UPDATE: March 14, 2019: During a conference call with analysts after the earnings report, CEO Edward Stack noted a strategy change for Dick's merchandise assortment at some stores, according to a Seeking Alpha transcript. The retailer's hunting category will be removed from approximately 125 stores where it is currently underperforming, he said, after a successful test of the same strategy at 10 stores in the third quarter. "If it goes as well as expected, we would probably take another batch of stores next year," Stack said. "This is around having productive space. And there is some places that the hunt business is very good, other places that it's not very good."
Dick's management also discussed the launch of a new private label, which will take the place of Reebok in stores. When asked about Under Armour's place in stores, Stack said they would not be granting the brand additional floor space, but they were enthusiastic about the business going forward.
Dick's Sporting Goods on Tuesday announced that net income in the fourth quarter was $102.6 million, compared to $116 million in the year-ago quarter, according to a company press release. Net income for the year was $319.9 million, down from $323.4 million from the prior year.
Net sales for the quarter decreased 6.5% to $2.49 billion, while net sales for the year decreased 1.8% to $8.44 billion. Digital sales were up 17% in the quarter, with e-commerce making up 23% of total net sales, compared to 19% during Q4 2017.
Based on an unshifted calendar, same-store sales at the athletics retailer decreased 3.7%, compared to a 2% decline in the fourth quarter last year. That number changes to 2.2% if the calendar is shifted to account for the 53rd week in fiscal 2017. Adjusted for the calendar, same-store sales for the year declined 3.1%, compared to a 0.3% decline in fiscal 2017.
Dick's earnings results did not inspire much confidence among investors, as shares slid 3.5% in pre-market trading on the news, although the athletics retailer did beat estimates of earnings-per-share and for net sales, according to MarketWatch.
The results maintain a trend from the retailer's third quarter results, where net sales fell 4.5% and e-commerce rose 16%. While e-commerce growth is generally a positive sign, the effect it's having on the retailer's physical stores is concerning, according to emailed comments from Neil Saunders, managing director of GlobalData Retail.
"In part, we view such cannibalization as a function of changing patterns of consumption. Indeed, we applaud Dick's for investing in channels where its customers wish to shop. However, we also believe that the chain has not put in place adequate steps to revitalize its shops and keep them relevant in the digital era," Saunders said, noting that the retailer receives lower scores for store ambience and inspiration than rivals like Nike, REI and Lululemon.
The retailer also might be suffering from the hard stance it's taken on gun control after last year's Parkland shooting led it to stop selling assault-style rifles at its Field & Stream stores. Since then, the retailer has lobbied for gun control and even saw increased foot traffic in the week after its decision. Chairman and CEO Edward Stack has stuck by that decision, but Saunders noted that many of the hunters and "gun enthusiasts" have moved over to Bass Pro or other retailers in the wake of that decision.
"At the same time, Dick's has not benefited from an upswing in trade among those who agree with its gun policy," Saunders said. "We make no political judgement on Dick's stance; however, it has clearly had an adverse impact on sales."
Despite the tough year, Stack remains confident in the business and said in a statement that the athletics retailer should return to positive comp sales at the beginning of the second quarter. "We will continue to make significant investments in our business to meet our athletes' ever-changing needs and grow our leadership position in the industry," he said.