Dick’s Sporting Goods, inc., was once a “start-up” that sold bait-and-tackle. Below, a class exercise in earnings reports.
Dick’s Sporting Goods, Inc., the largest supplier of sporting equipment and apparel headquartered in the U.S., reported third quarter results today that exceeded company expectations originally stated on August 14, 2012.
According to a press release distributed by the company, the third quarter closed with net earnings of $50.1 million, or 40 cents per diluted share, topping the estimated diluted share price predicted in August by four cents. Additionally, company net sales during the third quarter reached $1.3 billion, an 11.2% increase.
Executives credited the company’s strong third quarter to the opening of twenty-one new Dick’s Sporting Goods Stores across the country, adding to 490 existing retail locations in forty-four states. The new locations were part of a yearlong initiative expanding the company’s retail space, culminating in the opening of an additional seven stores at the beginning of the fourth quarter. One store was relocated and one Golf Galaxy location was repositioned as part of the program.
In addition to the introduction of a mobile app and increased social media presence, Chairman and Chief Executive Officer Edward Stack attributed increased sales to the strength of the company’s “ship from store” program, and to “providing customers more choice about when, where, and how they shop.”
“Ship from store is an incredibly powerful tool, as it reduces delivery time to the customer while improving productivity and transaction profitablility,” said Stack during the conference call. “Because ship from store allows us to use inventory located in our stores, which was previously unavailable online to customers, we are seeing a meaningful increase in our online sales.”
The company projects reporting consolidated earnings per diluted share from $1.03 to $1.05 in the fourth quarter of 2012, up from an earlier $1.01 to $1.05 estimate.
Zacks Investment Research gives Dick’s Sporting Goods, Inc., a short-term buy rating, recommending company stock for the next one to three months and citing excellent quarterly performance, successful growth and e-commerce strategy, and skillful utilization of overstock merchandise and discounts.
Though analysts note the company’s healthy performance is offset by the risk associated with leisure good-based businesses, which rely on customers’ available surplus income, holiday spending is expected to further boost profits in the fourth quarter.
During a conference call for investors, President & Chief Operating Officer Joseph H. Schmidt reminded shareholders to take into account the cost and projected growth that would result from the construction of an additional distribution center to supply more retailers with merchandise.
“We remain on plan to open our fourth distribution center in January of 2013,” said Schmidt. “This 600,000 square foot facility will be located in Arizona, and combined with our existing DC network we will be able to support a total of 750 stores.”
Stack addressed several challenges faced by the company in the third quarter, including the National Hockey League “lockout” and Hurricane Sandy. Following the storm, the company both lost revenue from closed stores and made a sizable charitable donation.
“Our guidance also takes into account the NHL Lockout and Hurricane Sandy,” said Stack, “which includes a donation of approximately $1 million in retail value of outdoor supplies and cold weather apparel that we made to the American Red Cross to assist with relief efforts.”
Following the close of quarter three, Dick’s Sporting Goods, Inc. Board of Directors authorized the payment of a quarterly dividend of $0.125 per share on Common Stock and Class B Common Stock. Those who held stock at the close of business November 30, 2012 will receive a dividend payment in cash on December 28, 2012.
Along with other companies, Dick’s Sporting Goods, Inc., has recently come under the scrutiny of the Council of Institutional Investors for allowing multiple unequal share classes, a practice the Council says can lead to unfair control of an organization.