Dick's Sporting Goods (DKS) is riding a great deal of momentum into the all-important holiday shopping season.
And there is more behind it than a second quarter that included stimulus checks to many U.S. households.
Investors could boil the company's much-better-than-expected quarter on Wednesday to several factors: 1) more outdoor-minded athletes have been formed during the pandemic; 2) Dick's stores are becoming better places to shop amid investments in upgraded shopper experiences; and 3) the golf business remains on fire given the sport's socially distanced nature.
"We're also seeing strong retention of the 8.5 million new athletes we acquired last year and we added 2 million new athletes during this quarter," Dick's Sporting Goods CEO Lauren Hobart told analysts on an earnings call. "We are also making our stores more experiential. During Q2, we converted approximately 25 additional stores to premium full-service footwear and we added 50 new elevated soccer shops. These strategies are working and continue to set us apart within the marketplace."
Meanwhile, Hobart says Dick's redesigned its golf shops at 20 stores in the quarter. The company is also on pace to have Trackman performance golf technology in all its stores by the end of the quarter. Such technology helps fit clubs to golfers, and will likely improve the average ticket from the golf department.
The collective efforts appear to be paying off.
Dick's said it saw double-digit percentage sales gains in all three of its product categories in the quarter — hardline, apparel and footwear. Average ticket and transactions increased, too. Here is how Dick's performed in the second quarter compared to Wall Street estimates.
Net Sales: $3.27 billion vs. $2.85 billion
Adjusted EPS: $5.08 vs. $2.88
Dick's also offered up a bullish full-year outlook to investors, and sweetened its capital return plans:
Adjusted EPS: $12.45 to $12.95 (consensus: $9.01)
New special dividend: $5.50 a share
Dividend: Raised by 21%
Full-year planned share repurchases: Raised to $400 million from $200 million
Shares of Dick's Sporting Goods rose 15% to $131.19. The stock has skyrocketed 305% over the past two years, and is trading at a record high after second quarter earnings.
The big question now is whether Dick's could live up to its self-created, sky-high profit expectations as the year progresses. Six months of impressive execution suggests it could, provided athletes, who were created during the pandemic, don't injure themselves and become couch potatoes. Somehow we don't think that is going to happen, at least to any large degree that Dick's drops the ball.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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