Up 48% YTD, Dick’s Sporting Goods Still Has Room to Run
It has been an excellent earnings season for the retail sector, In fact, retail stocks have been the best performers within the broader consumer discretionary sector so far in 2024.
Broadly, retail stocks are up by about 16% year to date as of March 14, while specialty retailers have posted an average return of 10% year to date. These numbers have outperformed the S&P 500, which is up by about 8% YTD.
The specialty retail segment got another boost on Thursday as Dick’s Sporting Goods (NYSE:DKS) was one of the best performers on the day. The leading sporting goods retailer saw its stock price surge more than 15% on Thursday after reporting strong fourth-quarter earnings. As of Thursday afternoon, the company’s stock was up 48% YTD to over $216 per share, so some investors may be wondering if there’s anymore gas left in the tank.
Best sales quarter in history
You really can’t do much better than Dick’s did in the fourth quarter. It absolutely obliterated earnings estimates with net income of $296 million or $3.57 per share, which was up 36% year over year. Adjusted net income was $320 million or $3.85 per share, which was up 31% and came in well above the $3.35-per-share estimate from analysts.
Dick’s also had a blowout quarter with $3.9 billion in sales, up 8% year over year. That not only beat estimates by 2%, but it also marked the best sales quarter in company history. Further, comparable-store sales increased 2.8% for the fourth quarter.
Those results capped off a strong year overall, as Dick’s saw its net sales jump 5% to $12.9 billion for all of fiscal year 2023 with same-store sales up 2.4% for the year, compared to a 0.5% decline in fiscal 2022. Net income was $1 billion for the year or $12.18 per share — up 13% from the previous year.
“With our industry-leading assortment and strong execution, we capped off the year with an incredibly strong fourth quarter and holiday season,” said President and CEO Lauren Hobart in the earnings report. “Even excluding the extra week, this was the largest sales quarter in the history of the company, and during the fourth quarter, we drove significant gross margin and EBT margin expansion. Our full-year comps increased 2.4%, driven by growth in transactions, and we continued to gain market share.”
The company also ended the year with $1.8 billion in cash and $1.5 billion in operating cash flow and was able to reduce its debt by 4%, bringing it down to $1.48 billion. The strong balance sheet allowed Dick’s to raise its dividend by 10% to $1.10 per share at a yield of 2.1%, marking the 10th straight year of dividend increases.
Thursday’s rally brought Dick’s share price up to a record $220 per share before it fell back to about $216 per share, still up by about 15% on the day.
The good news is that the stock looks like it still has room to run based on its valuation and outlook. The stock is still a good value trading at 14 times forward earnings, and that looks even better paired with Dick’s 2024 guidance.
The company is calling for earnings of $12.85 to $13.25 per share, which would be a 5.5%-to-9% increase over 2023. Dick’s projects net sales of between $13 billion and $13.1 billion, up slightly from 2023, with comparable-store sales expected to be up by 1% to 2%. Management also expects to continue gaining market share in 2024.
“We are guiding to another strong year in 2024,” Hobart said. “We plan to grow both our sales and earnings through positive comps, higher merchandise margin and productivity gains. With the continued success of our new store formats and our omnichannel experience, we will accelerate our investment in our growth strategies to drive our business forward and continue gaining market share in a fragmented $140-billion-dollar industry.”
Dick’s Sporting Goods got a slew of price-target upgrades following the earnings report, and it is easy to see why. Even at an all-time-high share price, this stock has the potential to go higher.
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