It has been a superb earnings season for the retail sector, In actual fact, retail stocks have been the most effective performers throughout the broader consumer discretionary sector thus far in 2024.
Broadly, retail stocks are up by about 16% 12 months up to now as of March 14, while specialty retailers have posted a median return of 10% 12 months up to now. These numbers have outperformed the S&P 500, which is up by about 8% YTD.
The specialty retail segment got one other boost on Thursday as Dick’s Sporting Goods (NYSE:DKS) was probably the greatest performers on the day. The leading sporting goods retailer saw its stock price surge greater than 15% on Thursday after reporting strong fourth-quarter earnings. As of Thursday afternoon, the corporate’s stock was up 48% YTD to over $216 per share, so some investors could also be wondering if there’s anymore gas left within the tank.
Best sales quarter in history
You actually can’t do a lot better than Dick’s did within the fourth quarter. It absolutely obliterated earnings estimates with net income of $296 million or $3.57 per share, which was up 36% 12 months over 12 months. Adjusted net income was $320 million or $3.85 per share, which was up 31% and got here in well above the $3.35-per-share estimate from analysts.
Dick’s also had a blowout quarter with $3.9 billion in sales, up 8% 12 months over 12 months. That not only beat estimates by 2%, however it also marked the most effective sales quarter in company history. Further, comparable-store sales increased 2.8% for the fourth quarter.
Those results capped off a robust 12 months overall, as Dick’s saw its net sales jump 5% to $12.9 billion for all of fiscal 12 months 2023 with same-store sales up 2.4% for the 12 months, in comparison with a 0.5% decline in fiscal 2022. Net income was $1 billion for the 12 months or $12.18 per share — up 13% from the previous 12 months.
“With our industry-leading assortment and robust execution, we capped off the 12 months with an incredibly strong fourth quarter and holiday season,” said President and CEO Lauren Hobart within the earnings report. “Even excluding the additional week, this was the most important sales quarter within the history of the corporate, and throughout the fourth quarter, we drove significant gross margin and EBT margin expansion. Our full-year comps increased 2.4%, driven by growth in transactions, and we continued to achieve market share.”
The corporate also ended the 12 months with $1.8 billion in money and $1.5 billion in operating money flow and was able to scale back its debt by 4%, bringing it right down to $1.48 billion. The strong balance sheet allowed Dick’s to boost its dividend by 10% to $1.10 per share at a yield of two.1%, marking the tenth straight 12 months of dividend increases.
Thursday’s rally brought Dick’s share price as much as a record $220 per share before it fell back to about $216 per share, still up by about 15% on the day.
The excellent news is that the stock looks prefer it still has room to run based on its valuation and outlook. The stock continues to be a very good value trading at 14 times forward earnings, and that appears even higher paired with Dick’s 2024 guidance.
The corporate is asking for earnings of $12.85 to $13.25 per share, which can be a 5.5%-to-9% increase over 2023. Dick’s projects net sales of between $13 billion and $13.1 billion, up barely from 2023, with comparable-store sales expected to be up by 1% to 2%. Management also expects to proceed gaining market share in 2024.
“We’re guiding to a different strong 12 months in 2024,” Hobart said. “We plan to grow each our sales and earnings through positive comps, higher merchandise margin and productivity gains. With the continued success of our recent store formats and our omnichannel experience, we are going to speed up our investment in our growth strategies to drive our business forward and proceed gaining market share in a fragmented $140-billion-dollar industry.”
Dick’s Sporting Goods got a slew of price-target upgrades following the earnings report, and it is straightforward to see why. Even at an all-time-high share price, this stock has the potential to go higher.