Sporting Goods Is a Great Business to Be In
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The sporting goods business is enjoying the benefits of a number of tailwinds. Among them are a rebounding economy, strengthening housing market, and an overall love for all things sports. Sales of sportswear, including footwear and apparel, have been particularly strong. This was evidenced by the strong earnings just reported by Nike. The following three companies have a strong retail presence and will continue to benefit as long as market tailwinds continue.
Shop for everything at Dick's
Dick's Sporting Goods (NYSE: DKS) is the largest U.S. sporting goods retailer, and operates approximately 520 Dick's Sporting Goods in 44 states and 81 Golf Galaxy stores in 30 states. The company also operates an e-commerce site. The stores sell team sports, apparel, footwear, exercise gear and equipment, golf, and outdoor gear.
In the first quarter of this year, the company reported earnings of $0.48 per share compared to $0.45 per share last year. Net sales increased 4.1% to $1.3 billion, which grew as a result of new stores. Same-store sales decreased 3.2% at Dick's Sporting Goods and decreased 11.8% at Golf Galaxy. This was due to a harsher winter this year compared to last year. E-commerce sales grew to comprise 5.8% of total revenue compared to 3.7% in 2012.
Looking forward, Dick's expects earnings for the second quarter to be between $0.75 and $0.77 per share compared to $0.65 last year. Same-store sales are forecast to grow by 2% to 3%. In total for 2013, the company plans to open 40 Dick's Sporting Goods, fully remodel 4 stores and partially remodel 75 stores. The new stores will have Nike and Under Armour stores located within the Dick's Sporting Goods stores. The company will also open 1 new Golf Galaxy and relocate another.
The other segment for growth is the opening of its new outdoor concept stores. The new Field & Stream stores will offer everything for the hunter, fisherman and camping enthusiast. The plan is to open two stores this year, and the first will be in Pittsburgh. This segment is a prime area for growth, especially considering the strong demand for guns and ammunition.
The neighborhood sporting goods store
Hibbett Sports (NASDAQ: HIBB) operates sporting goods stores primarily in small to medium markets. The company has over 800 stores in 29 states. The focus is on selling athletic footwear, apparel and team sporting equipment for baseball, football, basketball, and soccer.
In the first quarter of this year, net sales increased 3% to $240 million. Comparable store sales increased 0.8%. Earnings increased 2% to $1.00 per share. Hibbett opened nine new stores and expanded five high-performing stores. The company closed three underperforming stores.
Going forward, Hibbett plans to open 70 to 75 new stores this year and expand approximately 18 high-performing stores. The company also plans to close 15 to 20 underperforming stores. The company's goal is to grow to over 1,500 stores. To finance expansion, the company has $103.2 million in cash and no bank debt.
For this fiscal year, the company expects to earn $2.85 to $3.05 per share. This compares to $2.73 last year. Comparable store sales are expected to increase in the low to mid-single digit range. Hibbett has approximately $244 million remaining on its share repurchase program for share repurchases.
A growing competitor
Big 5 Sporting Goods (NASDAQ: BGFV) is a sporting goods retailer with approximately 460 stores in 12 western states. Each store averages approximately 11,000 square feet and sells athletic shoes, apparel and accessories, as well as a broad selection of outdoor and athletic equipment for team sports, fitness, camping, hunting, fishing, tennis, golf, snowboarding and in-line skating.
In the first quarter of this year, net sales increased to $246.3 million from $218.5 million in the same quarter last year. Same-store sales increased 10.5%. Gross profit increased to $80.5 million from $67.4 million. The gross profit margin increased as well, to 32.7% from 30.9%. Net income was $0.34 per share compared to $0.01 per share last year.
Going forward, Big 5 anticipates opening 15 to 20 net new stores in 2013. Big 5 currently doesn't have an e-commerce site and will launch a site in 2014. That will drive revenues and help it to catch up to the other sporting goods companies that do have an e-commerce presence. Startup expenses for the e-commerce site are expected to knock off $0.05 to $0.06 in earnings per share for 2013. In the upcoming quarter, Big 5 expects same-store sales growth in the mid-single digit range. Earnings are expected to be $0.20 to $0.26 per share.
I think sporting goods is a great business to be in. These three companies have each built a great business and are primed for expansion. An investor couldn't go wrong owning any one or all three.
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