DKS: Quick Hit - We Still Like It

 

Solid quarter from DKS coming in $0.07 above the top end of its range and consensus expectations. Revenues came in strong up +15% a little better than our expectation for +14%E and the consensus of +10.5%E, but the real callout in the quarter is inventory management reflected in better than expected gross margins.

  • Inventories were up +14% on +15% sales growth resulting in an 8pt improvement in the sales/inventory spread, but more importantly a return to positive to +1%. The negative spread posted last quarter due to excess cold weather product was DKS’ first in over 3-years since Q3 ’08. The company’s ability to clean the decks headed into Q2 is impressive.      
  • Equally impressive is the gross margin improvement up +112bps on stronger sales despite clearance activity and higher equipment sales mix.
  • It’s also worth noting that both Dicks and Golf Galaxy comps accelerated on a 1yr and 2yr basis this quarter. We’ll get more color behind the drivers at Dicks, but Golf Galaxy came reflected the strength we’ve seen in the golf channel YTD.
  • The increase in full-year EPS to $2.45-$2.48 from $2.38-$2.41 reflects Q1 coming in $0.07 above the high end of Q1 outlook and comp expectations up to +3-4% from +2-3%. These expectations continue to look flat out conservative to us.

Call at 10am

 

Casey Flavin

Director

 

DKS: Quick Hit - We Still Like It - DKS S