Earnings preview: Holiday slump damps Q4 prospects of Dick’s Sporting

Dick’s Sporting Goods (DKS) is set to release its fourth-quarter earnings results on March 12 before the market opens. It is widely expected that the sportswear retailer will register a 7% fall in revenues to $2.48 billion, reflecting the widespread weakness in sales during the holiday season.

Comparable store sales of the Coraopolis, Pennsylvania-based firm are seen contracting 3.8% compared to the fourth quarter of the previous year. It is estimated that earnings will fall sharply to $1.07 per share. Considering the fact that earnings exceeded estimates in all of the trailing five quarters, a beat cannot be ruled out this time.

In recent years, the company’s electronics and hunting segments witnessed a sharp decline, which can be attributed mainly to the curbs imposed by the government on firearm sales. Last year, the company had decided to stop the sale of assault-style guns and ammunition to youngsters. Same-store sales performance deteriorated sharply in the last two years amid faltering store traffic, reflecting the change in customer taste and rising competition.

In the third quarter, the company achieved decent bottom-line growth through its effective cost-reduction initiatives, despite a 5% fall in revenues. Net profit grew 11% to $0.39 per share as the impact of heavy investments was more than offset by lower operating expenses.

Among the other sportswear companies, Under Armour (UAA) last month posted a 2% increase in revenues to $1.4 billion, generating earnings of $0.09 per share, on an adjusted basis.

Also read: Under Armour Q4 2018 Earnings Conference Call Transcript

Like most American retailers, sales of Dick’s Sporting have been affected by the digital invasion of Amazon (AMZN). Adding to the woes, some of the leading apparel and sportswear makers have launched their own e-commerce platforms for direct-to-consumer business.

Dick’s Sporting’s shares jumped about 18% in the past 12 months, despite the volatilities, and outperformed the S&P 500 index. The stock has maintained a steady uptrend since the beginning of 2019, recovering from the lows seen towards the end of last year.

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