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DICK'S SPORTING GOODS REPORTS 2Q RESULTS
Source: DICK'S Sporting Goods news release

Pittsburgh, Pennsylvania -- DICK'S Sporting Goods, Inc., the largest U.S. based full-line omni-channel sporting goods retailer, today reported sales and earnings results for the second quarter ended August 4, 2018.

Second Quarter Results

The Company reported consolidated net income for the second quarter ended August 4, 2018 of $119.4 million, or $1.20 per diluted share. The Company reported consolidated net income for the second quarter ended July 29, 2017 of $112.4 million, or $1.03 per diluted share, and non-GAAP consolidated net income of $104.8 million, or $0.96 per diluted share, which is detailed in a table later in the release under the heading "GAAP to non-GAAP Reconciliations."

Net sales for the second quarter of 2018 increased 1.0% to approximately $2.18 billion. Adjusted for the calendar shift due to the 53rd week in 2017, which we believe is the best view of the business, consolidated same store sales decreased 4.0% on a 13-week to 13-week comparable basis.

Based on an unshifted calendar, consolidated same store sales for the second quarter decreased 1.9%. Second quarter 2017 consolidated same store sales increased 0.1%.

"As we continue to focus on driving profitable sales, we are very pleased with our strong gross margin improvement. An improved product cycle, fewer promotions, and a favorable product mix contributed to the overall strength in our merchandise margin," said Edward W. Stack, Chairman and Chief Executive Officer.

Mr. Stack continued, "We delivered double digit growth in eCommerce, private brands, and athletic apparel excluding Under Armour, however, as expected, sales were impacted by the strategic decisions we made regarding the slow growth, low margin hunt and electronics businesses, which accounted for nearly half of our comp decline. In addition, we experienced continued significant declines in Under Armour sales as a result of their decision to expand distribution. We are very confident our sales trajectory will improve next year as these headwinds are expected to subside."

"We have made great progress in executing our strategic framework, particularly in delivering productivity improvements, which are leading to real savings that are being reinvested in long-term growth initiatives such as eCommerce and Team Sports HQ," said Lauren R. Hobart, President of DICK'S Sporting Goods. "Additionally, we continue to develop a leading omni-channel experience for athletes through improvements in our in-store and online experiences."

Omni-channel Development

Adjusted for the calendar shift due to the 53rd week in 2017, eCommerce sales for the second quarter of 2018 increased 12%. eCommerce penetration for the second quarter of 2018 was approximately 11% of total net sales, compared to approximately 9% during the second quarter of 2017.

In the second quarter, the Company opened five new DICK'S Sporting Goods stores. As of August 4, 2018, the Company operated 729 DICK'S Sporting Goods stores in 47 states, with approximately 38.7 million square feet, 94 Golf Galaxy stores in 32 states, with approximately 2.0 million square feet, and 35 Field & Stream stores in 16 states, with approximately 1.7 million square feet.

Store count, square footage and new stores are listed in a table later in the release under the heading "Store Count and Square Footage."

Balance Sheet

The Company ended the second quarter of 2018 with approximately $124 million in cash and cash equivalents and approximately $108 million in outstanding borrowings under its revolving credit facility. Over the course of the last 12 months, the Company continued to invest in omni-channel growth, while returning over $381 million to shareholders through share repurchases and quarterly dividends.

Total inventory decreased 6.4% at the end of the second quarter of 2018 as compared to the end of the second quarter of 2017.

Year-to-Date Results

The Company reported consolidated net income for the 26 weeks ended August 4, 2018 of $179.5 million, or $1.78 per diluted share. For the 26 weeks ended July 29, 2017, the Company reported consolidated net income of $170.6 million, or $1.55 per diluted share, and non-GAAP consolidated net income of $165.1 million, or $1.50 per diluted share, which is detailed in a table later in the release under the heading "GAAP to non-GAAP Reconciliations."

Net sales for the 26 weeks ended August 4, 2018 increased 2.6% to approximately $4.09 billion. Adjusted for the calendar shift due to the 53rd week in 2017, which we believe is the best view of the business, consolidated same store sales decreased 3.3% on a 26-week to 26-week comparable basis. Based on an unshifted calendar, consolidated same store sales for the 26 weeks ended August 4, 2018 decreased 1.4%. We delivered double digit growth in eCommerce, private brands, and athletic apparel excluding Under Armour. As expected, consolidated same store sales were impacted by our strategic decisions regarding the slow growth, low margin hunt and electronics businesses, which accounted for more than half of our comp decline. In addition, we experienced continued significant declines in Under Armour sales as a result of their decision to expand distribution. Consolidated same store sales for the 26 weeks ended July 29, 2017 increased 1.1%.

Capital Allocation

On August 24, 2018, the Company's Board of Directors authorized and declared a quarterly dividend in the amount of $0.225 per share on the Company's Common Stock and Class B Common Stock. The dividend is payable in cash on September 28, 2018 to stockholders of record at the close of business on September 14, 2018.

During the second quarter of 2018, the Company repurchased approximately 2.2 million shares of its common stock at an average cost of $33.27 per share, for a total cost of $73.8 million. The Company has approximately $575 million remaining under its authorization that extends through 2021.

Full Year 2018 Outlook

The Company currently anticipates reporting earnings per diluted share in the range of $3.02 to $3.20. The Company's earnings per diluted share guidance is not dependent upon additional share repurchases. The Company reported earnings per diluted share of $3.01 for the 53 weeks ended February 3, 2018.

Consolidated same store sales are currently expected to decline 3% to 4% on a 52-week to 52-week comparative basis, compared to a decline of 0.3% in 2017.

The Company expects to open 19 new DICK'S Sporting Goods stores and relocate four DICK'S Sporting Goods stores in 2018. The Company does not expect to open any new Field & Stream or Golf Galaxy stores in 2018.

The Company now anticipates net capital expenditures to be approximately $225 million. In 2017, net capital expenditures were $373 million.