Dick's Sporting Goods (NYSE:DKS) belted another earnings home run in the fourth quarter, handily beating analyst expectations for sales and earnings as it saw across-the-board gains in all its segments. It also hiked its dividend nearly 14%.

In a surprise to no one, the company said it would be removing the hunting category from an additional 440 stores this year, leaving around 200 or so stores that still feature such goods. Expect those to be gone eventually, too.

Baseball batter hitting ball, with catcher kneeling behind him.

Image source: Getty Images.

Shooting out the lights

The sporting-goods retailer was able to overcome hurdles that have tripped up others, including the shortened holiday sales season that saw six fewer shopping days between Thanksgiving and Christmas and milder-than-expected winter weather.

Net sales still jumped 4.7% to $2.61 billion. Comparable-store sales surged 5.7% from the year-ago period when they had actually fallen 2.2% on an adjusted basis when removing the extra week of sales in the year-ago quarter.

That decline occurred as a result of Dick's actions surrounding firearms. It eliminated the sale of modern sporting rifles from its stores, raised the minimum age to purchase a firearm to 21, and took the first steps toward removing the hunting category from a few dozen stores.

Hunters and gun owners boycotted the retailer over its stance, and Dick's business declined. That only served to harden the retailer's resolve, which eventually expanded the removal of hunting items from 100 stores while bringing in other seasonal items that carried higher profit margins. 

While the impact of hunters withdrawing their support from Dick's lingered for several quarters, the sporting-goods retailer saw its base firm up and sales began to grow again. That undoubtedly has made it an easy decision for Dick's to dramatically scale up the elimination of hunting items from its stores, and at some point, firearms will not be considered part of the sporting-goods business for the retailer.

Everything is better

That is evident from the comments of chairman and CEO Ed Stack, who said the changes Dick's made to its business last year "fueled our strongest annual comp sales gain since 2012 and a 14% increase in non-GAAP earnings per diluted share over 2018."

The sporting-goods company reported adjusted net income of $113.3 million, or $1.32 per share, well ahead of the consensus estimates of just $1.22 per share. The adjustments excluded a $48.8 million restructuring charge related to the changes made in the hunting category.

Beyond firearms, though, Dick's said it saw strong results in each of its primary businesses of hardlines, apparel, and footwear -- pretty much identical to the performance achieved in the third quarter when Stack pointed to their growth as "a pretty good sign that the structural foundation of the businesses [is] in pretty good shape."

Coronavirus clouds the future

While the retailer avoided the worst aspects of the trade war with China last year, it has sounded a more cautionary tone with regards to the coronavirus outbreak and the impact it may have on its business. Much of Dick's inventory in many departments is sourced from China, and even products from other manufacturers rely upon China for their goods. Therefore, the effects of the COVID-19 virus could be material as the supply chain is disrupted.

However, Dick's said it doesn't expect to feel anything until the second quarter, though it may linger for some time after as full-year guidance is muted. It forecasts same-store sales to be flat to up 2%, versus the 3.7% gain it reported in 2019, though earnings are expected to be in a range of $3.60 to $4 per share compared to the $3.69 per share it just recorded.

The results, however, suggest Dick's Sporting Goods' goal of becoming an all-seasons retailer that minimizes the fluctuations from quarter to quarter, especially by eliminating the volatility associated with the firearms industry, is working according to plan.

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