
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☑						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended July ~~30, 2022~~29, 2023


☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File No. 001-31463

DICK’S SPORTING GOODS, INC.

(Exact name of registrant as specified in its charter)


Delaware						16-1241537
(State or Other Jurisdiction of						(I.R.S. Employer
Incorporation or Organization)						Identification No.)

345 Court Street, Coraopolis, PA 15108

(Address of Principal Executive Offices)

(724) 273-3400

(Registrant’s Telephone Number, including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of Each Exchange on which Registered

Common Stock, $0.01 par value

DKS

The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☑ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

As of August ~~19, 2022,~~18, 2023, DICK’S Sporting Goods, Inc. had ~~55,603,316~~61,452,503 shares of common stock, par value $0.01 per share, and ~~23,595,633~~23,570,633 shares of Class B common stock, par value $0.01 per share, outstanding.


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INDEX TO FORM 10-Q


Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

(Unaudited)


		13 Weeks Ended				26 Weeks Ended					13 Weeks Ended				26 Weeks Ended
		July 30, 2022		July 31, 2021		July 30, 2022		July 31, 2021			July 29, 2023		July 30, 2022		July 29, 2023		July 30, 2022
Net sales	Net sales	$	3,112,419	$	3,274,842	$	5,812,624	$	6,193,561	Net sales	$	3,223,643	$	3,112,419	$	6,065,823	$	5,812,624
Cost of goods sold, including occupancy and distribution costs	Cost of goods sold, including occupancy and distribution costs	1,991,037		1,967,765		3,706,528		3,797,857		Cost of goods sold, including occupancy and distribution costs	2,114,167		1,991,037		3,927,731		3,706,528

GROSS PROFIT	GROSS PROFIT	1,121,382		1,307,077		2,106,096		2,395,704		GROSS PROFIT	1,109,476		1,121,382		2,138,092		2,106,096

Selling, general and administrative expenses	Selling, general and administrative expenses	657,368		640,268		1,272,661		1,248,562		Selling, general and administrative expenses	775,590		657,368		1,469,494		1,272,661

Pre-opening expenses	Pre-opening expenses	3,836		3,256		6,736		7,780		Pre-opening expenses	22,127		3,836		31,216		6,736

INCOME FROM OPERATIONS	INCOME FROM OPERATIONS	460,178		663,553		826,699		1,139,362		INCOME FROM OPERATIONS	311,759		460,178		637,382		826,699

Interest expense	Interest expense	25,494		13,801		51,136		27,183		Interest expense	14,384		25,494		29,427		51,136
Other expense (income)		7,363		(6,795)		16,385		(14,146)
Other (income) expense										Other (income) expense	(28,499)		7,363		(46,206)		16,385

INCOME BEFORE INCOME TAXES	INCOME BEFORE INCOME TAXES	427,321		656,547		759,178		1,126,325		INCOME BEFORE INCOME TAXES	325,874		427,321		654,161		759,178

Provision for income taxes	Provision for income taxes	108,819		161,038		180,117		269,060		Provision for income taxes	81,543		108,819		105,181		180,117

NET INCOME	NET INCOME	$	318,502	$	495,509	$	579,061	$	857,265	NET INCOME	$	244,331	$	318,502	$	548,980	$	579,061

EARNINGS PER COMMON SHARE:	EARNINGS PER COMMON SHARE:									EARNINGS PER COMMON SHARE:
Basic	Basic	$	4.21	$	5.86	$	7.63	$	10.13	Basic	$	2.90	$	4.21	$	6.57	$	7.63
Diluted	Diluted	$	3.25	$	4.53	$	5.70	$	7.96	Diluted	$	2.82	$	3.25	$	6.23	$	5.70

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:	WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:									WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic	Basic	75,610		84,512		75,895		84,631		Basic	84,142		75,610		83,607		75,895
Diluted	Diluted	100,389		109,271		104,509		107,641		Diluted	86,783		100,389		88,224		104,509

See accompanying notes to unaudited consolidated financial statements.


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DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(Unaudited)


		13 Weeks Ended				26 Weeks Ended					13 Weeks Ended				26 Weeks Ended
		July 30, 2022		July 31, 2021		July 30, 2022		July 31, 2021			July 29, 2023		July 30, 2022		July 29, 2023		July 30, 2022
NET INCOME	NET INCOME	$	318,502	$	495,509	$	579,061	$	857,265	NET INCOME	$	244,331	$	318,502	$	548,980	$	579,061
OTHER COMPREHENSIVE INCOME (LOSS):	OTHER COMPREHENSIVE INCOME (LOSS):									OTHER COMPREHENSIVE INCOME (LOSS):

Foreign currency translation adjustment, net of tax	Foreign currency translation adjustment, net of tax	4		(21)		(3)		43		Foreign currency translation adjustment, net of tax	68		4		(25)		(3)
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)	TOTAL OTHER COMPREHENSIVE INCOME (LOSS)	4		(21)		(3)		43		TOTAL OTHER COMPREHENSIVE INCOME (LOSS)	68		4		(25)		(3)
COMPREHENSIVE INCOME	COMPREHENSIVE INCOME	$	318,506	$	495,488	$	579,058	$	857,308	COMPREHENSIVE INCOME	$	244,399	$	318,506	$	548,955	$	579,058

See accompanying notes to unaudited consolidated financial statements.


Table of Contents

DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands)

(Unaudited)


		July 30, 2022		January 29, 2022		July 31, 2021			July 29, 2023		January 28, 2023		July 30, 2022
ASSETS	ASSETS							ASSETS
CURRENT ASSETS:	CURRENT ASSETS:							CURRENT ASSETS:
Cash and cash equivalents	Cash and cash equivalents	$	1,895,521	$	2,643,205	$	2,236,733	Cash and cash equivalents	$	1,901,903	$	1,924,386	$	1,895,521
Accounts receivable, net	Accounts receivable, net	83,151		68,263		88,725		Accounts receivable, net	139,842		71,286		83,151
Income taxes receivable	Income taxes receivable	1,277		1,978		700		Income taxes receivable	13,795		8,187		1,277
Inventories, net	Inventories, net	2,995,963		2,297,609		2,011,020		Inventories, net	2,851,366		2,830,917		2,995,963
Prepaid expenses and other current assets	Prepaid expenses and other current assets	100,761		95,601		81,758		Prepaid expenses and other current assets	115,138		128,410		100,761

Total current assets	Total current assets	5,076,673		5,106,656		4,418,936		Total current assets	5,022,044		4,963,186		5,076,673

Property and equipment, net	Property and equipment, net	1,321,737		1,319,681		1,323,174		Property and equipment, net	1,520,678		1,312,988		1,321,737
Operating lease assets	Operating lease assets	2,071,084		2,044,819		2,083,010		Operating lease assets	2,269,101		2,138,366		2,071,084

Intangible assets, net	Intangible assets, net	85,553		86,767		88,157		Intangible assets, net	62,993		60,364		85,553
Goodwill	Goodwill	245,857		245,857		245,857		Goodwill	250,503		245,857		245,857

