Dick's Sporting Goods Inc. (NYSE:DKS) Q3 2017 Earnings Conference Call Transcript

Nov 14, 2017 • 10:00 am ET

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Dick's Sporting Goods Inc. (NYSE:DKS) Q3 2017 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good morning, and welcome to the DICK'S Sporting Goods Third Quarter 2017 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Nate Gilch, Director of Investor Relations. Please go ahead.

Executive
Nate Gilch

Thank you. Good morning and thank you for joining us to discuss our third quarter 2017 financial results. On today's call will be Ed Stack, our Chairman and Chief Executive Officer; Lauren Hobart, our President; and Lee Belitsky, our Chief Financial Officer. Please note that a rebroadcast of today's call will be archived on the Investor Relations portion of our website, located at dicks.com for approximately 30 days. In addition, as outlined in our press release, a dial-in replay will also be available for approximately 30 days. (Forward-Looking Cautionary Statements) Our presentation of the most directly comparable financial measures, calculated in accordance with generally accepted accounting principles and related reconciliations can be found on the Investor Relations portion of our website at dicks.com. I will now turn the call over Ed Stack.

Executive
Edward W. Stack

Thank you, Nate. I'd like to thank all of you for joining us today. As we announced this morning, for the third quarter we earned $0.30 per share on a non-GAAP basis. This is at the high end of our guidance, which was $0.22 to $0.30. Our total sales increased 7.4% to approximately $1.94 billion. Within this, consolidated same-store sales decreased 0.9%; our e-commerce business increased 16%. As expected, the environment was competitive and promotional. While we were pleased to deliver continued growth across key businesses, such as golf, our private brands and athletic footwear, other categories including hunting and electronics remained under pressure.

As expected, merchandise margins were under pressure in this highly-promotional environment and directionally in line with our expectations. We feel we continue to gain market share from our traditional competitors and will continue our current strategy and tactics to protect market share through the fourth quarter and throughout 2018. In the fourth quarter, we expect the retail landscape to be fiercely competitive. With excess inventory still in the supply chain, broadened distribution strategies from some key vendors and a lack of newness and innovation, the fourth quarter and 2018 will continue to be promotional and pressure margins from last-year levels.

Looking ahead, we see tremendous opportunity in our industry as it continues to evolve. Because of the confidence we have in our business long term, we plan to make significant investments in our business in Q4 and into next year. This will have a short-term negative impact on our earnings. However, we expect these investments will pay meaningful dividends in the future. We plan to increase investments in our e-commerce business, the technology in our stores, store payroll to enhance the consumer experience. Meaningful investments will also be made in DICK'S Team Sports HQ and in the development and support of our private brands.

Given these investments, continued gross margin pressure and approximately flat comp