DICK’S Sporting Goods, Inc. — Form 10-Q Summary
Period and filing mismatch: The supplied filing is for the 13 and 26 weeks ended July 31, 2021 (second quarter and year to date of fiscal 2021), not 2020 Q2 as stated in the request. The financial statements are unaudited.
Business context and results
DICK’S is an omnichannel sporting goods retailer, also operating Golf Galaxy, Field & Stream and GameChanger. Results compared with 2020 are affected by last year’s temporary COVID-19 store closures; management also provides comparisons with 2019 to add context.
- Second-quarter net sales were $3.275 billion, up 20.7% year over year and about 45% versus Q2 2019. Same-store sales rose 19.2% year over year; transactions increased 12.1% and sales per transaction 7.1%.
- Year-to-date sales were $6.194 billion, up 53.1% year over year and about 48% versus the comparable 2019 period. Same-store sales rose 51.0% versus 2020, when stores were temporarily closed.
- Second-quarter eCommerce sales fell about 28% year over year following a 194% increase in Q2 2020, but were up 111% versus Q2 2019. eCommerce represented about 18% of quarterly sales, compared with 30% in Q2 2020 and 12% in Q2 2019. Year-to-date penetration was about 19%.
Financial performance and liquidity
| Metric | 13 weeks ended July 31, 2021 | 13 weeks ended August 1, 2020 | 26 weeks ended July 31, 2021 | 26 weeks ended August 1, 2020 |
|---|---|---|---|---|
| Net sales | $3.275B | $2.713B | $6.194B | $4.047B |
| Gross profit margin | 39.91% | 34.53% | 38.68% | 28.57% |
| Operating income | $663.6M | $391.4M | $1.139B | $205.2M |
| Net income | $495.5M | $276.8M | $857.3M | $133.4M |
| Diluted EPS | $4.53 | $3.12 | $7.96 | $1.53 |
- Operating margin was 20.26% in Q2 versus 14.42% a year earlier; year-to-date operating margin was 18.40% versus 5.07%. Gross-margin improvement reflected stronger merchandise margins, fewer promotions, favorable mix and occupancy leverage.
- Operating cash flow for the first half was $1.031 billion, compared with $876.7 million. Capital expenditures were $167.7 million; cash dividends paid were $64.2 million and treasury-stock purchases were $152.7 million.
- Cash and equivalents were $2.237 billion at July 31, 2021, versus $1.658 billion at January 30, 2021. No revolving-credit borrowings were outstanding; remaining capacity was $1.558 billion after letters of credit.
- The company had $575 million principal amount of 3.25% convertible senior notes due 2025, reported at a carrying value of $433.5 million. Operating lease liabilities were $2.642 billion in total, including current and long-term amounts.
Material changes, outlook and risks
- Year-to-date sales and earnings were substantially above 2020, but the prior-year comparison is distorted by pandemic-related closures and cost measures. Versus 2019, sales and margins were also materially higher.
- Management cited COVID-related costs of about $15 million year to date in 2021 versus about $76 million of similar costs in the comparable 2020 period. It noted that prior-year figures also included a $16.6 million employee-retention-tax-credit benefit.
- No full-year sales or earnings guidance is stated in the supplied filing text. Management expected fiscal 2021 capital expenditures of $300 million to $325 million, net of landlord construction allowances, and a minimum of $400 million in share repurchases for the year.
- After quarter-end, the board declared a quarterly dividend of $0.4375 per share and a special dividend of $5.50 per share, both payable September 24, 2021. The company said the special dividend would return over $475 million to shareholders.
- Management said the pandemic’s effects on demand and consumer behavior remain uncertain and warned of supply-chain disruptions, rising costs, and possible inventory replenishment constraints. Other risks include inflation and product-cost pressures, dependence on discretionary spending and key suppliers, competition, wage increases, and potential changes in tax laws.
- A stockholder derivative suit alleging fiduciary-duty breaches relating to 2020 equity awards was in its early stages; the company said it could not predict the outcome or potential impact.
Important facts for investors to verify
- Confirm the intended reporting period: the filing covers fiscal 2021 Q2, despite the request specifying 2020 Q2.
- Assess how much of the strong year-over-year growth reflects recovery from 2020 closures, and compare performance with 2019 and subsequent periods.
- Monitor whether supply-chain delays, freight and input-cost inflation, or changes in demand affect inventory availability and gross margins.
- Review the convertible notes’ potential dilution: diluted EPS includes note- and warrant-related shares, while bond-hedge shares are not treated as an offset in diluted weighted-average shares.
- Confirm the cash and liquidity implications of the announced special dividend, planned repurchases, and the company’s intention to repay the notes’ principal in cash.