Deferred income taxes	Deferred income taxes	55,873		35,024		34,672		Deferred income taxes	24,278		41,189		55,873
Other assets	Other assets	208,498		202,872		192,358		Other assets	207,767		230,246		208,498

TOTAL ASSETS	TOTAL ASSETS	$	9,065,275	$	9,041,676	$	8,386,164	TOTAL ASSETS	$	9,357,364	$	8,992,196	$	9,065,275

LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY							LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:	CURRENT LIABILITIES:							CURRENT LIABILITIES:
Accounts payable	Accounts payable	$	1,489,321	$	1,281,322	$	1,213,449	Accounts payable	$	1,320,662	$	1,206,066	$	1,489,321
Accrued expenses	Accrued expenses	503,759		620,143		564,400		Accrued expenses	597,740		508,573		503,759
Operating lease liabilities	Operating lease liabilities	482,195		480,318		468,667		Operating lease liabilities	499,189		546,755		482,195
Income taxes payable	Income taxes payable	12,673		13,464		83,645		Income taxes payable	52,699		29,624		12,673
Deferred revenue and other liabilities	Deferred revenue and other liabilities	294,003		317,433		237,143		Deferred revenue and other liabilities	305,389		350,428		294,003
Total current liabilities	Total current liabilities	2,781,951		2,712,680		2,567,304		Total current liabilities	2,775,679		2,641,446		2,781,951
LONG-TERM LIABILITIES:	LONG-TERM LIABILITIES:							LONG-TERM LIABILITIES:

Revolving credit borrowings	Revolving credit borrowings	—		—		—		Revolving credit borrowings	—		—		—
Senior notes due 2032 and 2052	Senior notes due 2032 and 2052	1,481,886		1,481,443		—		Senior notes due 2032 and 2052	1,482,794		1,482,336		1,481,886
Convertible senior notes due 2025	Convertible senior notes due 2025	368,478		449,287		433,456		Convertible senior notes due 2025	—		58,271		368,478
Long-term operating lease liabilities	Long-term operating lease liabilities	2,096,410		2,099,146		2,173,897		Long-term operating lease liabilities	2,276,037		2,117,773		2,096,410

Other long-term liabilities	Other long-term liabilities	163,041		197,534		206,132		Other long-term liabilities	178,493		167,747		163,041
Total long-term liabilities	Total long-term liabilities	4,109,815		4,227,410		2,813,485		Total long-term liabilities	3,937,324		3,826,127		4,109,815
COMMITMENTS AND CONTINGENCIES	COMMITMENTS AND CONTINGENCIES	0		0		0		COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:	STOCKHOLDERS' EQUITY:							STOCKHOLDERS' EQUITY:
Common stock	Common stock	522		520		605		Common stock	602		585		522
Class B common stock	Class B common stock	236		236		237		Class B common stock	236		236		236
Additional paid-in capital	Additional paid-in capital	1,384,949		1,488,834		1,468,217		Additional paid-in capital	1,419,628		1,416,847		1,384,949
Retained earnings	Retained earnings	4,493,516		3,956,602		3,857,257		Retained earnings	5,255,787		4,878,404		4,493,516
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(85)		(82)		(6)		Accumulated other comprehensive loss	(277)		(252)		(85)
Treasury stock, at cost	Treasury stock, at cost	(3,705,629)		(3,344,524)		(2,320,935)		Treasury stock, at cost	(4,031,615)		(3,771,197)		(3,705,629)
Total stockholders' equity	Total stockholders' equity	2,173,509		2,101,586		3,005,375		Total stockholders' equity	2,644,361		2,524,623		2,173,509
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	9,065,275	$	9,041,676	$	8,386,164	TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	9,357,364	$	8,992,196	$	9,065,275

See accompanying notes to unaudited consolidated financial statements.


Table of Contents

DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands)

(Unaudited)


												Accumulated																	Accumulated
					Class B			Additional				Other										Class B			Additional				Other
		Common Stock			Common Stock			Paid-In		Retained		Comprehensive		Treasury					Common Stock			Common Stock			Paid-In		Retained		Comprehensive		Treasury
		Shares	Dollars		Shares	Dollars		Capital		Earnings		Loss		Stock		Total			Shares	Dollars		Shares	Dollars		Capital		Earnings		Loss		Stock		Total
BALANCE, January 29, 2022		51,989	$	520	23,621	$	236	$	1,488,834	$	3,956,602	$	(82)	$	(3,344,524)	$	2,101,586
Adjustment for cumulative effect from change in accounting principle (ASU 2020-06)		—	—		—	—		(118,961)		34,232		—		—		(84,729)

