Clear Channel Outdoor Holdings\' (CCO) Management On Q2 2017 Results Earnings Call Transcript

Dick’s Sporting Goods (DKS)

Q3 2015 Earnings Conference Call

November 17, 2015 10:00 am ET

Executives

Edward Stack - Chief Executive Officer

André Hawaux - Chief Operating Officer

Teri List-Stoll - Executive Vice President, Chief Financial Officer

Anne-Marie Megela - Vice President, Treasury Services, Investor Relations

Analysts

Kate McShane - Citi Research

Seth Sigman - Credit Suisse

Tim - Morgan Stanley

Camilo Lyon - Canaccord Genuity

Robbie Holmes - Bank of America Merrill Lynch

Aram Rubinson - Wolfe Research

Michael Lasser - UBS

Paul Swinand - Morningstar

Stephen Tanal - Goldman Sachs

Matt McClintock - Barclays

Sam Poser - Sterne Agee

Dan Wewar - Raymond James

Christopher Horvers - JP Morgan

Matt Nemer - Wells Fargo

Mike Baker - Deutsche Bank

Scot Ciccarelli - RBC Capital Markets

Rick Nelson - Stephens

John Kernan - Cowen

Peter Benedict - Robert W. Baird

Chris Svezia - Susquehanna Financial Group

David Magee - SunTrust Robinson Humphrey

Presentation

Operator

Compare to:

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» Dick's Sporting Goods (DKS) Edward W. Stack on Q2 2015 Results - Earnings Call Transcript

» Dick's Sporting Goods' (DKS) CEO Ed Stack on Q1 2015 Results - Earnings Call Transcript

» Dick's Sporting Goods' (DKS) CEO Ed Stack on Q4 2014 Results - Earnings Call Transcript

Good morning and welcome to the Dick’s Sporting Goods Third Quarter 2015 Earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded.

I would now like to turn the conference over to Anne-Marie Megela, Vice President of Treasury Services and Investor Relations. Please go ahead.

Anne-Marie Megela

Thank you. Good morning and thank you for joining us to discuss our third quarter 2015 financial results. On today’s call will be Ed Stack, our Chairman and Chief Executive Officer; André Hawaux, our Chief Operating Officer, and Teri List-Stoll, our Chief Financial Officer.

Please note that a rebroadcast of today’s call will be archived on the Investor Relations portion of our website located at dicks.com for approximately 30 days. In addition, as outlined in our press release, the dial-in replay will also be available for 30 days.

During this call, we will be making forward-looking statements which are predictions, projections and other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in today’s earnings press release, in the comments made during this conference call, and in the Risk Factors section of our Form 10-K, Form 10-Q, and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement.

We have also included some non-GAAP financial measures in our discussion today. Our presentation of the most directly comparable financial measures calculated in accordance with generally accepted accounting principles and related reconciliations can be found on the Investor Relations portion of our website at dicks.com.

I will now turn the call over to Ed Stack.

Edward Stack

Thank you, Anne-Marie. As announced this morning, our third quarter non-GAAP earnings per diluted share were $0.45, within our guidance of between $0.45 and $0.48. Net sales for the quarter increased 7.6% to approximately $1.6 billion. Within this, consolidated same store sales increased 0.4%, below our guidance range largely due to performance in a couple of key categories. As we mentioned on our last call, our inventory was well positioned coming into the third quarter for back-to-school selling season. Our merchants did a great job selecting key items, refining our product assortments. Overall, we were very pleased with our performance across the important categories such as athletic apparel, athletic footwear, and accessories.

At the conclusion of back-to-school, our comps were running at the higher end of our guidance; however, as the quarter progressed, record warm weather across the majority of our markets negatively impacted sales and traffic. This impact was notable in the critical cold weather categories. The outdoor category comped relatively flat in the quarter. We saw strength in lifestyle camping, paddle sports, and sport games offset by a decline in hunting. We expect the hunt business to remain under pressure in the fourth quarter based on recent trends and an anticipated promotional environment.

Our golf business continued to show meaningful improvement. During the quarter, our gold margins expanded over 200 basis points compared to last year as both golf apparel and equipment comped positive on a consolidated basis.

We continue to leverage our strong vendor relationships. We are working together to create and deliver best-in-class merchandise presentations and a new unique shopping experience for our customers. Key vendors such as Nike, Under Armour, The North Face and Adidas continue to make investments in our business at an increasing rate to support growth in important categories such as athletic apparel and footwear, where we delivered solid comp gains for the quarter.

With Nike, we opened up six Brand Jordan shops during the third quarter and have opened an additional four this quarter. We have also partnered with Nike to develop a new full-service footwear deck. With Under Armour, we’re working to create a next-generation shop concept that we plan to roll out next year, and we are also working with new partners, such as Polo, and are opening 75 Polo shops this year. Additionally, our investments in private brand continues to pay off. For example, Calia remains well positioned to become our number three women’s athletic apparel brand by the end of 2016.

As a key element of our omni-channel focus, our ecommerce business remains strong. Ecommerce penetration grew to 8% of net sales in the third quarter compared to 7.3% in the third quarter of 2014, reflecting a growth rate of 18%. We continue to move forward with our ecommerce independents to capitalize on the significantly improved economics and other strategic benefits, including the control to create a differentiated online experience, easier access to data and the ability to leverage cross-channel data, control over development cycles, including faster testing times and implementation, and the ability to quickly stand up new sites.

Turning to the fourth quarter, we’re off to a slow start as the continuation of unseasonably warm weather across the majority of our market is putting pressure on sales and traffic. This is obviously affecting our inventory levels, which are higher than we’d planned. To address this situation, we are working with key vendors to return slow-moving product as well as cancelling some orders. We are also developing markdown strategies and securing markdown allowances. We expect a more promotional holiday season that will create additional margin rate pressure. Given these dynamics, we have reduced our expectations for the rest of the year, and Teri will provide more detail around our guidance.

I’d like to thank our associates for their hard work during the quarter and for delivering earnings in spite of a challenging retail environment.

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