Dick's Sporting Goods outperforms rivals as athletes buy more often and spend more each trip

By James RogersCiara Linnane

Stronger-than-expected earnings come after disappointment with Foot Locker and Nike

Dick's Sporting Goods Inc.'s stock rose more than 3% Tuesday before paring those gains, after the retailer reported first-quarter sales and earnings that were above analysts' expectations.

Coming just days after a disappointing report from smaller rival Foot Locker Inc. (FL) and a day after a downgrade of Nike Inc(NKE) that sent it stock to a new 2023 low, the numbers excited analysts on the company's earnings call.

Read:Foot Locker stock tumbles 22% on Q1 top and bottom line miss, lowered outlook

"While consumers face macroeconomic uncertainties, our athletes have continued to prioritize sport and rely on Dick's to meet their needs," Chief Executive Lauren Hobart said on the call, according to a FactSet transcript. "In fact, compared to the same period of last year, more athletes purchased from us, they purchased more frequently and they spend more each trip."

Growth came in every demographic, from the lower-income customer to the upper-income one, she said. And unlike other retailers, the company did not experience a sudden slowdown in March.

See also: Hibbett profit and sales fall below estimates as shoppers buy footwear but shun apparel

The company posted net income of $305 million, or $3.40 a share, for the quarter, up from $261 million, or $2.47 a share, in the same period last year.

Sales rose to $2.842 billion from $2.7 billion. The FactSet consensus was for EPS of $3.18 and sales of $2.799 billion.

Same-store sales grew 3.4%, matching the FactSet consensus. The company also reaffirmed its full-year EPS outlook of $12.90 to $13.80 and still expects same-store sales to be flat to up 2%.

Bobart said the company's House of Sport new store format is fostering strong engagement with athletes and will be a primary driver of square footage growth.

The large-store format includes such attractions as climbing walls, batting cages and golf bays. The company is on track with plans to open 9 locations ahead of the back-to-school season. Dick's is planning to start construction on another 10 locations that will open through 2024.

By the end of 2027, the company is expecting to have 75 to 100 House of Sport locations nationwide, she said.

The next-generation Dick's store will be based on its more traditional 50,000-square-foot format, with the first store opening last week in South Bend, Indiana.

The company is also seeing benefits from its warehouse formats and its Going Going Gone stores, which it uses to clear inventory, allowing it to bring fresh product to its Dick's stores and make more products, sizes and color runs available.

CFRA reiterated its buy rating on the stock and stuck with its 12-month price target of $175, which is about 39% above its current price.

"We believe DKS is a top pick in retail as the company continues to gain market share, generate strong free cash flow, and repurchase shares aggressively," analyst Zachary Warring wrote in a note.

DA Davidson also reiterated a buy rating and its price target of $178.

"Their 1Q23 print was solid in our view, not perfect, but more than good enough relative to expectations," wrote analyst Michael Baker.

"The company is taking share in a challenging environment, continuing to comp positively and is holding on to most of the margin gains over the last few years."

The stock is up 5% in the year to date, while the S&P 500 has gained 9%.

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-James Rogers

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05-24-23 0825ET

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