Exchange of convertible senior notes due 2025 and partial unwind of convertible bond hedge and warrants		1,833	18		—	—		3,793		—		—		—		3,811
BALANCE, January 28, 2023																		BALANCE, January 28, 2023	58,547	$	585	23,571	$	236	$	1,416,847	$	4,878,404	$	(252)	$	(3,771,197)	$	2,524,623
Retirement of convertible senior notes due 2025 and termination of convertible bond hedge and warrants																		Retirement of convertible senior notes due 2025 and termination of convertible bond hedge and warrants	1,723	17		—	—		58,455		—		—		—		58,472
Exercise of stock options	Exercise of stock options	389	4		—	—		12,661		—		—		—		12,665		Exercise of stock options	485	5		—	—		12,365		—		—		—		12,370
Restricted stock vested	Restricted stock vested	933	9		—	—		(9)		—		—		—		—		Restricted stock vested	1,983	20		—	—		(20)		—		—		—		—
Minimum tax withholding requirements	Minimum tax withholding requirements	(332)	(3)		—	—		(33,284)		—		—		—		(33,287)		Minimum tax withholding requirements	(668)	(6)		—	—		(94,689)		—		—		—		(94,695)
Net income	Net income	—	—		—	—		—		260,559		—		—		260,559		Net income	—	—		—	—		—		304,649		—		—		304,649
Stock-based compensation	Stock-based compensation	—	—		—	—		15,177		—		—		—		15,177		Stock-based compensation	—	—		—	—		12,809		—		—		—		12,809
Foreign currency translation adjustment, net of taxes of $2		—	—		—	—		—		—		(7)		—		(7)
Foreign currency translation adjustment, net of taxes of $30																		Foreign currency translation adjustment, net of taxes of $30	—	—		—	—		—		—		(93)		—		(93)
Purchase of shares for treasury	Purchase of shares for treasury	(417)	(4)		—	—		—		—		—		(42,223)		(42,227)		Purchase of shares for treasury	(418)	(4)		—	—		—		—		—		(57,697)		(57,701)
Cash dividend declared, $0.4875 per common share		—	—		—	—		—		(38,942)		—		—		(38,942)
BALANCE, April 30, 2022		54,395	$	544	23,621	$	236	$	1,368,211	$	4,212,451	$	(89)	$	(3,386,747)	$	2,194,606
Exchange of convertible senior notes due 2025 and partial unwind of convertible bond hedge and warrants		1,675	17		—	—		5,750		—		—		—		5,767
Cash dividend declared, $1.00 per common share																		Cash dividend declared, $1.00 per common share	—	—		—	—		—		(86,264)		—		—		(86,264)
BALANCE, April 29, 2023																		BALANCE, April 29, 2023	61,652	$	617	23,571	$	236	$	1,405,767	$	5,096,789	$	(345)	$	(3,828,894)	$	2,674,170
Exercise of stock options	Exercise of stock options	52	1		—	—		1,331		—		—		—		1,332		Exercise of stock options	53	—		—	—		961		—		—		—		961
Restricted stock vested	Restricted stock vested	47	—		—	—		—		—		—		—		—		Restricted stock vested	64	1		—	—		(1)		—		—		—		—
Minimum tax withholding requirements	Minimum tax withholding requirements	(13)	—		—	—		(1,860)		—		—		—		(1,860)		Minimum tax withholding requirements	(16)	—		—	—		(2,296)		—		—		—		(2,296)
Net income	Net income	—	—		—	—		—		318,502		—		—		318,502		Net income	—	—		—	—		—		244,331		—		—		244,331
Stock-based compensation	Stock-based compensation	—	—		—	—		11,517		—		—		—		11,517		Stock-based compensation	—	—		—	—		15,197		—		—		—		15,197
Foreign currency translation adjustment, net of taxes of ($1)		—	—		—	—		—		—		4		—		4
Foreign currency translation adjustment, net of taxes of ($22)																		Foreign currency translation adjustment, net of taxes of ($22)	—	—		—	—		—		—		68		—		68
Purchase of shares for treasury	Purchase of shares for treasury	(3,945)	(40)		—	—		—		—		—		(318,882)		(318,922)		Purchase of shares for treasury	(1,570)	(16)		—	—		—		—		—		(202,721)		(202,737)
Cash dividend declared, $0.4875 per common share		—	—		—	—		—		(37,437)		—		—		(37,437)
BALANCE, July 30, 2022		52,211	$	522	23,621	$	236	$	1,384,949	$	4,493,516	$	(85)	$	(3,705,629)	$	2,173,509
Cash dividend declared, $1.00 per common share																		Cash dividend declared, $1.00 per common share	—	—		—	—		—		(85,333)		—		—		(85,333)
BALANCE, July 29, 2023																		BALANCE, July 29, 2023	60,183	$	602	23,571	$	236	$	1,419,628	$	5,255,787	$	(277)	$	(4,031,615)	$	2,644,361

See accompanying notes to unaudited consolidated financial statements.


Table of Contents

~~DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES~~


											Accumulated
				Class B			Additional				Other
	Common Stock			Common Stock			Paid-In		Retained		Comprehensive		Treasury
	Shares	Dollars		Shares	Dollars		Capital		Earnings		Loss		Stock		Total
BALANCE, January 29, 2022	51,989	$	520	23,621	$	236	$	1,488,834	$	3,956,602	$	(82)	$	(3,344,524)	$	2,101,586
Adjustment for cumulative effect from change in accounting principle (ASU 2020-06)	—	—		—	—		(118,961)		34,232		—		—		(84,729)
Exchange of convertible senior notes due 2025 and partial unwind of convertible bond hedge and warrants	1,833	18		—	—		3,793		—		—		—		3,811
Exercise of stock options	389	4		—	—		12,661		—		—		—		12,665
Restricted stock vested	933	9		—	—		(9)		—		—		—		—
Minimum tax withholding requirements	(332)	(3)		—	—		(33,284)		—		—		—		(33,287)
Net income	—	—		—	—		—		260,559		—		—		260,559
Stock-based compensation	—	—		—	—		15,177		—		—		—		15,177
Foreign currency translation adjustment, net of taxes of $2	—	—		—	—		—		—		(7)		—		(7)
Purchase of shares for treasury	(417)	(4)		—	—		—		—		—		(42,223)		(42,227)
Cash dividend declared, $0.4875 per common share	—	—		—	—		—		(38,942)		—		—		(38,942)
BALANCE, April 30, 2022	54,395	$	544	23,621	$	236	$	1,368,211	$	4,212,451	$	(89)	$	(3,386,747)	$	2,194,606
Exchange of convertible senior notes due 2025 and partial unwind of convertible bond hedge and warrants	1,675	17		—	—		5,750		—		—		—		5,767
Exercise of stock options	52	1		—	—		1,331		—		—		—		1,332
Restricted stock vested	47	—		—	—		—		—		—		—		—
Minimum tax withholding requirements	(13)	—		—	—		(1,860)		—		—		—		(1,860)
Net income	—	—		—	—		—		318,502		—		—		318,502
Stock-based compensation	—	—		—	—		11,517		—		—		—		11,517
Foreign current translation adjustment, net of taxes of $(1)	—	—		—	—		—		—		4		—		4
Purchase of shares for treasury	(3,945)	(40)		—	—		—		—		—		(318,882)		(318,922)
Cash dividends declared, $0.4875 per common share	—	—		—	—		—		(37,437)		—		—		(37,437)
BALANCE, July 30, 2022	52,211	$	522	23,621	$	236	$	1,384,949	$	4,493,516	$	(85)	$	(3,705,629)	$	2,173,509

~~CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Continued)~~

~~(in thousands)~~

~~(Unaudited)~~

Accumulated
Class B Additional Other
Common Stock Common Stock Paid-In Retained Comprehensive Treasury
Shares Dollars Shares Dollars Capital Earnings (Loss) Income Stock Total
BALANCE, January 30, 2021 61,195 $ 612 23,736 $ 237 $ 1,442,298 $ 3,064,702 $ (49) $ (2,168,266) $ 2,339,534
Exercise of stock options 297 3 — — 12,330 — — — 12,333
Restricted stock vested 791 8 — — (8) — — — —
Minimum tax withholding requirements (237) (3) — — (18,598) — — — (18,601)
Net income — — — — — 361,756 — — 361,756
Stock-based compensation — — — — 12,870 — — — 12,870
Foreign currency translation adjustment, net of taxes of ($20) — — — — — — 64 — 64
Purchase of shares for treasury (1,030) (10) — — — — — (76,831) (76,841)
Cash dividend declared, $0.3625 per common share — — — — — (32,391) — — (32,391)
BALANCE, May 1, 2021 61,016 $ 610 23,736 $ 237 $ 1,448,892 $ 3,394,067 $ 15 $ (2,245,097) $ 2,598,724
Exchange of Class B common stock for common stock 40 — (40) — — — — — —
Exercise of stock options 189 2 — — 8,313 — — — 8,315
Restricted stock vested 31 1 — — (1) — — — —
Minimum tax withholding requirements (10) — — — (1,531) — — — (1,531)
Net income — — — — — 495,509 — — 495,509
Stock-based compensation — — — — 12,544 — — — 12,544
Foreign currency translation adjustment, net of taxes of $6 — — — — — — (21) — (21)
Purchase of shares for treasury (808) (8) — — — — — (75,838) (75,846)
Cash dividend declared, $0.3625 per common share — — — — — (32,319) — — (32,319)
BALANCE, July 31, 2021 60,458 $ 605 23,696 $ 237 $ 1,468,217 $ 3,857,257 $ (6) $ (2,320,935) $ 3,005,375

See accompanying notes to unaudited consolidated financial statements.


