Updated Research Report On Dick's Sporting - Analyst Blog

We issued an updated research report on DICK'S Sporting Goods Inc. DKS after the company's dismal first-quarter fiscal 2014 results followed by a lowered fiscal 2014 guidance.

DICK'S Sporting's first-quarter fiscal 2014 adjusted earnings of $0.50 per share not only missed its own guidance range of $0.51–$0.52 but also came below the Zacks Consensus Estimate of $0.53 per share. Net sales of $1,438.9 million also lagged the Zacks Consensus Estimate of $1,459.0 million.

The dismal earnings  was the outcome of unfavorable weather conditions that turned the tables for the company's golf and hunting businesses, both of which performed against expectations. During the quarter, the golf business witnessed a significant decline as opposed to an expectation of slight improvement while the hunting business saw results fall greatly when compared with the projection of a meager decline.

Furthermore, the company anticipates the golf business to perform miserably throughout fiscal 2014 while the hunting business is expected to stabilize only by year-end. These factors led to a bleak outlook for fiscal 2014 and the upcoming quarter causing estimates to roll down significantly.

For fiscal 2014, management now anticipates earnings per share to be between $2.70 and $2.85, down from the previous forecast of $3.03 and $3.08. Comparable store sales (comps) are now projected to grow in the range of 1%–3% versus earlier anticipation of 3%–4%. For the second quarter, DICK'S Sporting anticipates its earnings per share to come in the range of $0.62–$0.67 on a non-GAAP basis. On a GAAP basis, the company expects earnings of $0.67 per share. Comps for the second quarter are expected to increase in the range of 1%–3%.

DICK'S Sporting has witnessed sharp downward estimate revisions for the upcoming quarter as well as for fiscal 2014 and 2015, over the last 30 days. The Zacks Consensus Estimate for second-quarter fiscal 2014 declined 20.7% to 65 cents per share, while estimate for fiscal 2014 fell nearly 10.0% to $2.78 per share over the last 30 days. For fiscal 2015 too, most of the estimates were revised downward over the same time frame with the Zacks Consensus Estimate falling 10.9% to $3.20 per share.

Moreover, the stock remains vulnerable to sluggish economic recovery and cautious consumer spending. Also, risks of sourcing merchandise from overseas markets may drag the company's results going forward.

Currently, DICK'S Sporting carries a Zacks Rank #5 (Strong Sell).

Key Picks from the Sector

Some better-ranked stocks worth considering in the sector include Build-A-Bear Workshop Inc. BBW, Office Depot Inc. ODP and ULTA Salon, Cosmetics & Fragrance Inc. ULTA. While Build-A-Bear Workshop sports a Zacks Rank #1 (Strong Buy), Office Depot and ULTA Salon have a Zacks Rank #2 (Buy).

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