Dick’s Sporting Goods Earnings Call Nuggets: Sales Performance and Market Share

Dick’s Sporting Goods, Inc. (NYSE:DKS) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.

Sales Performance

Brian Nagel – Oppenheimer: The first question I wanted to ask is just on sales and maybe from a bigger picture perspective. But as I listen to you talk about the sales by category. Having followed DICK’S for a while, it seems to me that the underperformers and the outperformers are still – are largely the same as they’ve been for a while, but the sales performance of the Company is deteriorating. So, the question I have is, is that right. And then behind the scene and putting aside any type of near term or recent weather disruptions. Is there something else inflecting for the negative that’s causing a further deterioration in your top line results?

Edward W. Stack – Chairman and CEO: We don’t think so, this is – in the second quarter we are so reliant upon the Golf business and that Outdoor category is a big part of our business, and as we said those are the categories that were really difficult this year compared to last year and they accounted for 3.3% of our 330 basis points of sales reduction. So, we don’t see that there is something fundamentally an issue with the business, we just – we kind of hit the perfect storm, we’re not happy about it, but we really feel that we’ve hit the perfect storm. We do think the consumer is somewhat cautious. So that’s the other difference that we see right now is that we do feel that the consumer is going to continue to be cautious, and is also we’ve all heard about what the housing business is doing, what the auto business is doing, and we’re probably right now not at the top of the food chain from a consumer spend standpoint, but there is nothing fundamental inside our business that really concerns us.

Brian Nagel – Oppenheimer: If I can just follow up just on markdowns. Your gross margin has held up well in the quarter. As we look at back half of the year and maybe in light of the guidance you gave, is there an assumption of more aggressive markdowns assuming that sales could stay soft (indiscernible) clearing some product?

Andre J. Hawaux – EVP Finance, Administration and CFO: No, Brian, this is Andre. Actually our margins – actually from a merchandising margin standpoint holds up very well. The decline in the back half is really driven by occupancy deleverage, so the net effect that we don’t see a lot of that and we think and we know that our inventory is very well positioned.

Market Share

Michael Lasser – UBS: First, on your market share. Do you think you gained or lost market share during the quarter? And how about relative to where you had been trending over the last couple of quarters?

Edward W. Stack – Chairman and CEO: I think the market share as a whole is – I wouldn’t say that we lost market share. There are some categories of business that are more important to some other retailers than our category and a bit less important to us such as the gun and ammunition business. There are some other people that it is a much more – it is much bigger part of their business. So, they get a bigger benefit from that. But in our main categories of athletic apparel, footwear, high school athlete we don’t feel that we lost market share.

Michael Lasser – UBS: There has been a couple of – kind of down traffic quarters in a row, does this mean you rethink the size of the box given that you are having to go after some categories that probably are in decline?

Edward W. Stack – Chairman and CEO: We are looking at what categories we can move around. In square footage allocation we feel that – we think that fitness business is going to continue to be difficult. I think people are just working out and exercising differently than they have in the past. So, we think that business is going to continue to struggle. We’ve got other opportunities to move that square footage. There are some other things that we’ve done from a women’s athletic standpoint around the studio concepts that we tested with Under Armour have done extremely well. So, there is ebb and flow. We think that there is the opportunity to take some of these down trending categories and scale that square footage back and some other categories that we think have got a lot of legs to them, we can expand; women’s category is one. The other one that’s doing extremely well was the youth business. So, the youth apparel business from both Nike, Under Armour and Reebok is doing extremely well and we anticipate continuing to add square footage to those categories.

Michael Lasser – UBS: Then if I could have one more final question. Presumably, you are going to get some lift from the partial remodels that you’ve done, eCommerce is going to continue to grow and you should see some benefit from the incremental traffic driving, investments that you are putting in in the third quarter. So, can you kind of frame how you thought about your third and fourth quarter sales guidance in light of all those different factors?

Edward W. Stack – Chairman and CEO: We looked at kind of where we think the business can from and to be honest with you, we are somewhat cautious about what’s happening with the consumer out there. We said, it’s been pretty well (indiscernible). The consumer seems to be a bit sluggish and may have other priorities right now in the short-term of where they want to spend their money.

A Closer Look: Dick’s Sporting Goods Earnings Cheat Sheet>>