Table of Contents

DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


		26 Weeks Ended					26 Weeks Ended
		July 30, 2022		July 31, 2021			July 29, 2023		July 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	Net income	$	579,061	$	857,265	Net income	$	548,980	$	579,061
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	164,269		158,009		Depreciation and amortization	168,900		164,269
Amortization of deferred financing fees and debt discount	Amortization of deferred financing fees and debt discount	2,601		14,963		Amortization of deferred financing fees and debt discount	1,210		2,601
Deferred income taxes	Deferred income taxes	8,416		16,803		Deferred income taxes	16,911		8,416
Stock-based compensation	Stock-based compensation	26,694		25,414		Stock-based compensation	28,006		26,694

Other, net	Other, net	6,852		—		Other, net	(1,464)		6,852
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Accounts receivable	Accounts receivable	(28,971)		(22,754)		Accounts receivable	(30,311)		(28,971)
Inventories	Inventories	(698,354)		(57,452)		Inventories	16,254		(698,354)
Prepaid expenses and other assets	Prepaid expenses and other assets	(9,430)		1,559		Prepaid expenses and other assets	(10,088)		(9,430)
Accounts payable	Accounts payable	189,082		13,578		Accounts payable	14,404		189,082
Accrued expenses	Accrued expenses	(90,127)		35,853		Accrued expenses	14,004		(90,127)
Income taxes payable / receivable	Income taxes payable / receivable	877		48,344		Income taxes payable / receivable	17,671		877
Construction allowances provided by landlords	Construction allowances provided by landlords	29,273		18,344		Construction allowances provided by landlords	30,995		29,273
Deferred revenue and other liabilities	Deferred revenue and other liabilities	(35,280)		(24,563)		Deferred revenue and other liabilities	(35,648)		(35,280)
Operating lease assets and liabilities	Operating lease assets and liabilities	(43,219)		(54,582)		Operating lease assets and liabilities	(86,331)		(43,219)
Net cash provided by operating activities	Net cash provided by operating activities	101,744		1,030,781		Net cash provided by operating activities	693,493		101,744
CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:					CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	Capital expenditures	(167,693)		(167,689)		Capital expenditures	(248,560)		(167,693)
Proceeds from sale of other assets	Proceeds from sale of other assets	14,261		9,671		Proceeds from sale of other assets	27,500		14,261
Deposits and other investing activities		(17,580)		(19,130)
Other investing activities						Other investing activities	(47,719)		(17,580)
Net cash used in investing activities	Net cash used in investing activities	(171,012)		(177,148)		Net cash used in investing activities	(268,779)		(171,012)
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:
Principal paid in connection with exchange of convertible senior notes due 2025	Principal paid in connection with exchange of convertible senior notes due 2025	(200,000)		—		Principal paid in connection with exchange of convertible senior notes due 2025	(137)		(200,000)
Payments on other long-term debt and finance lease obligations		(361)		(385)
Payments on finance lease obligations						Payments on finance lease obligations	(401)		(361)
Proceeds from exercise of stock options	Proceeds from exercise of stock options	13,997		20,648		Proceeds from exercise of stock options	13,332		13,997
Minimum tax withholding requirements	Minimum tax withholding requirements	(35,147)		(20,132)		Minimum tax withholding requirements	(96,992)		(35,147)
Cash paid for treasury stock	Cash paid for treasury stock	(392,882)		(152,687)		Cash paid for treasury stock	(260,438)		(392,882)
Cash dividends paid to stockholders	Cash dividends paid to stockholders	(82,937)		(64,232)		Cash dividends paid to stockholders	(189,110)		(82,937)
Increase (decrease) in bank overdraft		18,917		(58,222)
Increase in bank overdraft						Increase in bank overdraft	86,574		18,917
Net cash used in financing activities	Net cash used in financing activities	(678,413)		(275,010)		Net cash used in financing activities	(447,172)		(678,413)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	(3)		43		EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	(25)		(3)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(747,684)		578,666
NET DECREASE IN CASH AND CASH EQUIVALENTS						NET DECREASE IN CASH AND CASH EQUIVALENTS	(22,483)		(747,684)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	2,643,205		1,658,067		CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	1,924,386		2,643,205
CASH AND CASH EQUIVALENTS, END OF PERIOD	CASH AND CASH EQUIVALENTS, END OF PERIOD	$	1,895,521	$	2,236,733	CASH AND CASH EQUIVALENTS, END OF PERIOD	$	1,901,903	$	1,895,521
Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:

Accrued property and equipment	Accrued property and equipment	$	40,955	$	37,468	Accrued property and equipment	$	101,289	$	40,955

Cash paid for interest	Cash paid for interest	$	38,406	$	11,487	Cash paid for interest	$	27,704	$	38,406
Cash paid for income taxes	Cash paid for income taxes	$	172,212	$	210,168	Cash paid for income taxes	$	75,320	$	172,212

Accrued treasury stock						Accrued treasury stock	$	—	$	6,501

See accompanying notes to unaudited consolidated financial statements.


Table of Contents

DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business and Basis of Presentation

DICK’S Sporting Goods, Inc. (together with its subsidiaries, referred to as “the Company”, “we”, “us” and “our” unless specified otherwise) is a leading omni-channel sporting goods retailer offering an extensive assortment of authentic, high-quality sports equipment, apparel, footwear and accessories through a blend of dedicated teammates, in-store services and unique specialty shop-in-shops. In addition to DICK’S Sporting Goods stores, the Company also owns and operates Golf Galaxy, ~~Field & Stream,~~ Public Lands, Moosejaw and Going Going Gone! specialty concept stores, and offers its products both online and through its mobile apps. The Company also owns and operates DICK’S House of Sport and Golf Galaxy Performance Center, as well as GameChanger, a youth sports mobile app for scheduling, communications, live scorekeeping and video streaming. When used in this Quarterly Report on Form 10-Q, unless the context otherwise requires or otherwise specifies, any reference to a “year” is to the Company’s fiscal year.

Basis of Presentation ~~and Use of Estimates~~

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the requirements for Quarterly Reports on Form 10-Q and do not include all the disclosures normally required in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The interim consolidated financial statements are unaudited and have been prepared on the same basis as the annual audited consolidated financial statements. In the opinion of management, such unaudited consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the interim financial information.

The unaudited interim financial information should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended January ~~29, 2022~~28, 2023 as filed with the Securities and Exchange Commission on March 23, ~~2022.~~2023. Operating results for the 13 and 26 weeks ended July ~~30, 2022~~29, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending ~~January 28, 2023~~February 3, 2024 or any other period.

