Dick’s Sporting Goods Inc (NYSE: DKS) got some positive press last month when the company announced major changes to its gun sales policies in the wake of the Parkland school shootings. Unfortunately for Dick’s investors, headlines about the company’s fourth-quarter earnings report on Tuesday morning aren’t nearly as positive.
Dick’s reported adjusted fourth-quarter earnings per share of $1.22, beating consensus analyst estimates of $1.20.
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However, holiday-quarter revenue of $2.66 billion came up short of consensus expectations of $2.74 billion. In addition, same-store sales declined by 2 percent, worse than the 1 percent drop analysts were expecting. Same-store sales were up 5 percent in the fourth quarter of 2016.
CEO Ed Stack says 2018 is shaping up to be a better year for Dick’s, but the stock’s 4 percent decline on Tuesday suggests investors aren’t convinced.
“In 2018, we expect stronger product innovation from select key partners and the continued expansion of our private brands to result in less margin pressure than previously expected,” Stack says.
Last month, Dick’s took a stand for gun control by announcing it will no longer be selling assault rifles or high-capacity magazines. It will also no longer be selling firearms of any kind to customers under the age of 21.
Looking ahead, Dick’s issued EPS guidance of between $2.80 and $3 for 2018. Same-store sales are expected to be flat to a low single-digit decline this year after falling 0.3 percent overall in 2017. Dick’s also said it would no longer be providing quarterly guidance starting in 2018.
Bank of America analyst Robert Ohmes says Dick’s earnings will likely come in on the low end of its guidance range as it focuses on investing in its business.
“We believe the more likely scenario is DKS accelerates investments in e-commerce, private label initiatives, and the Dick’s Sports HQ to support long-term growth,” Ohmes says.
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Dick’s is planning to open 19 new Dick’s Sporting Goods stores in 2018, and CFRA analyst Victor Ahluwalia says those openings should at least help the struggling retailer gain market share from brick-and-mortar competitors.
“However, pressure from online retailers and brands going direct-to-consumer should hurt its overall market share,” Ahluwalia says.
Bank of America has a “neutral” rating and $35 price target for Dick’s. CFRA has a “hold” rating and $34 price target for DKS stock.
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Dicks Sporting Goods Inc (DKS) Stock Falls on Weak Holiday Sales originally appeared on usnews.com
