Dick's Forecast Irks Wall Street

The sporting-goods seller offers a weak forecast, saying Galyan's stores are underperforming.
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After

Dick's Sporting Goods

(DKS) - Get Report

offered a weak forecast Tuesday, saying its recently acquired Galyan's stores hadn't performed up to par, shareholders let loose the collective Bronx cheer.

For the current fiscal year, Dick's cut its profit forecast to a range of $1.70 to $1.75 a share. That's the range the company originally provided when it announced the Galyan's acquisition in June 2004, but falls short of its most recent guidance of $1.82 to $1.87 and means Dick's could miss Wall Street's consensus target by as much as 15 cents.

On average, analysts surveyed by Thomson First Call were looking for a profit of $1.85 a share for the fiscal year. Including merger integration and store-closing costs, Dick's predicted full-year earnings of $1.27 to $1.32.

Shares of Dick's were getting thumped, dropping $5.73, or 14.6%, to $33.50 in heavy trading. About 90 minutes into the session, nearly 7 million shares had changed hands, whereas the average daily volume is around 556,000 shares.

"Guidance is being revised due to a sales shortfall to our plan in the former Galyan's stores," Dick's said in a press release. "The stores are behaving more similar to a new Dick's store in a new market, when we had anticipated they would outperform a new Dick's store."

Comp sales for the year are expected to increase by roughly 2%. The Pittsburgh-based sporting-goods merchant now expects to open 26 new stores in 2005. The company projected third-quarter earnings of 6 cents to 8 cents a share, with same-store sales up 1% to 2%.

For the second quarter ended July 30, Dick's matched estimates, earning $24.2 million, or 45 cents a share, before merger expenses, store-closing costs and a gain on the sale of an investment. Including the items, the company reported net income for the second quarter of $22.1 million, or 41 cents a share.

Total sales for the second quarter rose 50% from last year to $622 million, reflecting same-store sales growth of 0.5%, the opening of new stores, and the inclusion of the former Galyan's operations in this year's quarterly results.

However, the top line didn't meet the consensus forecast of $654.3 million. Dick's also said it was lowering the estimated total merger and store-closing costs to $65 million from $70 million.

(On Monday, Dick's was the "Mad Money"

pick of the week. The company's results led to

a lively discussion on

TheStreet.com's

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RealMoney

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