Dick's Sporting Goods Is an Industry MVP

Dick's Sporting Goods Is an Industry MVP

The decline in big-box retailing isn't slowing down Dick's Sporting Goods , as the company posted another round of solid earnings to a delighted Wall Street this past Tuesday. Bottom-line figures showed no improvement over the prior year's numbers, but the company had other more appealing numbers to further evidence its strength in a difficult retailing environment. For investors, a big question is whether these companies with tremendous square footage can continue to earn an attractive return with the ever-growing e-commerce competitors. The answer is a typical one in the world of investing: It depends.

Earnings recap
In the company's fiscal third quarter, Dick's Sporting Goods saw sales rise by 7%, to $1.4 billion, nearly $100 million ahead of last year's numbers, and above analyst expectations of $1.37 billion. The bottom line didn't see such growth, mainly because the company had to use aggressive marketing tactics and slash prices in order to keep store traffic up. Dick's earned just $50 million in net income -- $0.40 per share. Last year, the company earned just about the same amount. Wall Street was expecting $0.01 less.

Regarding store traffic, the company brought in its most favorable numbers by a long shot. Consolidated same-store sales grew by more than 3% in the quarter -- well above internal guidance of a 1% gain at most. Investors should note that the quarter was facing a tough comp. A year ago, Dick's posted a 5.1% comparable-sales gain.

Looking ahead, the company expects $1.04-$1.07 per share for the fourth quarter -- in line with estimates -- while same-store sales are pegged to rise 3% to 4%. For the full year, Dick's management expects $2.62 to $2.65 per share, with same-store sales up roughly 1%.

Dick's is a growing company -- adding 25 new stores in the past quarter. Including the first few weeks of the fourth quarter, the company has reached its development goal of 40 new Dick's Sporting Goods stores, one new Golf Galaxy store, two Field & Stream stores, and one True Runner store.

Big-box retailing may one day be a thing of the past, but investors in this company have little to fear.

In stride
For one thing, Dick's sells some of the increasingly few things that shoppers want to see and touch in person before shelling out the cash. Items such as skis or Rollerblades are relatively big purchases for the consumer, and they are highly personalized ones at that. This gives Dick's some protection from the flight to Web-based shopping.

Additionally, management has wisely expanded its smaller-format store footprints. The Golf Galaxy, Field & Stream, and True Runner stores are specialty locations that cater to a loyal, returning customer base. Investors will want to keep a close eye on the ROIC of these different brands during the coming years.

At nearly 18 times forward earnings, Dick's isn't a cheap retailer, but investors are getting a growing business with smart management at the reins. As the Internet weeds out the weaker brick-and-mortar retailers, the remaining players will see their brightest days. If things keep going the way they are now, Dick's Sporting Goods will firmly be in that camp.

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