Sporting goods retailer Dick's Sporting Goods, Inc. (DKS) Tuesday morning reported a loss for the fourth quarter compared to a profit last year, hurt by a non-cash impairment charge and costs related to the Golf Galaxy and Chick's Sporting Goods integration. However, non-GAAP earnings per share declined, but topped analysts' expectations by two cents, while quarterly revenues edged down 0.4% and missed consensus estimate.
Further, the company provided earnings forecast for the first quarter of fiscal 2009, below analysts' estimates. The company also initiated earnings guidance for fiscal 2009, in line with Street view.
The company noted that the results include operations of Golf Galaxy, which it acquired on February 13, 2007, and Chick's Sporting Goods, which it acquired on November 30, 2007.
In a statement, chairman and chief executive officer, Edward Stack said, "We continued to execute well in the fourth quarter in spite of the challenging environment. We ended the quarter without any balance outstanding on our line of credit, which is an indication of our strong cash flow and balance sheet position. Additionally, we successfully reduced inventory levels and leveraged S,G & A expenses."
Fourth Quarter Results
The Pittsburgh, Pennsylvania-based company reported net loss of $104.38 million or $0.93 per share for the fourth-quarter, compared to a net income of $73.17 million and $0.62 per share in the prior-year quarter.
The results for the latest quarter were impacted by a non-cash impairment charge of $161.7 million or $1.44 per share, which includes $164.26 million of impairment of goodwill and other intangible assets, $29.10 million of impairment of store assets and $9.90 million of merger and integration costs. The year-ago quarter had no special items.
Excluding the impact of special items, non-GAAP net income for the quarter declined to $63.44 million or $0.55 per share from $73.17 million and $0.62 per share in the year-ago quarter.
On average, twenty-three analysts polled by Thomson Reuters estimated the company to report earnings of $0.53 per share for the fourth quarter. Analysts' estimates typically exclude special items.
Dick's Sporting noted that the earnings per share were in line with the company's guidance of $0.49 to $0.56 per share and comparable store sales were also in line with the guidance of a decrease in a range of 8% to 10%.
Net sales for the quarter edged down 0.4% to $1.208 billion from $1.213 million in the same quarter last year, and misses eighteen Wall Street analysts' consensus estimate of $1.23 billion.
The decline in sales was attributable to an 8.6% decrease in consolidated comparable store sales, partially offset by the opening of new stores. Meanwhile, comparable store sales consisted of 8.1% decrease at Dick's Sporting Goods stores and a 20.4% drop at Golf Galaxy stores.
Other Metrics
Loss from operations for the quarter was $92.87 million, compared to income of $124.65 million in the prior-year quarter. Gross profit for the quarter decreased to $352.18 million from the year-ago quarter's $376.20 million, while gross margin slipped to 20.17% from 31.03% a year ago.
Selling, general and administrative expenses declined to $241.68 million from $250.36 million in the same quarter last year. The latest quarter include $164.26 million of impairment of goodwill and other intangible assets, $29.10 million of impairment of store assets and $9.90 million of merger and integration costs.
Provision for income tax for the fourth quarter was $7.53 million, compared to $48.75 million in the year-ago quarter.
The company ended the fourth quarter with cash and cash equivalents of $74.84 million, compared to $50.31 million at end of the prior-year quarter.
The company revealed that it has completed the integration of Golf Galaxy's operations and initiated the integration of Chick's Sporting Goods. Conversions of Chick's Sporting Goods stores to Dick's Sporting Goods stores are expected to be completed in the second quarter of fiscal 2009.
During the fourth quarter, Dick's Sporting opened four Golf Galaxy stores. At the end of the fourth quarter, the company operates a total of 384 Dick's Sporting Goods stores, 89 Golf Galaxy stores and 14 Chick's Sporting Goods stores.
Full-Year Highlights
For fiscal 2008, Dick's Sporting reported net loss of $35.09 million or $0.31 per share, compared to net income of $155.04 million or $1.33 per share posted in fiscal 2007.
Excluding the impact of special items, non-GAAP net income for the year declined to $138.91 million or $1.19 per share from $155.04 million or $1.33 per share reported last year. Analysts expected the company to report earnings of $1.15 per share for the full-year 2008.
Net sales for the full year increased 6% to $4.13 billion from $3.89 billion reported in the previous year. The Street was looking for full-year 2008 revenues of 4.16 billion.
Consolidated comparable store sales for the year decreased 4.8%, excluding Golf Galaxy and Chick's Sporting Goods.
Outlook
"As we plan our business for 2009, we are not anticipating any improvement in the macro economic conditions compared to what we experienced in the fourth quarter. We will continue to remain focused on servicing core athletes and outdoor enthusiasts, carefully managing inventory levels, tightly controlling expenses, and modestly growing our store base," Stack added.
For the first quarter of fiscal 2009, Dick's Sporting anticipates GAAP earnings in a range of $0.01 to $0.06 per share and non-GAAP earnings between $0.03 and $0.08 per share, excluding merger and integration costs. Analysts expect the company to report earnings of $0.10 per share for the first quarter.
Comparable store sales for the first quarter are expected to decrease about 12% to 9%, including Dick's Sporting Goods stores and Golf Galaxy stores. The company also expects to open about nine new Dick's Sporting Goods stores and one new Golf Galaxy Store in the first quarter.
For fiscal 2009, the company currently projects GAAP earnings in a range of $0.77 to $0.97 per share and non-GAAP earnings between $0.80 and $1.00 per share, excluding merger and integration costs. Analysts are looking for earnings of $0.99 per share for the full-year 2009.
Comparable store sales for fiscal 2009 are expected to decrease about 12% to 8%, including Dick's Sporting Goods stores and Golf Galaxy stores. In the full-year 2009, the company anticipates opening about 19 new Dick's Sporting Goods stores, relocate one Dick's Sporting Goods store and open one new Golf Galaxy store.
The Company also looks to close two Chick's Sporting Goods stores and convert the remaining 12 Chick's Sporting Goods stores to Dick's Sporting Goods stores.
Stock Quote
In Tuesday's regular trading session, DKS is trading at $11.56, up $0.63 or 5.76% on a volume of 0.17 million shares. In the past 52-week period, the stock has been trading in a broad range of $9.21 to $30.21.
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