Dick's Sporting Goods Surges on Earnings: Time to Buy?

As I write this, shares of Dick’s Sporting Goods (DKS) are surging over 27% after retailer beat expectations for the fiscal first quarter. Dick’s has had a lackluster year so far—could this be enough to break its losing streak? Let’s find out.

The the athletic gear and accessories retailer had a generally solid quarter. E-commerce sales rose 24% over a year ago. Meanwhile, net sales climbed 4.6% to $1.91 billion. Analysts were expecting $1.88 billion in revenue, so Dick’s posted a modest sales surprise.

Adjusted earnings ticked up 3.8% year-on-year to $0.54 per share. Analysts were expecting $0.45 EPS, so Dick’s posted a 20% earnings surprise.

Investors cheered the earnings surprise, along with Dick’s revised guidance for FY 2018. The company now expects adjusted earnings per share to range betwen $2.92 and $3.12. This is above its previous outlook of $2.80 to $3.00 EPS.

However, the company didn’t revise its same-store sales guidance. In fact, same-store sales are expected to be anywhere from flat to a low single-digit decline compared with last year.

The fact is that it’s too soon to tell whether Dick’s can turn itself around this year. For the current fiscal year, analysts are projecting just 0.8% sales growth, and a 2.7% year-on-year drop in earnings.

Those estimates may increase a little in the coming weeks, but it won’t be enough to truly change Dick’s fortunes. The fact is that it’s going to take more than strong quarter to convince me that DKS has turned around its financial statements. So I consider DKS a D-rated Sell.

Instead of taking a chance with Dick’s, I’d go with a retailer has a proven track record of strong fundamentals. An example of this is Best Buy Co. (BBY), which I currently recommend in my Growth Investor newsletter.


Louis Navellier

Louis Navellier

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