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Dick’s Sporting Goods’ Third-Quarter Bottom Line Beat Estimates

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Adjusted EPS beats estimate

Dick’s Sporting Goods (DKS) reported its third-quarter results on November 28. Its adjusted EPS of $0.39 handily beat analysts’ estimate of $0.26. Its EPS rose 30.0% year-over-year.

The lower provision for taxes helped the bottom-line growth. Dick’s Sporting Goods also repurchased $107.9 million worth of stock in the third quarter. It has about $467 million worth of stock left under buyback authorization.

It also raised its EPS outlook for fiscal 2018 due to a strong third-quarter bottom line. The company now expects EPS of $3.15–$3.25, versus the previous range of $3.02–$3.20.

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Hibbett Sports (HIBB) reported a 62.2% decline in adjusted EPS to $0.14 in the third quarter of fiscal 2019 on a year-over-year basis and missed analysts’ estimate by 12.5%. Big 5 Sporting Goods’ (BGFV) third-quarter adjusted EPS were $0.15, a 46.4% decline from the third quarter of 2017 and short of estimates by 21.1%.

Margin numbers in details

Dick’s Sporting Goods’ gross margin expanded by ~70 basis points to 28.2% due to a 213-basis-point improvement in merchandise margins. Changes to the ScoreCard loyalty program also contributed to the margin improvement.

Selling, general, and administrative expenses fell 1.5% due to aggressive cost cuts. Dick’s Sporting Goods expects $25 million in cost reduction for fiscal 2018. Nonetheless, the company’s selling, general, and administrative expense rate increased by ~76 basis points due to lower sales. Operating income grew 5.7% to $52.9 million while the company’s operating margin expanded by ~30 basis points to 2.9%.

For fiscal 2018, DKS management expects the company’s gross margin to remain unchanged on a year-over-year basis.

Capex details

For the first three quarters of 2018, Dick’s Sporting has spent $111.8 million in net capital expenditure. In the current fiscal year, the company expects to incur capex of about $165 million, compared to $373 million in fiscal 2017. In the third quarter, it opened six new stores.

For the first nine months of 2018, the company generated cash from operations of $160.5 million, versus $125.5 million in the corresponding period last year.

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