It's all fun and games until you miss a quarterly estimate. Well, for Dick's Sporting Goods (NYSE:DKS), the fun and games continue. Although the recent acquisition of sporting-goods store Galyan's creates a morass of pro forma figures and one-time charges and costs, Dick's did beat estimates on both the top and bottom line.
Now, I'm not usually a big fan of pro forma reporting, but it doesn't really matter much in this case. Whether you use pro forma or reported figures, Dick's still came in better than it predicted it would.
Results were fueled in part by a 3.2% increase in same-store sales -- significantly better than the 1%-2% guidance offered by management. What's more, of all of the comparable firms that have reported thus far, Dick's has posted better same-store sales growth than all but one of them, the exception being Finish Line (NASDAQ:FINL).
It's worth noting that Dick's management didn't make any real commentary on the impact of weather or gas prices on the quarter. Given that sporting goods are generally intended for outdoor use and aren't a necessity, it's interesting to me that the same bad weather and gas prices that other retailers have used to explain away sluggish performance didn't really hurt Dick's.
Makes you go "hmmm," doesn't it?
Luckily for shareholders, better days could still be ahead. While the folks in management are maintaining same-store guidance of 1%-2%, they've beaten this number before, like they did in. well, this quarter! I also believe that Dick's has a significant opportunity to improve the results at the former Galyan's stores. Assuming that management can bring these stores up to snuff (and I don't think the company would have made the purchase if it didn't believe it could), there could be some impressive leverage in margin and earnings growth lurking in the future.
With all of that said, Dick's shareholders had better hope that management delivers those goods. Debt and the P/E ratio are both high, and the retail bogeyman (that's Wal-Mart (NYSE:WMT)) has made rumblings from time to time about getting more involved in the sporting-goods market.
Dick's isn't necessarily my cup of tea, but there's no arguing with the stock's rocket ride since early 2003. The heat is on -- management will have to perform to make the Galyan's buyout work and justify the valuation -- but management has a good track record, and I, for one, wouldn't bet against management unlocking quite a bit of growth out of the business in the years to come.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
