Dick’s Sporting Goods Falls On ‘Lower-Than-Expected’ 4Q Results

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Dicks Sporting Goods Inc (NYSE:DKS) stocks lost 8.9 percent in early trading today after the full year profit forecast from the company fell short of analysts’ expectations.

In New York, the shares fell 8.8 percent to $46.15 at 8:10 am after dropping to as low as $46.11. Till March 8 this year, company’s stock has gained 11 percent compared with an 8.8 percent gain for the Standard & Poor’s 500 Index.

Dick's Sporting Goods Falls On 'Lower-Than-Expected' 4Q Results

The largest U.S. sporting goods retailer posted lower-than-expected fourth quarter results owing to wrong estimation of demand for cold weather merchandise due to mild temperatures early in the season. The company reported, because of its decision to trim merchandise it was unable to gain on sales in January when temperatures dropped and snowfall increased.

“As a result of the unusually warm weather conditions, including during peak selling periods in December, we significantly reduced our inventory levels of cold weather merchandise to align with lower consumer demand and avoid carrying over excess inventory after a second year in a row of warm weather,” Chief Executive Edward W. Stack said. “While this was a prudent move that enabled us to effectively manage inventory and protect our margins, it did limit our ability to capture sales in January when temperatures dropped and snowfall increased.”

Pittsburgh-based company reported an increase of 12 percent in revenue to $1.8 billion in the fourth quarter against the general expectations of $1.86 billion. Comparable store sales for the company was down by 2.2 percent in the quarter ended Feb. 2. Net income for the quarter increased to $129.7 million, or $1.03 per share, from $111.1 million, or 88 cents per share, a year earlier.  Analyst expected a profit of $1.06 a share. Gross margin for the company rose to 32.6 percent from 31.8 percent. Dick’s board has authorized a share-repurchase plan of up to $1 billion over the next five years. The company plans to finance the buybacks with cash on hand and with debt.

For fiscal 2014, the company expects per-share earnings of $2.84 to $2.86, while analyst surveyed by Thomson Reuters estimate a profit of $2.92 a share. For the current quarter, the company expects earnings of 47 cents to 49 cents against the analyst’s estimates of 50 cents a share.

 As on February 2nd, Dicks Sporting Goods Inc (NYSE:DKS) operated 518 stores, including Golf Galaxy stores, compared with 510 stores a year ago. The company plans to open about 40 stores this year.

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at [email protected]

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