Recently Adopted Accounting Pronouncement

~~Convertible Instruments~~Supplier Finance Programs

In ~~August 2020,~~September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ~~2020-06, “~~2022-04, ~~Debt - Debt with Conversion and Other Options~~“Supplier Finance Programs (Subtopic ~~470-20) and Derivatives and Hedging - Contracts~~405-50): Disclosure of Supplier Finance Program Obligations,” which requires that a buyer in ~~Entity’s Own Equity (Subtopic 815-40),” which removes~~a supplier finance program disclose the ~~separation models for convertible debt with cash conversion or beneficial conversion features.~~ ~~ASU 2020-06 also requires the application~~key terms of the ~~if-converted method for calculating earnings per diluted share, under which the Company must assume~~ ~~that any conversion~~programs along with information about obligations outstanding, including a roll-forward of ~~its convertible senior notes due 2025 (the “Convertible Senior Notes”) will be satisfied entirely in common stock~~.

those obligations. The Company adopted ~~ASU 2020-06 on the first day of fiscal 2022 using the modified retrospective approach, which resulted in the following adjustments to the Consolidated Balance~~ ~~Sheet~~ ~~(in millions)~~:

Last Day of Fiscal 2021 Adoption of ASU 2020-06 First Day of Fiscal 2022
Balance sheet line item
Convertible senior notes due 2025 $ 449.3 $ 114.0 $ 563.3
Net deferred tax assets $ 35.0 $ 29.3 $ 64.3
Additional paid-in capital $ 1,488.8 $ (119.0) $ 1,369.8
Retained earnings $ 3,956.6 $ 34.2 $ 3,990.8

Following the adoption of ASU 2020-06, the embedded conversion feature of the Convertible Senior Notes is no longer separately presented within stockholders’ equity, eliminating the non-cash debt discount. Accordingly, the Company’s effective interest rate on the Convertible Senior Notes decreased from 11.6% to 3.9% upon adoption, resulting in a $13.2 million reduction in non-cash interest expense for the 26 weeks ended July 30, 2022 as compared to the same prior year period. The Company anticipates that fiscal 2022 earnings will not include $27.4 million of pre-tax non-cash interest expense that was incurred in fiscal 2021 as a result of the adoption of ASU 2020-06.


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DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Despite the Company’s intention to settle the principal amount of the Convertible Senior Notes in cash, the application of the if-converted method requires earnings per diluted share to reflect the assumed share conversion of the Convertible Senior Notes, which was 11.6 million dilutive shares as of July 30, 2022. The Company used the treasury stock method prior to adoption of ASU 2020-06. The impact of adoption was not material to earnings per diluted share.

~~Recently Issued Accounting Pronouncement~~

~~Reference Rate Reform~~

~~In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.~~” The update provides optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as the London Interbank Offered Rate (“LIBOR”). The amendments in this ASU ~~can be applied anytime between~~during the first quarter of fiscal ~~2020~~2023. The adoption did not have a significant impact on the Company’s financial condition, results of operations, cash flows or disclosures.

The Company has entered into supply chain financing arrangements with third-party financial institutions, whereby suppliers have the opportunity to settle outstanding payment obligations early at a discount. The Company does not have an economic interest in suppliers’ voluntary participation and the ~~fourth quarter of fiscal 2022 and apply only to contracts, hedging relationships, and other transactions that reference LIBOR~~Company does not provide any guarantees or ~~another reference rate expected to be discontinued.~~pledge assets under these arrangements. The Company settles invoices with the third-party financial institutions in accordance with the original supplier payment terms. The Company’s ~~primary association~~rights and obligations to its suppliers, including amounts due and scheduled payment terms, are not impacted by these arrangements. Liabilities associated with ~~LIBOR was through interest rates applicable to loans under its former revolving credit facility,~~the funded participation in these arrangements, which ~~was terminated in January 2022 and replaced with a new revolving credit facility that uses an adjusted secured overnight financing rate (“SOFR”). Accordingly, the impact of ASU 2020-04~~are presented within accounts payable on the ~~Company's financial statements~~Consolidated Balance Sheets, were $38.1 million, $40.1 million, and ~~related disclosures is not expected to be significant.~~$86.1 million as of July 29, 2023, January 28, 2023, and July 30, 2022, respectively.

2. Earnings Per Common Share

Basic earnings per common share is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share is computed based on the weighted average number of shares of common stock outstanding, plus the effect of dilutive potential common shares, which include stock-based awards, such as restricted stock and stock options, and shares the Company could behave been obligated to issue from its convertible senior notes due 2025 (“Convertible Senior ~~Notes~~Notes”) and warrants ~~and stock-based awards, such as stock options and restricted stock. Dilutive potential common shares are excluded from~~prior to their retirement in the ~~computation~~first quarter of ~~earnings per share if their effect is anti-dilutive.~~

For both periods presented, dilutive potential common shares for the Company’s stock-based awards and warrants were determined using the treasury stock method. For the 13 and 26 weeks ended July 31, 2021, the dilutive effect of the Convertible Senior Notes was calculated using the treasury stock method; however, upon the adoption of ASU 2020-06, the Company was required to calculate diluted earnings per common share using the if-converted method, which was applied to the 13 and 26 weeks ended July 30, 2022. See Note 1 – Description of Business and Basis of Presentation for further discussion.fiscal 2023.

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DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Dilutive potential common shares for the Company’s stock-based awards and warrants are determined using the treasury stock method, while the dilutive effect of the Convertible Senior Notes on the Company’s diluted earnings per common share was calculated using the “if-converted method.” Dilutive potential common shares are excluded from the computation of earnings per share if their effect is anti-dilutive.

The computations for basic and diluted earnings per common share were as follows for the periods presented (in thousands, except per share data):


		13 Weeks Ended				26 Weeks Ended					13 Weeks Ended				26 Weeks Ended
		July 30, 2022		July 31, 2021		July 30, 2022		July 31, 2021			July 29, 2023		July 30, 2022		July 29, 2023		July 30, 2022
Numerator:	Numerator:									Numerator:
Numerator for basic earnings per common share - Net income	Numerator for basic earnings per common share - Net income	$	318,502	$	495,509	$	579,061	$	857,265	Numerator for basic earnings per common share - Net income	$	244,331	$	318,502	$	548,980	$	579,061
Effect of dilutive securities	Effect of dilutive securities									Effect of dilutive securities
Interest expense associated with Convertible Senior Notes, net of tax	Interest expense associated with Convertible Senior Notes, net of tax	7,992		—		16,201		—		Interest expense associated with Convertible Senior Notes, net of tax	—		7,992		337		16,201
Numerator for diluted earnings per common share - Net income after the effect of dilutive securities	Numerator for diluted earnings per common share - Net income after the effect of dilutive securities	$	326,494	$	495,509	$	595,262	$	857,265	Numerator for diluted earnings per common share - Net income after the effect of dilutive securities	$	244,331	$	326,494	$	549,317	$	595,262

