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Dick's Sporting Goods stock surges on raised outlook, Bank of America upgrades to Buy

Published 05/29/2024, 07:17 AM
Updated 05/29/2024, 10:02 AM
© Reuters.  Dick\'s Sporting Goods (DKS) stock jumps  on earnings beat, raised outlook
(Updated - May 29, 2024 9:59 AM EDT)

Dick's Sporting Goods (NYSE:DKS) stock jumped more than 15% Wednesday after the company reported a robust first quarter with earnings and revenue exceeding analyst expectations, prompting the company to raise its full-year guidance.

The sporting goods retailer announced an adjusted EPS of $3.30, surpassing the consensus estimate of $2.98. Revenue for the quarter reached $3.02 billion, also beating the forecast of $2.94 billion. This performance represents a 6.2% increase in net sales compared to the same period last year, underlining the company's strong market position.

The company's first-quarter success was attributed to a 5.3% growth in comparable sales, fueled by increases in transactions and average ticket size. Management credited the company's status as a premier destination for sports and sports culture in the U.S., as well as strong product offerings from key brand partners and its own vertical brand portfolio.

President and CEO Lauren Hobart expressed pride in the company's performance, highlighting the double-digit EBT margin of over 11% and the continued market share gains.

"Our core strategies and execution are delivering strong results, and we are continuing to gain market share as consumers prioritize Dick's Sporting Goods to meet their needs," Hobart stated.

Looking ahead, Dick's Sporting Goods raised its full-year 2024 EPS guidance to a range of $13.35 to $13.75, up from the previous range of $12.85 to $13.25. This updated forecast is above the analyst consensus of $13.24. The company also expects full-year 2024 revenue to be between $13.1 billion and $13.2 billion, which is in line with the consensus estimate of $13.16 billion.

The company's optimistic outlook is further supported by the announcement of a quarterly dividend of $1.10 per share, payable on June 28, 2024, to stockholders of record as of June 14, 2024.

Executive Chairman Ed Stack commented on the quarter's results, emphasizing the company's momentum and the anticipation of new, innovative products from brands like Nike.

"We have significant momentum and are excited about the differentiated product and compelling experience we are providing," said Stack.

Reacting to the report, Bank of America Securities upgraded DKS to Buy from Neutral, stating that the company's omni-channel execution is well ahead of peers and key brand partnerships are at all-time highs."

BofA stated: "DKS is repositioning its retail portfolio to House of Sport stores (+75-100 by 2027) and Next Generation stores (+16 in 2024) which operate at higher sales & profitability levels vs. legacy stores and DKS is seeing momentum in vertical apparel brands (CALIA, VRST, DSG) whose sourcing capabilities are competitive with leading global athletic brands."

Meanwhile, focusing on the results, analysts commented that it was a strong beat with comps "landing ahead of the bogey (which we thought was +3-4%), and margins better than feared given management had talked them down a bit, leading some to brace for a potential miss on EPS (despite the strong cadence of recent beats)."

Analysts stated that the first quarter results represent a strong start to FY24 for the retailer, noting that profit and revenue was ahead of their estimates.

Analysts highlighted that the company's gross margin was up +10 bps year-on-year at 36.3% in the first quarter, while its inventory level increased by +5.5%, compared to +0.6% in 4Q23.

Analysts said: " Dick's Sporting Goods had a much better than expected 1Q24, as the company executed very well despite a challenging consumer environment."

"Overall, we believe Dick's continues to gain share in the category, given its unique assortment of national brands, differentiated private brands, new concepts, like House of Sports, and e-commerce, which is helped by its off-mall locations that provide convenient BOPIS and curbside pickup experiences."

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