Monday morning, sporting goods retailer Dicks Sporting Goods Inc. (NYSE:DKS) announced results for its fourth quarter. Revenue fell short of consensus expectations, growing 12% year-over-year to $1.8 billion, even though the firm had an extra selling week. Earnings per share fell well short of expectations, growing 17% year-over-year to $1.03 per share, even though the company had $0.03 added by the extra week of retailing.
Dicks Sporting Goods Inc. (NYSE:DKS) had been on a roll throughout most of 2011 and 2012, but same-store sales growth totaled just 1.2% year-over-year growth during the fourth quarter. Same-store sales at Dick’s Sporting Goods locations actually dipped 2.2%, though Golf Galaxy’s same-store sales increased 1.3%, and e-commerce sales soared 54%.
Management identified hunting as a strong driver during the quarter, even though supplies of ammo were constrained. Athletic apparel and footwear were also strong, with basketball shoes and cleats performing well. Unfortunately for the company, this strength was offset by a warm winter December in which the company chose to draw down inventories.
However, because the firm decided to clear inventory, it did not have ample product for when the weather got cold and snowfall accelerated in January. Further, fitness sales were weak, which the firm blamed mostly on Lance Armstrong and his decision to come clean about his doping. Management specifically stated:
“…the Livestrong brand is a little bit more than 50% of our treadmill and elliptical business. And unfortunately, when the news came out about Lance and the issues that he had and that being confirmed, people had a very negative reaction to the Livestrong brand, unfortunately. Even though with Lance ... he's no longer with the foundation, the foundation does great work, the customers had a very negative reaction to the Livestrong brand. And the business with Livestrong treadmills and ellipticals, which, as I said, were over 50% of our business, just stopped.”
When the news was released, the market wondered whether it would be NIKE, Inc. (NYSE:NKE) taking some blows to revenue. However, the LiveStrong apparel line is a tiny portion of the firm’s overall revenue mix, and the brand has done a wonderful job of absorbing any impact. Michael Jordan, Kobe Bryant, Michael Vick, Oscar Pistorious, and Tiger Woods have all had their fair share of private life debacles (some worse than others), but NIKE, Inc. (NYSE:NKE) has done a fantastic job simply dissociating from the athlete or ignoring it.