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Why Dick’s Sporting Goods Fell ~10% after Its Q4 Results Release

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Fourth-quarter performance

Dick’s Sporting Goods (DKS) posted its earnings results for the fourth quarter of fiscal 2018 today. In the quarter, which ended on February 2, 2019, the company posted adjusted EPS of $1.07 on revenue of $2.49 billion. During the quarter, the company outperformed analysts’ EPS expectation of $1.06 and their revenue estimate of $2.48 billion. Although DKS outperformed analysts’ revenue and EPS expectations, the company’s stock fell due to its weak outlook.

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The company’s management also announced that it would stop selling firearms in 125 of its stores and would utilize the space for the sale of licensed sports gear and outdoor recreational equipment. The company stated that it had tested this concept in ten of its stores before implementing it. The announcement appears to have contributed to the fall in the company’s stock price. DKS was trading ~9.9% lower than its previous day’s closing price at 12:40 PM EST today.

Year-over-year revenue fall

DKS’s revenue fell 6.5% during the fourth quarter of fiscal 2018 from its revenue of $2.66 billion in the fourth quarter of fiscal 2017. The fall was the result of one fewer week of operations during the quarter compared to 14 weeks in the fourth quarter of fiscal 2017 and a 2.2% fall in same-store sales on the basis of a 13-week to 13-week comparison.

During the quarter, the company’s e-commerce sales rose 17% on a comparable basis to generate ~23% of its total sales. In the fourth quarter of fiscal 2017, its e-commerce sales contribution made up 19% of its total sales.

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Fall in EPS

In the fourth quarter of fiscal 2018, DKS posted adjusted EPS of $1.07, representing a fall of 12.3% from its EPS of $1.22 in the fourth quarter of fiscal 2017. The decline in its revenue and its lower EBIT margin lowered its EPS and was partially offset by a lower effective tax rate and share repurchases.

Outlook

For fiscal 2019, DKS’s management expects its same-store sales growth to be in the range of 0%–2%. During the same period, management also expects to open seven DICK’s Sporting Goods stores and two Golf Galaxy stores. For fiscal 2019, the company’s management has set its EPS guidance in the range of $3.15–$3.35.

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