Dick’s Sporting Goods, Inc. (DKS) Q2 2012 Earnings Call August 14, 2012 10:00 am ET Executives Ed Stack – Chairman & Chief Executive Officer Joe Schmidt – President & Chief Operating Officer Tim Kullman – Executive Vice President, Finance and Administration & Chief Financial Officer Anne-Marie Megela – Director, Investor Relations Analysts Robbie Ohmes – Bank of America Merrill Lynch Michael Lasser – UBS Gary Balter – Credit Suisse Sean Naughton – Piper Jaffray Dan Wewer – Raymond James Christopher Horvers – JP Morgan Rick Nelson – Stephens Inc. Sam Poser – Sterne Agee Matthew Fassler – Goldman Sachs Brian Nagel – Oppenheimer & Co. Peter Benedict – Robert W. Baird Camilo Lyon – Canaccord Genuity Mike Baker – Deutsche Bank Mark Miller – William Blair & Co. Kate McShane – Citi Research Kate Went – Wells Fargo Securities John Zolidis – Buckingham Research Paul Swinand – Morningstar David Magee – SunTrust Robinson Humphrey [Sean Colnig] – Morgan Stanley Chris Svezia – Susquehanna Financial Group Joe Feldman – Telsey Advisory Group Presentation Operator
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» Dick's Sporting Goods, Inc. CEO Discusses Q2 2011 Results - Earnings Call Transcript
For a summary of risk factors that could cause results to differ materially from those expressed in the forward-looking statements, please refer to our periodic reports filed with the SEC including the company’s annual report on Form 10(k) for the year ended January 28, 2012. We disclaim any obligation and do not intend to update these statements except as required by the Securities law.We’ve also included some non-GAAP financial measures in our discussion today. Our presentation of the most directly comparable financial measures calculated in occurrence with generally accepted accounting principles, and a related reconciliation can be found on the Investor Relations portion of our website at www.dickssportinggoods.com. Leading our call today will be Ed Stack, Chairman and Chief Executive Officer. Ed will review our Q2 financial and operating results, our guidance, and discuss our growth strategy. Following this, Joe Schmidt, our President and Chief Operating Officer, will outline our store and ecommerce development programs. After Joe’s comments, Tim Kullman, our Executive Vice President of Finance and Administration and Chief Financial Officer will provide greater detail regarding our financial results. I will now turn it over to Ed Stack. Ed Stack Thank you, Anne-Marie, and I’d like to thank all of you for joining us today. For Q2 we generated record results that exceeded expectations. On a non-GAAP basis, earnings per diluted share increased 25% to $0.65 as a result of a 10% increase in sales and an operating margin expansion of 82 basis points. We’re using the strength of our balance sheet to invest in our business with new stores, continuing developing our online channel capabilities and supporting our private brand, including the recent purchase of the Field & Stream brand and a broad range of outdoor categories. The 10% sales increase in Q2 was driven by the growth of our store network, by a 3.8% increase in consolidated same-store sales which was on top of a 2.5% increase in Q2 of last year. Same-store sales in Q2 2012 for Dick’s Sporting Goods were up 2.9%, Golf Galaxy up 4.4%, and ecommerce sales were up 34.6%. The comp growth at Dick’s stores was broad-based with all three major categories – hard lines, apparel and footwear – comping positively.
Our continued profitable growth is being fueled by our three growth drivers, which are expansion of our store base, strengthening of our omni-channel capabilities, and development of our margin rate accelerators. Looking at our store growth, we opened four new Dick’s Sporting Goods stores in Q2 and in 2012 we expect to open approximately 38 Dick’s Sporting Goods stores. Our ecommerce business represented approximately 3% of total sales in Q2, with same-store sales increasing 34.6% over Q2 last year.In Q2 we increased our merchandise margin by 29 basis points. As we move ahead we plan to generate continued margin growth with the three main drivers. One is to leverage our inventory management, another is to emphasize private brands and the third driver is to optimize our product mix. To strengthen our private brand platform we entered into an agreement this month to purchase the intellectual property and rights to the Field & Stream mark in the hunting, fishing, camping, and flannel categories. Upon completion, we expect this acquisition to give us the control and flexibility necessary to maximize and leverage the value of this popular brand. Lastly, we are successfully shifting our product mix to include more higher-margin products by increasing our focus on in-store specialty shops from Nike, Under Armour and The North Face as well as continuing to build our shared-service footwear deck in our new and remodeled stores. As announced in our release this morning we have fully impaired the value of our investment in JJB. We continue to believe in this market thesis underlying our investment; however, since our investment and its public announce by JJB’s management, JJB’s performance has materially deteriorated from its expectations. The investment was structured to provide us with meaningful upside and to cap our downside. Accordingly we have no further funding obligations and will continue to monitor the situation.
For Q3 2012, we now expect consolidated earnings per diluted share to increase by 13% to approximately $0.36, compared with non-GAAP consolidated earnings per diluted share of $0.32 for the same period in 2011. This is better than our previously communicated expectations of mid-single digit growth since consolidated same-store sales are expected to increase approximately 4.0% on top of a 4.1% increase for Q3 last year.Read the rest of this transcript for free on seekingalpha.com