Dicks 2Q17 Earnings Call Notes

Ed Stack – Chairman and CEO

Retail market is currently in flux

“The retail market is currently influx. The environment is highly competitive and dynamic. We continue to believe this disruption translates into opportunity for our business long-term. We like the position we occupy in the sporting goods marketplace. And as this industry continues to consolidate, we believe we will become stronger. Although, sales and earnings did not meet our original expectations, we still reported a significant increase in our bottom line from last year of approximately 17% increase over the same period last year.”

We tried not to be promotional. We didn’t want to be the price leaders.

“We tried to not be promotional. We didn’t want to be the price leaders in the industry. And as things got competitive and somewhat unpredictable, the consumer told us that they felt that we weren’t priced competitively in the marketplace. Part of it has come from the fact that if we have an expensive athletic shoe or a high-priced jacket, we’re not — we weren’t high-priced on that jacket or on that shoe, but it was a high-priced shoe or a high-priced jacket. And we think with the right price guarantee, they’ll feel comfortable that we are at the right price, and that we are competitively priced, but as we go forward with this, we need to make sure that we convince the customer that they should be comfortable shopping with us. And that’s the whole idea around the right price promise. And it’s gotten some — it’s gotten some traction, we’ve got a very positive response from it.”

Irrational pricing is going to be the new normal until the industry consolidates further

“That’s a really good question, and if — I don’t really know, I think that this whole mindset in what’s going on with the business that everybody resetting their business can get more rational. I think there is going to be continued consolidation in this industry. And as we know it’s — when the consolidation starts to happen, price is the first line of defense if you will or the last line of defense. So I think it’s going to continue on. As I said, I think that this pricing — how the market is being priced right now in the promotional opportunity, I think it’s going to be at least for the foreseeable future, it’s going to be the new normal until the industry consolidates further.”

“the definition of loyalty in the retail business for the consumer is the absence of the better alternative.”

“But the promotional aspects are across a number of categories. So there is a hunt category, the athletic apparel category. And with the increase distribution in the athletic apparel category, it’s become more promotional. We didn’t start the promotion, but we can’t sit around and pretend it doesn’t happen. We need to engage in that. And our customers have told us, you need to engage here in today’s marketplace, the higher price than I can find the product someplace else. And I’m a firm believer that the definition of loyalty in the retail business for the consumer is the absence of the better alternative. And we need to make sure that we provide the consumer the best alternative, and that’s what we are going to do. It’s going be a little expensive and it’s going to be a little painful for a short period of time, but it’s what we need to do long-term.”

It’s a perfect storm right now

“It’s a perfect storm right now, we’re not particularly happy that we’re in it but we think we are the one we are one of the few that are very well positioned to come up the other side very strong and continue to be the leaders in this industry and we think it’s there and we think it’ll be great on the back side but it’s going to be painful for a while and we’re fortunate that we’ve got the financial strength in the balance sheet to get through it all without having to raise additional capital.”

Real estate prices are coming down at all but true A mall locations

“we’ve talked about slowing down our store growth not because we’re not happy with our new store performance or new store performance has been very good. We slowed the store growth down because we think real estate prices a couple years from now are going to be less expensive than they are today. We’re starting to we’re seeing that as we renegotiate leases or relocate stores. The rents are coming down in all but the truth A mall so, if you take a look at the true A malls we actually think rents in those malls might actually go up we’re not in a ton of those, we think in and we’ve got long term option so it won’t affect us. But we actually think those rents may go up because they’re going to be in such high demand but some of the secondary locations and we’re destination shop so, we can take that kind of the B Mall location in the rents have continued to come down in those and we think they’re going to continue to come down. We’ve got 25% of our stores over the next three years that are up for renewal and the renewals there are options.”