Dicks Sporting Goods 1Q14 Earnings Call Notes

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A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Two issues affecting performance one temporary, one longer lasting

“There were two major issues that significantly affected our business in Q1 offsetting strong performance across many product categories. One issue we believe to be temporary, the other may be longer lasting.”

Hunting soft after big increases last several years because of concerns about legislation

“Our hunting business missed the first quarter plan by approximately $15 million, a comp down high teen to last year. We had anticipated this category to be below last year as did others in the space but we underestimated decline. We all knew the significant increase in sales during the past couple of years was temporary and driven by concerns about legislative action that would broadly change our gun laws.”

Golf was the real issue

“The more concerning and unpredictable issue is the golf business. We anticipate softness, but instead we saw significant decline… We don’t feel we found that bottom yet in the golf sales number. We now expect this trend to continue for the balance of the year”

Three issues with golf: too much inventory, products not resonating with consumers, decline in rounds played

“The issues in golf are threefold. First, there is glut of inventory in the market at both wholesale and retail as a result of lackluster sales over the past 15 months…The second issue is the core golfer doesn’t seem to understand or not yet fully embraced the new technology; our vendors have brought to market…the core golfer has not replaced his equipment and the more casual player is elected to buy closeout products at a lower price. Third, we are continued to be concerned about the structural issues of the decline in rounds played.”

Rest of the business doing pretty well outside of golf and hunting

“If we take out golf and hunt which we know we can’t, our first quarter comps would have been 6.6%”

Plan to aggressively manage inventory

“we plan to aggressively manage our higher than planned inventory level so that as we enter the back half of the year we are well positioned for the holiday season”

Golf industry has real issues

“A couple of the golf manufacturers have come out and talked about what is going on in their golf business. It hasn’t been good. Adidas announced that is tailor-made business was off 34% in the first quarter. That’s a big difference and tailor-made is to the golf business what a couple of the real big athletic guys are to the athletic business. TaylorMade is off 34% — the industry has a real issue.”

If we take out sqft of golf space, we have plenty we can replace it with

“even if we take a little bit of square feet out of the golf business, our average store has from a sales standpoint, maybe 4500 square feet of golf. You can take — even if you to 1000 square feet out of that, we’ve got categories that we would expand such as the women’s business, the youth business, the footwear business, the team sports business. So I don’t think these results in any meaningful reduction in our store size.”

Not going to hide behind weather

“we didn’t call out weather. We — based on the fact that we’ve got some real issues in this industry has some very big issues in the golf business per se, and what was going on in the hunt business, we didn’t — we didn’t want it to look like we were hiding behind the weather and in fact that we did do a very good job in the other categories of business kind of mitigated what that weather was. If the weather had been better with those other categories have been a little the better? It probably would’ve been but we are not — in this case here we are not sitting hiding behind weather. We are just step up and kind of let you know that our golf business is difficult right now and the reasons of what’s going on in hunting this is really golf hunt story.”

Golf is a product issue not a weather issue

“the biggest issue is around some of the new products not doing as well as we had thought. And AUR decline to 16% in drivers is not a weather issue.”

Inventory overstock drives big revenue decline even though unit decline not so severe

“we indicated that there is a glut of inventory which is a real and was significant and took a large 16% while units only down 2%. So if you take you’re a large down 16% and any significant business in the unit goes down 2% that’s a difficult business.”