Sign in

    DICK'S SPORTING GOODS (DKS)

    DKS Q1 2025: Beats, raises FY comp to 2–3% and EPS to $13.35–13.75

    Reported on May 29, 2024 (Before Market Open)
    Pre-Earnings Price$195.00Last close (May 28, 2024)
    Post-Earnings Price$212.97Open (May 29, 2024)
    Price Change
    $17.97(+9.22%)

    What went well

    • Strong Q1 Performance & Athlete Engagement: Q1 sales increased 6.2% to over $3 billion with comps rising 5.3%, driven by enhanced omnichannel athlete engagement and robust digital as well as in-store experiences.
    • Innovative Store Formats & Digital Investments: The successful rollout of new concepts like House of Sport and next-generation 50K stores, coupled with the GameChanger platform (with 5 million active users averaging 30 minutes daily), supports sustained growth and market share gains.
    • Improving Margin Outlook: Despite a planned slight decline in merchandise margin in Q1 due to non-annualized shrink reserves, management expects modest expansion in both gross and merch margins over the full year as favorable shrink adjustments and strong inventory quality drive profitability.

    What went wrong

    • Margin Pressure from Merchandise Decline: Q&A participants noted that Q1 saw a 45 basis point decline in merch margin, with recovery hinging on favorable shrink performance—a challenge that remains uncertain and could pressure margins if shrink does not moderate as expected .
    • Ongoing Shrink Risks: Although Q1 shrink moderated relative to internal expectations, management remained cautious about Q3 and Q4 shrink rates. High shrink levels could continue to weigh on profitability if not effectively controlled .
    • High SG&A Investment Exposure: Heavy reinvestment in SG&A—spanning talent, technology, and advertising—could pressure long‐term profitability if the resulting sales growth lags, making margins vulnerable to rising operational costs .

    Q&A Summary

    1. Full-Year Guidance
      Q: How is Q1 affecting full-year outlook?
      A: Management highlighted that strong Q1 performance has led to raising full-year expectations, with comp sales now forecast at 2–3% and EPS guidance in the range of $13.35–$13.75.

    2. Margin Outlook
      Q: What drives margin improvements overall?
      A: The team expects modest expansion in gross and merch margins driven by favorable shrink adjustments and modest SG&A leverage improvements, supporting an expanded full-year EBT margin.

    3. SG&A Investments
      Q: How are SG&A costs managed?
      A: SG&A expenses increased 6.6% to $739.7M in Q1, largely due to targeted investments in advertising and store enhancements that position the brand strongly while aiming for leverage improvements over time.

    4. Digital Platform Strategy
      Q: What is the plan for GameChanger?
      A: GameChanger, now with 5 million active users who spend an average of 30 minutes daily, remains a key part of the ecosystem, enhancing athlete engagement and boosting revenue through multi-channel usage.

    5. Athlete Traffic & Market Share
      Q: How is customer traffic performing?
      A: Management noted robust growth in new and returning athletes, with strong traffic numbers reflecting an elevated in-store and digital experience that continues to drive market share gains.

    6. Merchandise Margin Drivers
      Q: What factors impact merch margins?
      A: Despite a 45 basis point decline in Q1 due to shrink pressure, improved inventory management and favorable timing are expected to modestly expand merch margins over the full year.

    7. Store and eCommerce Synergy
      Q: How do physical stores drive digital sales?
      A: The integration of new House of Sport and next-gen store formats is bolstering both in-store and online sales, creating a mutually reinforcing ecosystem that strengthens overall performance.

    8. Premium Footwear Expansion
      Q: How strong is the premium footwear segment?
      A: Premium full-service footwear decks now feature in 90% of new stores, driving significant comps growth and yielding increased allocations for key brands like HOKA and On.

    9. Outdoor Segment Outlook
      Q: What is the perspective on outdoor performance?
      A: While outdoor remains a smaller segment, management is optimistic about its future given a $40 billion target addressable market and sustained high consumer participation.

    10. Calendar Shift Impact
      Q: How does the calendar shift affect earnings?
      A: A $45M benefit in Q1 and a $100M shift into Q2 were noted; these shifts balance out across the year, leaving net earnings largely neutral mid-year.

    Analyst Coverage

    Research analysts covering DICK'S SPORTING GOODS.