JJB Sports investment drags down earnings for Dick's Sporting Goods
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Months after announcing its investment in a United Kingdom sporting goods chain, Findlay-based Dick's Sporting Goods Inc. has already taken a hit to its earnings as the new investment struggles to survive.
Dick's this morning reported profit in the second quarter dropped to $53.7 million, or 43 cents per share, down from $73.8 million, or 59 cents per share, in the same period a year ago.
Excluding a 22-cent per-share charge related to the investment in JJB Sports, Dick's would have reported a profit of $81.3 million, or 65 cents per share, compared to $65.1 million, or 52 cents per share last year, a number boosted by a gain on the sale of an investment.
Analysts polled by Thomson Financial had been looking for earnings of 64 cents per share for this year's second quarter, which ended July 28.
Net sales for the second quarter rose by 10 percent to $1.4 billion, driven by the opening of new stores and by a 3.8 percent increase in sales through stores that have been open at least a year.
The company said it took a pre-tax impairment charge of $32.4 million to its investment in JJB Sports, a troubled U.K. chain that recently reported sales had fallen even further than expected in recent months and has changed top-level management.
"While we continue to believe in the underlying opportunity within the U.K. sporting goods market, in light of these developments and our own assessments, we have determined to fully impair the value of our investment," Dick's chairman and chief executive officer, Edward W. Stack, said in a prepared statement.
"As we indicated at the outset, this is a high risk investment that was structured to provide us with meaningful upside and capped downside. We have no further funding obligations to JJB at this time and will continue to monitor the situation."
Earlier this month, Dick's said, it worked out a $25 million deal to buy the intellectual property rights to the Field & Stream mark in the hunting, fishing, camping and paddling categories. The company had been licensing the rights since 2007.
First Published August 14, 2012 8:59 am