In the wake of last week's better-than-expected department store results, athletic equipment retailer Dick's Sporting Goods (DKS) caught Wall Street off guard on Tuesday with a big earnings beat, as the dissolution of a major peer didn't attack profits.
Earnings grew 6.5% to 82 cents a share, well above views for 69 cents. Revenue rose 8% to $1.97 billion vs. analyst estimates for $1.88 billion.
"Expectations for the quarter were low as investors remained concerned over margin pressures from the Sports Authority liquidation," said Retail Metrics President Ken Perkins in a retail-earnings report. "With one of its main competitors going out of business and selling all of its inventory at discounted prices there was concern that Dick's would lose business during the quarter."
Instead, shares surged 7% to close at 58.76 in the stock market today. In a release, Dick's Sporting Goods Chief Executive Edward Stack said that the company is now "focused on capturing the displaced market share and remain confident in our ability to strengthen our leadership position."
Total same-store sales rose 2.8% for the quarter, a pleasant surprise from the negative 4% to negative 1% comps the company had projected in light of its rival's liquidation activity.
For 2016, Dick's now expects $2.90-$3.05 in per-share profit, up from prior guidance for $2.60-$2.90 and above consensus for $2.84 a share. Comps are now seen rising 2%-3% for the year vs. previous outlook for negative 1% to positive 1% same-store sales.
For the third quarter, the company now sees 2%-3% comps and 39-42 cents earnings per share. All guidance excludes expected costs from the conversion of former Sports Authority stores to Dick's Sporting Goods locations. Analysts see 38 cents earnings per share for the current quarter.
IBD'S TAKE: Dick's Sporting Goods stock is now overextended by over 20% from its 48.66 entry point. Is it in profit-taking zone? To be sure, read: "Take These Two Steps Before You Buy Or Sell Any Stock."
Shares of Hibbett Sports (HIBB) closed up 2.8% and Foot Locker (FL) dipped 0.5% to 60.89.
