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Dick’s Sporting Goods: Q2 Optimism Shadows Dismal Q1

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Dick’s Sporting Goods (NYSE:DKS) reported a wider-than-expected loss for the first quarter of fiscal 2020, which ended on May 2. Store closures amid the COVID-19 outbreak had a negative impact on the company’s performance. Dick’s Sporting Goods closed its stores starting on March 18 to curb the spread of COVID-19.

However, the stock rose 3.2% in pre-market trading hours today following the company’s positive update about the second quarter. The stock rose 0.21% as of 12:12 PM ET today. The stock has declined about 26% YTD.  

The company disclosed that its same-store sales only declined 4.0% in the first four weeks of the fiscal second quarter with 44% of its stores still closed. As of May 30, the company has reopened about 80% of its stores.  

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COVID-19 hurts Dick’s Sporting Goods’ Q1 results

Dick’s Sporting Goods reported a loss per share of $1.71 in the first quarter compared to an adjusted EPS of $0.62 in the first quarter of fiscal 2019. Excluding the impact of expenses related to temporary store closures and other expenses amid COVID-19, the loss per share was $1.21. The company posted a wider-than-expected loss compared to analysts’ loss per share estimate of $0.57.

The first-quarter net sales fell 30.6% YoY to $1.33 billion compared to analysts’ forecast of $1.45 billion. Same-store sales declined 29.5% due to temporary store closures since March 18. Meanwhile, stay-at-home mandates amid the pandemic had a negative impact on sporting activities and events, which impacted the demand for sporting goods. Dick’s Sporting Goods experienced lower sales in hardlines, apparel, and footwear.

The company disclosed that its same-store sales through March 10 grew 7.9%. However, the continued spread of COVID-19 impacted store traffic and led to temporary store closures. Store closures wiped off the strong start to the quarter. 

One bright spot in the first quarter was the 110% rise in e-commerce sales. The new curbside contactless pickup service helped boost the company’s e-commerce sales. Notably, e-commerce sales accounted for 39% of Dick’s Sporting Goods’ net sales in the first quarter of fiscal 2020 compared to 13% in the first quarter of fiscal 2019.

Will the company recover this year?

On March 19, Dick’s Sporting Goods withdrew its fiscal 2020 guidance amid the COVID-19 uncertainty. Earlier, the company predicted fiscal 2020 EPS between $3.60 and $4.00. Dick’s Sporting Goods also predicted fiscal 2020 same-store sales of 0.0%–to 2%. The company didn’t provide an updated outlook since the COVID-19 crisis is still critical. As a result, there’s a lot of uncertainty regarding the retail environment and the overall economy.

Previously, Dick’s Sporting Goods suspended its share repurchase program and quarterly dividends. Today, the company announced that it might resume its share repurchase program if its business continues to stabilize.

Edward W. Stack, the company’s chairman and CEO, is optimistic. He thinks that health and fitness will be important as the COVID-19 crisis subsides.

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