Dick's Sporting Goods announced Monday that earnings in the coming year will be trimmed by investments in long-term growth, even as the Findlay retailer reported that earnings in the recently ended fourth quarter were trimmed by unpredictable weather and an all-too-human athletic hero.
Investors booed, sending the company's stock down more than 10 percent, or $5.49, to close at $45.11.
Chairman and CEO Edward W. Stack seemed resigned to the fact that Wall Street wouldn't be pleased.
In discussing Dick's plans to invest this year in remodeling a large number of its namesake stores as well as in developing new concepts like the True Runner store being tested in Shadyside and the Field & Stream prototype under way in Cranberry, Mr. Stack acknowledged capital expenditures will add up.
"I know this is somewhat painful from an investment standpoint to swallow," he said, during a conference call with analysts.
He also took responsibility for a decision to cut back early on cold weather inventory -- a decision that ended up hurting fourth quarter results. It seems the company, which had coped with last year's warm winter by holding onto unsold merchandise to sell this year, got worried after December 2012 was warm again.
When snow and cold arrived in January and hung on, Dick's missed those sales.
The retailer took another hit when fitness items from the Livestrong brand associated with Lance Armstrong stopped selling after the professional cyclist admitted doping. Those goods have been put on markdown and are being cleared out for replacement by other brands.
For the holiday quarter, Dick's reported a profit of $129.7 million, or $1.03 per share, during the three months ended Feb. 2. That was up over $111.1 million, or 88 cents per share, during the same period last year. Analysts polled by Thomson Financial had been looking for $1.06 per share.
Total sales of $1.8 billion, a 12 percent increase over last year's $1.6 billion, were driven by the opening of additional stores and a 1.2 percent increase in sales at stores open at least a year, as well as an additional week of sales during this year's fourth quarter.
For the full fiscal year, Dick's posted a profit of $290.7 million, or $2.31 per share, compared to $263.9 million, or $2.10 per share, the previous year. Net sales rose 12 percent to $5.8 billion, driven by a 4.3 percent gain in sales at established stores and continued growth in the company's store chain.
Looking ahead, Dick's is anticipating earnings per share of $2.84 to $2.86 in the next fiscal year. Analysts had been looking for $2.92 per share.
Even if investors were disappointed by the earnings projections, company officials see the potential for more growth in the future and they say that's why they are making the investments.
They have revised upward the number of Dick's stores that they think the country can support from 900 to 1,100 based on the success of 35,000- to 45,000-square-foot stores that can go into smaller markets.
The company had 518 Dick's stores in 44 states as of Feb. 2.
In addition, management is trying out changes to the Golf Galaxy concept, investing in a quickly growing e-commerce operation. Mr. Stack said the company expects to add two more True Runner stores to the two specialty running stores it opened last year, one in Shadyside and one in St. Louis.
In addition, he said the company has high hopes for the 50,000-square-foot Field & Stream prototype stores in the works.
The first of the stores carrying premium hunting, fishing and camping gear will be a Cranberry location that should be ready by the third quarter. A second store is also planned this year.
Dick's has taken some heat for its decision to stop carrying certain rifles following the Sandy Hook Elementary School tragedy in December. Mr. Stack said that policy has not been changed, adding, "We focus our product on the sportsman and the hunter."