Dick’s Sporting Goods Soars on Q3 Earnings, Outlook

Dick’s Sporting Goods (DKS) stock surged 19.1% as of 2:03 PM ET today after the company announced strong earnings results for the third quarter. The retailer also raised its full-year outlook.

The company’s third-quarter adjusted EPS grew 33.3% year-over-year to $0.52. It handily beat analysts’ estimate of $0.38.

Behind Dick’s Sporting Goods’ strong earnings

The company’s bottom line gained from strong sales and a 140-basis-point gross margin expansion. Sales rose 5.6% to $1.96 billion and beat Wall Street’s forecast of $1.91 billion. Same-store sales grew 6%, surpassing analysts’ expectation of 2.9%.

Dick’s Sporting Goods’ third-quarter same-store sales rise marked its highest quarterly growth since 2013. More transactions and a rise in average ticket size boosted same-store sales growth. All three key categories—hardlines, apparel, and footwear—performed well this time around.

Overall sales also gained from a 13% rise in e-commerce sales. The company’s e-commerce sales accounted for 13% of its fiscal 2019 third-quarter sales, compared to 12% in fiscal 2018’s third quarter. New fulfillment centers, a delivery partnership with FedEx, and enhanced website functionality are driving the company’s e-commerce sales.

However, the top line in the third quarter took a hit from the removal of hunting supplies from an additional 125 stores. As Dick’s announced earlier this year, the company decided to remove hunting equipment from more stores. It’s tightening up its firearm sales policies. So Dick’s Sporting Goods is continuing to review its hunting business, including the Field and Stream brand. It closed eight Field and Stream stores in the third quarter.

Higher fiscal 2019 guidance

Dick’s Sporting Goods upgraded its fiscal 2019 outlook following strong sales growth in the third quarter. It now anticipates same-store sales growth of 2.5% to 3% in fiscal 2019, compared to its previous outlook of low-single-digit growth. The company’s guidance marks a significant improvement compared to its 3.1% decline in fiscal 2018 same-store sales.

Plus, the company predicts fiscal 2019 adjusted EPS in the range of $3.50 to $3.60 and reported EPS between $3.63 and $3.73. It had previously forecast EPS in the range of $3.30 to $3.45. The company’s full-year outlook reflects its optimism about holiday sales. In contrast, Macy’s (M) disappointed investors by lowering its earnings outlook following poor third-quarter earnings.

Dick’s Sporting Goods sells popular brands like Nike (NKE), Adidas, and Under Armour. Recently, Nike announced its decision to stop selling its products directly on Amazon. Retailers like Dick’s Sporting Goods and Foot Locker are expected to benefit from this move.