Denominator:	Denominator:									Denominator:
Weighted average common shares outstanding - basic	Weighted average common shares outstanding - basic	75,610		84,512		75,895		84,631		Weighted average common shares outstanding - basic	84,142		75,610		83,607		75,895
Dilutive effect of stock-based awards	Dilutive effect of stock-based awards	4,922		6,297		5,476		6,352		Dilutive effect of stock-based awards	2,641		4,922		3,325		5,476
Dilutive effect of warrants	Dilutive effect of warrants	5,976		7,782		7,657		6,711		Dilutive effect of warrants	—		5,976		508		7,657
Dilutive effect of Convertible Senior Notes	Dilutive effect of Convertible Senior Notes	13,881		10,680		15,481		9,947		Dilutive effect of Convertible Senior Notes	—		13,881		784		15,481
Weighted average common shares outstanding - diluted	Weighted average common shares outstanding - diluted	100,389		109,271		104,509		107,641		Weighted average common shares outstanding - diluted	86,783		100,389		88,224		104,509

Earnings per common share:	Earnings per common share:									Earnings per common share:
Basic	Basic	$	4.21	$	5.86	$	7.63	$	10.13	Basic	$	2.90	$	4.21	$	6.57	$	7.63
Diluted	Diluted	$	3.25	$	4.53	$	5.70	$	7.96	Diluted	$	2.82	$	3.25	$	6.23	$	5.70

Stock-based awards excluded from diluted shares	Stock-based awards excluded from diluted shares	542		2		278		82		Stock-based awards excluded from diluted shares	312		542		222		278

The dilutive effect of the Convertible Senior Notes included ~~8.6 million and 10.7 million~~ shares ~~for the 13 weeks ended July 30, 2022 and July 31, 2021, respectively, and 10.2 million and 9.9 million shares for the 26 weeks ended July 30, 2022 and July 31, 2021, respectively,~~ that ~~are~~were designed to be offset at settlement by shares delivered from the bond hedge purchased by the Company. The shares provided by the bond hedge ~~are~~were anti-dilutive; accordingly, they ~~are~~were not treated as a reduction to diluted weighted average shares outstanding ~~for any periods presented.~~ until received at settlement.

In addition, the dilutive effect of the Convertible Senior Notes ~~for the 13 and 26 weeks ended July 30, 2022~~ included ~~approximately 5.3 million~~ shares related to the outstanding principal amount of the Convertible Senior ~~Notes, which~~Notes. Although the Company ~~intends~~was required to ~~settle~~assume that the Convertible Senior Notes would be settled in ~~cash.~~shares of its common stock in accordance with the “if-converted method” under U.S. GAAP, the Company settled the Convertible Senior Notes without dilutive effect, due to cash payments for principal, shares received from the convertible bond hedge and share repurchases to offset the share settlement of the remaining $59.1 million of principal during the first quarter of fiscal 2023. Refer to Note 5 – Convertible Senior Notes for further information.

3. Fair Value Measurements

Accounting Standard Codification (“ASC”) 820, ““Fair Value Measurement and Disclosures”,” outlines a valuation framework and creates a fair value hierarchy for assets and liabilities as follows:

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop

its own assumptions.

~~Recurring~~

The Company measures its deferred compensation plan assets held in trust at fair value on a recurring basis using Level 1 inputs. Such assets consist of investments in various mutual funds made by eligible individuals as part of the Company’s deferred compensation plans. As of July 30, 2022, January 29, 2022 and July 31, 2021, the fair value of the Company’s deferred compensation plans was $135.5 million, $150.8 million, and $148.2 million, respectively, as determined by quoted prices in active markets.

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DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Recurring

The Company measures its deferred compensation plan assets held in trust at fair value on a recurring basis using Level 1 inputs. Such assets consist of investments in various mutual funds made by eligible individuals as part of the Company’s deferred compensation plans. As of July 29, 2023, January 28, 2023 and July 30, 2022, the fair value of the Company’s deferred compensation plans was $148.0 million, $133.5 million and $135.5 million, respectively, as determined by quoted prices in active markets.

The Company discloses the fair value of its senior notes due 2032 and 2052 and Convertible Senior Notes using Level 2 inputs, which are based on quoted prices for similar or identical instruments in inactive markets, as follows (in ~~millions)~~thousands):


		July 30, 2022				January 29, 2022				July 31, 2021					July 29, 2023				January 28, 2023				July 30, 2022
		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value			Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
Senior notes due 2032	Senior notes due 2032	$	742.1	$	615.5	$	741.7	$	733.1	$	—	$	—	Senior notes due 2032	$	742,795	$	609,518	$	742,428	$	613,403	$	742,067	$	615,495
Senior notes due 2052	Senior notes due 2052	$	739.8	$	518.6	$	739.7	$	711.3	$	—	$	—	Senior notes due 2052	$	739,999	$	509,813	$	739,908	$	525,120	$	739,819	$	518,640
Convertible Senior Notes(1)	Convertible Senior Notes(1)	$	368.5	$	1,087.6	$	449.3	$	2,016.3	$	433.5	$	1,768.8	Convertible Senior Notes(1)	$	—	$	—	$	58,271	$	232,488	$	368,478	$	1,087,575

~~Prior to the adoption of ASU 2020-06, the carrying value of the~~(1) The Company’s Convertible Senior Notes excluded amounts classified within additional paid-in capital and any unamortized discounts as of January 29, 2022 and July 31, 2021. See Note 1 – Description of Business and Basis of Presentation for further information.were fully retired on April 18, 2023.

Due to their short-term nature, the fair value of cash and cash equivalents, accounts receivable, accounts payable and certain other liabilities approximated their carrying values at July ~~30, 2022,~~29, 2023, January ~~29, 2022,~~28, 2023 and July ~~31, 2021.~~30, 2022.

Nonrecurring

Assets and liabilities recognized or disclosed at fair value on a nonrecurring basis may include property and equipment, operating lease assets, goodwill and other intangible assets, equity and other assets. These assets are required to be assessed for impairment when events or circumstances indicate that the carrying value may not be recoverable, and at least annually, for goodwill and indefinite-lived intangible assets. In the event that an impairment is required, the asset is adjusted to fair value using Level 3 inputs.

4. Leases

The Company leases substantially all of its stores, 3three of its distribution centers, and certain equipment and storage under non-cancellable operating leases that expire at various dates through ~~2033.~~2039. The Company’s stores generally have initial lease terms of 10 to 15 years and contain multiple five-year renewal options and rent escalation provisions. The lease agreements are primarily for the payment of minimum annual rentals, costs of utilities, property taxes, maintenance, common areas and insurance.

