of its 3.25% Convertible Senior Notes, which added over $500 million of net proceeds to our cash position. The Company ended the first quarter of 2020 with $1.5 billion in cash and cash equivalents and $1.4 billion in outstanding borrowings under its revolving credit facility. Total inventory decreased 2.1% at the end of the first quarter of 2020 as compared to the end of the first quarter of 2019.
Capital Allocation
As previously announced during the quarter, in response to the COVID-19 pandemic, the Company has temporarily suspended its share repurchase programs and quarterly dividend program. As its business continues to stabilize, the Company may resume opportunistic share repurchases under its existing authorizations of $1,031 million. The Company paid previously declared quarterly dividends of $0.3125 per share on March 27, 2020 to shareholders of record as of the end of business on March 20, 2020.
Full Year 2020
Outlook As previously announced on March 19, 2020, the Company withdrew its fiscal 2020 outlook. The Company is not providing an updated outlook at this time.
Dicks Sporting Goods (NYSE: DKS) stock price history
The image below, obtained from Google, shows the stock price history of Dicks's Sporting Goods over the last 5 years. And its been a pretty volatile and largely negative time for Dick's stockholders The group's stock traded at around $46 a stock 5 years ago and is currently trading at $37.80 a stock. That's a loss of -17.8% suffered by Dicks Sporting Goods stockholders over the last 5 years.
Dicks stock is trading at a lot closer to its 52 week high of $49.80than it is to its 52 week low of $13.46 which to us is a clear indication that the short term momentum and sentiment of Dicks Sporting Goods' stock is positive
Dicks stock is trading at a lot closer to its 52 week high of $49.80than it is to its 52 week low of $13.46 which to us is a clear indication that the short term momentum and sentiment of Dicks Sporting Goods' stock is positive
Dicks Sporting Goods (NYSE: DKS) vs Foot Locker (NYSE:FL)
The image below shows the stock price performance of Dicks Sporting Goods (DKS) and Foot Locker (FL) over the last 3 years. While the trend of the performance of these two stocks are fairly similar the recent recovery in Dicks Sporting Goods stock price has easily outpaced that of Foot Locker. Over the three year period Dicks Sporting Goods stock lost -6.11% while the stock of Foot Locker is down -43.36%
Recent coverage of Dick's Sporting Goods
The extract below discusses the latest regarding Dick's Sporting Goods as obtained from Barrons.com
Dick’s Sporting Goods stock is notching gains even after the athletic gear and apparel retailer reported a bigger fiscal first-quarter loss than expected. Dick’s (ticker: DKS) said it lost $1.21 a share on revenue of $1.33 billion. Analysts were forecasting an 83 cent per-share loss, with revenue of $1.3 billion. Same-store sales fell 29.5% as the pandemic forced the chain to close ships, but e-commerce sales jumped 110%, including new contactless curbside pickup.
The company said that because of costs related to Covid-19, it incurred $62 million in pretax expenses, or roughly 50 cents a share, during the quarter. Dick’s withdrew its full-year financial forecasts in March and did not provide an update in Tuesday’s release. Dick’s stock was up 2.9% to $37.50 in early trading. Although the bottom-line result was much worse than expected, the retailer is hardly the only company that has had unexpected expenses during the pandemic. Indeed, in some cases, investors have applauded companies that try to take as much of their coronavirus-related costs as possible, as soon as possible. That allows for future quarters to be more focused on rebounds in traffic and sales, rather than inventory write-downs and safety costs.
Dick’s Sporting Goods stock is notching gains even after the athletic gear and apparel retailer reported a bigger fiscal first-quarter loss than expected. Dick’s (ticker: DKS) said it lost $1.21 a share on revenue of $1.33 billion. Analysts were forecasting an 83 cent per-share loss, with revenue of $1.3 billion. Same-store sales fell 29.5% as the pandemic forced the chain to close ships, but e-commerce sales jumped 110%, including new contactless curbside pickup.
The company said that because of costs related to Covid-19, it incurred $62 million in pretax expenses, or roughly 50 cents a share, during the quarter. Dick’s withdrew its full-year financial forecasts in March and did not provide an update in Tuesday’s release. Dick’s stock was up 2.9% to $37.50 in early trading. Although the bottom-line result was much worse than expected, the retailer is hardly the only company that has had unexpected expenses during the pandemic. Indeed, in some cases, investors have applauded companies that try to take as much of their coronavirus-related costs as possible, as soon as possible. That allows for future quarters to be more focused on rebounds in traffic and sales, rather than inventory write-downs and safety costs.
Dick's Sporting Goods (NYSE: DKS) latest stock valuation
So what do we value Dick's Sporting Goods stock at based on their latest earnings release? Based on Dick's Sporting Goods latest earnings report the fact that they are currently loss making and that they pulled their earnings guidance for the fiscal year our valuation model provides a target price (full value price) for Dick's Sporting Goods stock at $37.90 a stock. We therefore believe the stock of Dick's Sporting Goods is fully valued at its current price
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price which in this case is $37.90. A good entry point into Dick's Sporting Goods would therefore be at $34.10 or below.
We expect the stock of Dick's Sporting Goods to trade in a narrow range around its current price in coming weeks and months
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price which in this case is $37.90. A good entry point into Dick's Sporting Goods would therefore be at $34.10 or below.
We expect the stock of Dick's Sporting Goods to trade in a narrow range around its current price in coming weeks and months
Next earnings release of Dick's Sporting Goods
It is expected that Dick's Sporting Goods will release their 2nd quarter 2020 earnings report in early September 2020