Dick’s Sporting Goods just recently boosted its profit guidance. This follows a surprisingly positive second quarter, in which the company posted earnings that beat analyst estimates. The announcement comes as Dick’s navigates a challenging retail landscape characterized by a significant mall presence, a modest online business, and a core consumer demographic with limited discretionary income.
For the quarter ending August 2, Dick’s pulled in record sales of $3.65 billion. That represents approximately a 5% jump from $3.47 billion over the same period last year. As a result of the company’s impressive growth, management has made a change to their comparable sales expectations. They raised their expectations for growth from 2 to 3.5%, up from a prior forecast of 1 to 3%. Analysts were expecting only 2.9 percent growth.
Despite its solid quarterly performance, all anybody could talk about was Dick’s announcement that it was acquiring Foot Locker for $2.4 billion. This well-timed operation will further solidify Dick’s competitive position in the wholesale sneaker selling race, particularly for Nike sneakers. It will lay the groundwork to widen their global footprint. The company is now certain that it has secured all the regulatory approvals required to complete this transaction.
Though the acquisition is of no small importance, Foot Locker has been going through a tough time themselves. In that last quarter, Foot Locker posted a 2.4% sales drop and a $38 million loss. Most analysts consider the acquisition a coup for Dick’s. It will allow the firm to increase its market penetration and diversify its streams of income.
Dick’s earnings per share for the quarter hit an astounding $4.38. This number does not include non-recurring items related to the Foot Locker purchase and its related expenses. The company raised its full-year earnings per share guidance to a range of $13.90 to $14.50. This outlook is an increase from the prior estimate of $13.80 to $14.40. Analysts had predicted earnings per share of $14.39.
“We are pleased with our Q2 results, which reflect the execution of our long-term strategies and the strength of our operating model,” said Lauren Hobart, CEO of Dick’s Sporting Goods.
“Our performance shows how well our long-term strategies are working, the strength and resilience of our operating model and the impact of our team’s consistent execution.” – Lauren Hobart
Even as Dick’s enjoys the fruits of its strategic labors, it’s fighting a never-ending battle in a retail marketplace that’s changing quicker than ever before. The former, in its deep dependence on sales from mall locations. This dependence, along with its limited online footprint, may pose significant dangers as consumer shopping habits continue to move towards e-commerce. Its primary customers are more likely to have non-discretionary income than other retail sectors, putting future sales at risk.
Even with these headwinds, Dick’s comparable sales were up 5%, beating a consensus estimate of 3.2% by a wide margin. During its most recent quarter, the company forecast total revenue for the current fiscal year would land between $13.75 billion and $13.95 billion. That’s an estimate well short of analysts’ predictions of $14 billion.