Supplemental cash flow information related to operating leases for the 26 weeks ended July ~~30, 2022~~29, 2023 and July ~~31, 2021~~30, 2022 were as follows (in ~~millions~~thousands):


		26 Weeks Ended					26 Weeks Ended
		July 30, 2022		July 31, 2021			July 29, 2023		July 30, 2022
Cash paid for amounts included in the measurement of operating lease liabilities	Cash paid for amounts included in the measurement of operating lease liabilities	$	332.4	$	342.1	Cash paid for amounts included in the measurement of operating lease liabilities	$	388,606	$	332,406
Non-cash operating lease assets and liabilities obtained in exchange for new or modified leases		$	254.7	$	169.0
Non-cash operating lease assets obtained in exchange for operating lease liabilities						Non-cash operating lease assets obtained in exchange for operating lease liabilities	$	426,237	$	254,664

5. Convertible Senior Notes

~~Overview~~

InOn April ~~2020,~~18, 2023, the Company ~~issued an~~retired the remaining $59.1 million aggregate ~~$575.0 million~~principal amount outstanding of ~~3.25%~~its Convertible Senior Notes, ~~due 2025,~~substantially all of which ~~included~~was settled in shares of its common stock. The Company paid all accrued and unpaid interest as of April 18, 2023, and concurrently terminated the ~~exercise~~remaining proportionate amount of the ~~full $75.0 million over-allotment option, receiving proceeds~~bond hedge and warrant transactions. In connection with the retirement of $557.6 million, net of $17.4 million of transaction fees and other third-party offering expenses. The Convertible Senior Notes are scheduled to mature on April 15, 2025 and accrue interest at a rate of 3.25% per annum, payable semi-annually in arrears on April 15 and October 15.

~~As of July 30, 2022, the conversion rate for~~ the Convertible Senior Notes ~~was 30.8280, which represents a conversion price~~and termination of ~~$32.44 per share. The difference between~~ the ~~initial conversion rate~~bond hedge and the ~~conversion rate as of July 30, 2022 is due to dividends that have been declared and paid on~~warrant transactions, the Company issued 1.7 million shares of ~~the~~its Company’s common stock ~~following~~and recorded $58.5 million to additional paid-in-capital. Accordingly, the ~~issuance of the~~Company no longer has outstanding Convertible Senior Notes.

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DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Upon conversion, the Company may settle the Convertible Senior Notes for cash, shares of the Company’s common stock, or a combination thereof, at the Company’s option. The Company also has the ability to irrevocably elect to settle the Convertible Senior Notes in cash without amending the indentures or the Convertible Senior Notes themselves. The Company currently intends to settle the principal amount of the Convertible Senior Notes in cash and any conversion premium in shares of its common stock.

~~Convertible Senior Notes Exchanges~~

In the first quarter of 2022, the Company entered into agreements with certain holders of the Convertible Senior Notes to exchange $100.0 million in aggregate principal amount of the Convertible Senior Notes for a combination of cash and shares of the Company’s common stock. In the second quarter of 2022, the Company entered into agreements with certain holders of the Convertible Senior Notes to exchange an additional $100.0 million aggregate principal amount for a combination of cash and shares of the Company’s common stock in 2 separate transactions. The first and second quarter payments included all accrued and unpaid interest on the amounts exchanged. Concurrently with each of the exchanges in the first and second quarter of 2022 (collectively, the “Notes Exchanges”), the Company entered into agreements with certain counterparties to terminate a proportionate amount of the convertible bond hedge and warrant agreements that were entered into by the Company in April 2020 in connection with the issuance of the Convertible Senior Notes.

In connection with the Notes Exchanges, the Company recognized pre-tax inducement charges of approximately $6.6 million and $12.3 million during the 13 and 26 weeks ended July 30, 2022, respectively, which were recorded within interest expense on the Consolidated Statement of Income. The Company also paid a total of $200.0 million to noteholders to redeem the principal amount of the Convertible Senior Notes, which had a carrying value totaling $196.3 million, and issued approximately 3.5 million shares of the Company's common stock. Following the Notes Exchanges, $375.0 million aggregate principal amount of the Convertible Senior Notes remain outstanding at July 30, 2022. In addition, approximately 11.6 million shares underlie the Convertible Senior Notes, the convertible bond hedge and the warrants at July 30, 2022.

~~Financial Statement Impacts~~

As discussed in Note 1 – Description of Business and Basis of Presentation, following the adoption of ASU 2020-06, the Convertible Senior Notes are recorded entirely as a liability. A summary of the composition of the net carrying value of the Convertible Senior Notes is as follows:

(in millions) July 30, 2022 January 29, 2022 July 31, 2021
Principal $ 375.0 $ 575.0 $ 575.0
Debt discount (6.5) (125.7) (141.5)
Carrying amount $ 368.5 $ 449.3 $ 433.5
Equity component (*)
N/A $ 160.7 $ 160.7

~~(*) Included in additional paid-in capital on the Consolidated Balance Sheets as of January 29, 2022 and July 31, 2021.~~

During the 13 and 26 weeks ended July 30, 2022, the Company recognized $10.8 million and $21.9 million of interest expense related to the Convertible Senior Notes, or $8.0 million and $16.2 million, net of tax, respectively. Interest expense included $6.6 million and $12.3 million of pre-tax inducement charges related to the exchange transactions during fiscal 2022, of which $0.7 million and $1.5 million, respectively, was attributed to non-cash amortization of issuance fees during the 13 and 26 weeks ended July 30, 2022.

Following retirement of the Convertible Senior Notes in the first quarter of fiscal 2023, the Company did not incur any related interest expense during the 13 weeks ended July 29, 2023.During the 26 weeks ended July 29, 2023, the Company recognized $0.5 million of interest expense related to the Convertible Senior ~~Notes included~~Notes.

6. Income Taxes

The Company’s effective tax rate for the ~~aforementioned inducement charges~~13 and ~~$0.7 million~~26 weeks ended July 29, 2023 was 25.0% and ~~$1.5 million of non-cash amortization of the debt discount during~~16.1%, respectively, as compared to 25.5% and 23.7% for the 13 and 26 weeks ended July 30, 2022, respectively. During the 13 and 26 weeks ended July 31, 2021, the Company recognized $12.3 million and $24.3 million of interest expense related to the Convertible Senior Notes, of which $7.7 million and $15.0 million, respectively, was attributed to non-cash amortization of the debt discount.

~~At July 30, 2022, the stock price conditions under which the Convertible Senior Notes could be convertible at the holders’ option were met.~~ The ~~Company has not received any material conversion requests through the filing date of this Form 10-Q. Because the closing price of the Company’s common stock of $93.59 at the end of~~effective tax rate for the current ~~quarter exceeded~~year-to-date period was favorably impacted by a $48.0 million increase in excess tax benefits, resulting from a higher number of employee equity awards vesting and exercised in the ~~conversion~~current period at a higher share price ~~of $32.44,~~than the ~~if-converted value exceeded the principal amount outstanding of the Convertible Senior Notes by approximately $707.0 million at July 30, 2022.~~prior year period.


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DICK’S SPORTING GOODS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

6.7. Subsequent ~~Event~~Events

On August ~~22, 2022,~~21, 2023, the Company's Board of Directors authorized and declared a quarterly cash dividend in the amount of ~~$0.4875~~$1.00 per share on the Company's common stock and Class B common stock. The dividend is payable on September ~~30, 2022~~29, 2023 to stockholders of record as of the close of business on September ~~9, 2022.~~15, 2023.

