Dick’s Sporting Goods, Inc. :DKS-US: Earnings Analysis: Q4, 2017 By the Numbers : March 28, 2017

Dick’s Sporting Goods, Inc. reports financial results for the quarter ended January 31, 2017.

We analyze the earnings along side the following peers of Dick’s Sporting Goods, Inc. – Hibbett Sports, Inc., Cabela’s Incorporated, Big 5 Sporting Goods Corporation and Sportsman’s Warehouse Holdings, Inc. (HIBB-US, CAB-US, BGFV-US and SPWH-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 2,483.43 million, Net Earnings of USD 90.19 million.
  • Gross margins narrowed from 30.00% to 28.98% compared to the same period last year, operating (EBITDA) margins now 10.61% from 11.82%.
  • Year-on-year change in operating cash flow of 8.88% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-01-31 2016-10-31 2016-07-31 2016-04-30 2016-01-31
Relevant Numbers (Quarterly)
Revenues (mil) 2483.43 1810.35 1967.86 1660.34 2240.05
Revenue Growth (%YOY) 10.87 10.21 7.95 6.07 3.71
Earnings (mil) 90.19 48.91 91.42 56.88 128.99
Earnings Growth (%YOY) -30.08 3.6 0.64 -10.21 -17.07
Net Margin (%) 3.63 2.7 4.65 3.43 5.76
EPS 0.81 0.44 0.82 0.5 1.13
Return on Equity (%) 18.99 10.58 20.13 12.66 29.38
Return on Assets (%) 8.55 4.68 9.3 6.12 13.55

Access our Ratings and Scores for Dick’s Sporting Goods, Inc.

Market Share Versus Profits

Revenues History
Earnings History

DKS-US‘s change in revenue this period compared to the same period last year of 10.87% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that DKS-US is holding onto its market share. Also, for comparison purposes, revenues changed by 37.18% and earnings by 84.38% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 30.00% to 28.98%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 11.82% to 10.61% in this time frame. For comparison, gross margins were 30.54% and EBITDA margins were 6.98% in the previous period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

DKS-US‘s decline in gross margins were offset by some improvements on the balance sheet. The management of working capital, for example, shows progress. The company’s working capital days have fallen to 27.26 days from 31.11 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

DKS-US‘s change in operating cash flow of 8.88% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 9.28% to 7.20% and (2) one-time items that contributed to a decrease in pretax margins from 9.16% to 5.76%

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Dick’s Sporting Goods, Inc.

Company Profile

Dick’s Sporting Goods, Inc. is a sporting goods retailer, which engages in offering brand name sporting goods equipment, apparel, and footwear. Its products include belt, gloves, hats, insoles, athletic tape, braces and support, cups and athletic supporters, action cameras, drones, metal detectors, backpacks and duffles, bedding and blankets, and luggage. The company was founded by Richard T. Stack in 1948 and is headquartered in Coraopolis, PA.

CapitalCube does not own any shares in the stocks mentioned and focuses solely on providing unique fundamental research and analysis on approximately 50,000 stocks and ETFs globally. Try any of our analysis, screener or portfolio premium services free for 7 days. To get a quick preview of our services, check out our free quick summary analysis of DKS-US.