DICK’S Sporting Goods, Inc. — Form 10-Q Summary
Period: First quarter of fiscal 2015, the 13 weeks ended May 2, 2015, compared with the 13 weeks ended May 3, 2014. The request metadata says “2014 Q1,” but the filing itself reports fiscal 2015 Q1.
Business context and results
The company operates sporting goods, golf, Field & Stream and True Runner stores and eCommerce sites. At quarter-end it operated 704 stores across its concepts, versus 650 a year earlier. Revenue growth reflected store expansion and modest comparable-sales growth.
| Metric | Q1 2015 | Q1 2014 |
|---|---|---|
| Net sales | $1,565.3 million | $1,438.9 million |
| Gross profit / margin | $469.0 million / 29.96% | $440.9 million / 30.64% |
| Operating income / margin | $101.9 million / 6.51% | $112.1 million / 7.79% |
| Net income | $63.3 million | $70.0 million |
| Diluted EPS | $0.53 | $0.57 |
| Operating cash flow | $35.5 million | $13.9 million |
Financial position and cash flows
- Cash was $81.4 million at May 2, 2015, down from $221.7 million at January 31, 2015. Inventory was $1,623.8 million.
- Current assets were $1,929.1 million and current liabilities $1,229.1 million. The company reported $51.2 million of revolving-credit borrowings and $5.8 million of other long-term debt and leasing obligations.
- Cash used in investing activities was $66.1 million, including $65.7 million of capital expenditures. Cash used in financing activities was $109.7 million, including $150.0 million for treasury-stock purchases and $17.4 million of dividends paid.
- The $500 million revolving facility had $434.8 million of remaining availability after letters of credit. The company was in compliance with its covenants at quarter-end.
Changes, commentary and outlook
- Sales rose 9%; consolidated comparable sales increased 1.0%, comprising a 1.8% increase at Dick’s Sporting Goods and an 11.0% decrease at Golf Galaxy. eCommerce penetration increased to 8.5% of sales from 7.0%.
- Gross margin fell 68 basis points, mainly from increased promotional activity, occupancy costs and shipping expense. SG&A rose 12% in reported dollars; excluding the prior-year aircraft-sale gain, SG&A as a share of sales decreased 38 basis points.
- Net income declined 9%. The prior-year quarter included an $8.7 million after-tax, or $0.07 per diluted share, gain on the sale of a corporate aircraft; the associated pretax gain was $14.4 million.
- Management said operating cash and facility availability were expected to meet current capital needs through the remainder of fiscal 2015. No specific earnings or sales guidance is provided in the filing text. The business is seasonal, with typically stronger sales and cash generation in the fourth quarter.
- The company opened nine Dick’s stores and one Field & Stream store, and repurchased approximately 2.6 million shares for $150 million. A quarterly dividend of $0.1375 per share was declared; the next payment was scheduled for June 30, 2015.
Risks, contingencies and items to monitor
Risks cited include discretionary consumer spending, intense competition, changing demand, eCommerce and information-system disruptions, supply-chain and vendor issues, store expansion costs, seasonality, and the company’s geographic concentration. The filing reports ordinary-course legal proceedings and states management did not expect them to have a material adverse effect. Operating leases and purchase commitments are off balance sheet; management did not believe these arrangements were reasonably likely to have a material effect. The filing reports no material change in market-risk exposure or internal controls.
Important facts for investors to verify
- Confirm the intended reporting year: the supplied metadata says 2014 Q1, while the filing covers fiscal 2015 Q1.
- Track whether comparable-sales trends, particularly Golf Galaxy, improve and whether eCommerce growth translates into sustainable profitability.
- Monitor merchandise margins, promotions, occupancy and shipping costs, along with inventory levels and seasonal borrowing needs.
- Assess the pace and returns of store openings, capital spending, share repurchases and dividends against cash generation and credit-facility availability.
- Review the full 10-K and subsequent filings for detailed risk factors, lease and purchase commitments, and any developments after the quarter-end.