Dick's beats expectations, but golf sinks profits
Women's and youth apparel helped drive sales higher at Dick's Sporting Goods in the second quarter, although continued declines in the golf and hunting business cut into profits.
The Findlay-based sporting goods retailer said net income declined 17.5 percent to $69.5 million, or 57 cents per share, in the three months ended Aug. 2, from $84.2 million, or 67 cents, in the same period a year ago.
The decline in profits occurred despite a 10.3 percent increase in net sales and 3.2 percent growth in same store sales, a key measure of a retailer's performance, because it doesn't count revenue gains from new stores. Total sales rose to $1.69 billion from $1.53 billion a year ago.
The results came in “at the high end of our expectations,” CEO Edward Stack said in a statement, and were better than many analysts expected. Dick's shares rose $0.70, or 1.61 percent, to $44.21.
“They're doing all right,” said Paul Swinand, an analyst at Morningstar.
Still, the company is struggling against headwinds in golf and hunting businesses. Sales at its Golf Galaxy stores fell 9.3 percent. The company recorded pre-tax charges of $20.4 million from restructuring its golf business. That included a $3.7 million severance charge related to laying off golf professionals at its Dick's stores.
In July, the PGA of America said that 478 of its members were laid off from Dick's stores as the company struggled with flagging sales of golf equipment and merchandise that was caused, in part, by the long winter that cut into spring business.
The PGA professionals were part of a strategy to offer in-store expertise and differentiate Dick's from competitors. But the golf pros resulted in no “meaningful difference” between stores that had them and those that didn't, Stack told analysts in a conference call on Tuesday. The company had to adjust to what it believes is a “structural decline” in the golf retail business.
“As much as we all love golf, the business reality of it is that golf, from a retail standpoint, is under pressure, and we had to change that labor model to meet the demands and the sales,” Stack said. “We're taking those dollars and reallocating those in the areas of our business that are doing extremely well, such as the women's area, youth area, the team sports area, and I think it will serve the company well.”
The number of golfers dropped from 30 million in 2002 to 23 million in 2013, according to Pellucid Corp., a golf business analyst in Buffalo Grove, Ill. The estimated number of golf rounds played nationwide fell 2.1 percent through the first half of 2014 compared to the same period last year, according to the National Golf Foundation.
Golf will remain important to Dick's for the time being, but looks like it will become less so in the next few years, said Efraim Levy, equity analyst at S&P Capital IQ.
“Right now, they do have a problem with the golf business,” Levy said. “It doesn't look like it's going away, but over time, its importance will shrink to the company.”
Levy and Swinand said the Dick's expansion in other areas was promising. Women's and youth apparel has been strong and will be an area where the company reinvests money from cuts on the golf side, Stack said. Excluding the golf and hunting losses, Dick's had a 7.8 percent increase in same store sales.
Women's athletic apparel is “way under-penetrated,” Swinand said, as sports retailers traditionally focused on men. And a rise in the intensity and competitiveness within youth sports has spawned demand for specialty gear beyond jerseys and shorts for kids.
“The performance intensity of all the little doohickeys has just increased immensely,” he said. “There's just a lot of little details.”
Chris Fleisher is a staff writer for Trib Total Media. He can be reached at 412-320-7854 or email@example.com.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Cyber Monday increasingly a ‘blah-iday’ as deals rolled out earlier, longer
- Demand for surveillance systems boosts sales for Vector Security
- University of Pittsburgh researchers revisit war of electric currents
- Pennsylvania Game Commission reaps revenue from shale gas under game lands
- Paying pals digitally catches on
- Batteries key to alternative energy’s success
- Yahoo investors losing patience with ‘star’ CEO Marissa Mayer
- As historic breakup nears, Alcoa works to redefine its ‘advantage’
- Small stores take big gamble by not upgrading credit card readers
- Asian bug threatens oranges in Florida
- Make green home upgrades pay off