https://www.barrons.com/articles/dicks-sporting-goods-sale-revenue-outlook-stock-b46ac307
Dick’s Sporting Goods‘ on Tuesday reported a better-than-expected profit outlook for the year and increased its annual dividend as it tightens inventory, expands stores, and keeps margins high.
The sports retailer (ticker: DKS) said it expects 2023 fiscal year earnings to be between $12.90 and $13.80. That’s higher than the $12 consensus among analysts tracked by FactSet .
CEO Lauren Hobart said the company will grow its sales and earnings in 2023 partly through increasing its square footage and higher merchandise margin. Dick’s sells sports equipment, apparel, footwear, and accessories.
The company reported same-store sales growth of 5.3% in the fourth quarter, more than double the estimates of 2.1%, according to FactSet. Same-store sales refer to revenue from stores opened for 14 full months.
The stock moved up nearly 8% to $141.94 after markets opened on Tuesday. It’s up 10% this year, as of Monday’s close.
Dick’s has been beating earnings estimates over the past year despite other retailers struggling in an inflationary environment. Part of it has to do with the company’s positioning: Dick’s has routinely emphasized it’s a “necessity-based” retailer. Some of its categories, such active lifestyle and team sports, feed habits that people have adopted, and which continue to remain resilient despite hard economic times, Chief Financial Officer Navdeep Gupta said late last year.
Plus, the company serves different demographics—children’s soccer cleats range in price from about $24.99 to $279.99.
“Consumers are going through a lot of challenges with grocery prices and gas prices,” said Hobart in September last year when recession alarm bells were ringing loudly. But “everybody [is] just making the choices that are right for them.”
The moves by Dick’s allowed the retailer to more than double its annual dividend on Tuesday to $4 per share, from $1.95 per share in 2022. The company “now has among the highest yield in our Retailing/Broadlines & Hardlines space,” Michael Baker, an analyst at D.A. Davidson wrote Tuesday. He has a Buy rating on the stock
Advance Auto Parts (AAP) and Best Buy (BBY) are the only two stocks in Baker’s sector coverage that beat Dick’s 3% dividend yield. The average yield among the group is 2.3%.
To be sure, the company’s inventory levels were elevated last year as it struggled with supply-chain disruptions like other retailers. At the end of the second quarter inventory was 49% higher than the same period the previous year, by the end of the third quarter it was 35% higher, but by the end of the fourth quarter (which ended in January) it was down to 23% higher.
The company also reported $2.93 in adjusted earnings per share for the fourth fiscal quarter, higher than expectations for $2.88 among analysts. Sales were $3.6 billion, slightly beating estimates of $3.45 billion.
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