On August 22, 2023, the Company announced a business optimization of its organization to better align its talent, organizational design and spending in support of its most critical strategies while also streamlining its overall cost structure. In connection with this business optimization, which is expected to be completed during fiscal 2023, the Company eliminated certain positions primarily at its customer support center on August 21, 2023 for which it expects to incur approximately $20 million of severance expense in the third quarter of 2023. Cash payments related to this expense are expected to be made over the next twelve months.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

We caution that any forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) contained in this Quarterly Report on Form 10-Q or made by our management involve risks and uncertainties and are subject to change based on various important factors, many of which may be beyond our control. Accordingly, our future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. Investors should not place undue reliance on forward-looking statements as a prediction of actual results. These statements can be identified as those that may predict, forecast, indicate or imply future results, performance or advancements and by forward-looking words such as “believe”, “anticipate”, “expect”, “estimate”, “predict”, “intend”, “plan”, “project”, “goal”, “will”, “will be”, “will continue”, “will result”, “could”, “may”, “might” or any variations of such words or other words with similar meanings. Forward-looking statements address, among other things, our belief that many consumers have made lasting lifestyle changes bywith an increased focus on health and fitness, sports, and outdoor activities, leading to structurally higher sales; current macroeconomic conditions, including the uncertain impact of ~~inflation, fuel prices,~~inflationary pressures, the end of student loan payment deferments, and ~~the risk of recession;~~rising interest rates; our expectations regarding merchandise margins, supply chain ~~disruptions~~costs, and ~~labor market challenges, including factory closures and port congestion, which are resulting in rising container and transportation costs;~~inventory shrink; the ~~normalization of sales in certain categories, including fitness and outdoor equipment; the adequacy~~sufficiency of our cash flow; our ability to control expenses; plans to opportunistically open new stores in under-penetrated markets and leverage our real estate portfolio to capitalize on future opportunities in the near and intermediate term as our existing leases come up for renewal and our plans to add new retail concepts and experiential stores; ~~our intention~~plans to ~~repay~~open additional DICK’S House of Sport stores; plans to convert the ~~principal outstanding amounts~~existing Field & Stream stores to DICK’S House of ~~the Convertible Senior Notes using excess cash, free cash flow~~Sport stores, expanded DICK’S Sporting Goods stores, or ~~borrowings on our unsecured $1.6 billion revolving credit facility (the “Credit Facility”);~~ other specialty concept stores; projections of our future profitability; projected range of capital expenditures which we expect will be concentrated on new store development, relocations and ~~our plans to make~~remodels, improvements within our existing stores including converting approximately 100 stores to premium full-service footwear decks, and ~~new store development and to continue investing~~continued investments in technology to enhance our store fulfillment, ~~and~~ in-store pickup and other foundational capabilities; our business optimization initiatives and the time frame in which we expect to implement our business optimization; anticipated store openings and relocations; plans to return capital to stockholders through dividends and in share repurchases; and our future results of operations and financial condition.

The following factors, among others, in some cases have affected, and in the future, could affect our financial performance and actual results, and could cause actual results for fiscal ~~2022~~2023 and beyond to differ materially from those expressed or implied in any forward-looking statements included in this Quarterly Report on Form 10-Q or otherwise made by our management:

▪~~Challenging~~Uncertain macroeconomic conditions, including inflationary pressures, the ~~risk~~expiration of ~~recession and~~student loan payment deferments, rising interest rates, disruption of supply chain, ~~constraints,~~whether due to COVID-19, the conflict in Ukraine or ~~otherwise; decreases in consumer demand for our products;~~otherwise, and the effectiveness of measures to mitigate such ~~impact on our business and consumer spending;~~

▪The impact of COVID-19 on our business, operations and financial results, including the impact due to disruptions in our or our vendors’ supply chains and due to restrictions imposed by federal, state, and local governments in response to increases in the number of COVID-19 cases in areas in which we operate;impact;

▪The dependence of our business on consumer discretionary spending, the impact of a decrease in discretionary spending due to inflation or otherwise on our business, and our ability to predict or effectively react to changes in consumer demand or shopping ~~patterns, including the short-term and long-term impact due to the COVID-19 pandemic;~~patterns;

▪Intense competition in the sporting goods industry and in retail, including competition for talent and the level of competitive promotional activity;

▪~~Increasing~~That our strategic plans and business optimization initiatives may initially result in a negative impact on our financial results, or that such plans and initiatives may not achieve the desired results within the anticipated time frame or at all;

▪Fluctuations in product costs and availability, which could be caused by numerous reasons including foreign trade issues and instability, currency exchange rate fluctuations, ~~increasing~~fuel price uncertainty, increases in commodity prices, ~~for materials~~labor shortages, increases in material prices due to ~~inflation~~inflationary pressures or other reasons, or supply chain ~~delays, associated costs~~delays;

▪Organized retail crime and ~~constraints, or foreign political instability;~~our ability to effectively manage inventory shrink;

▪Disruptions to our eCommerce platform, including interruptions, delays or downtime caused by high volumes of users or ~~transactions;~~transactions, deficiencies in design or ~~implementation;~~implementation, or platform enhancements;

▪Vendors continuing to sell or increasingly selling their products directly to customers or through broadened or alternative distribution channels;

▪Negative reactions from our customers, shareholders or vendors regarding changes to our policies or positions related to social and political issues;

▪That our ~~strategic plans and~~investments in omni-channel growth or other business transformation initiatives ~~may initially result in a negative impact on our financial results, or that such plans and initiatives may~~ not ~~achieve~~producing the ~~desired results~~anticipated benefits within the ~~anticipated~~expected time frame or at all;

•▪The impact of an increase to corporate tax rates or imposition of an excise tax with respect to share repurchase ~~activity, including the potential impact of the Inflation Reduction Act of 2022;~~activity;

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•▪~~Our~~Risks associated with brick and mortar retail store model, including our ability to optimize our store lease portfolio and our distribution and fulfillment network;

▪Unauthorized disclosure of sensitive or confidential ~~customer~~athlete, teammate, vendor or Company information;

▪Risks associated with our vertical brand offerings, including product liability and product recalls, specialty concept stores, and GameChanger;

▪Disruptions or other problems with our information systems;

▪Risks and costs relating to changing laws and regulations affecting our business, including consumer products; firearms and ammunition; ~~tax,~~tax; foreign trade; labor; data protection; privacy; and environmental, social, and governance issues;

▪Litigation risks for which we may not have sufficient insurance or other coverage;

▪Our ability to secure and protect our trademarks and other intellectual property and defend claims of intellectual property infringement;

▪Our ability to protect the reputation of our Company and our brands;

▪Our ability to attract, train, engage and retain ~~qualified leaders and associates due to current labor challenges or otherwise or the loss of Edward Stack or Lauren Hobart as executive officers;~~key teammates;

▪The impact of wage increases on our financial results, including those related to supply chain disruptions and labor challenges;

▪Disruptions at our supply chain facilities or customer support center;

▪Poor performance of professional sports teams, professional team lockouts or strikes, retirement, serious injury or scandal involving key athletes, and disruptions to or cancellations of major sporting events or organized youth and adult sports programs due to COVID-19 or otherwise;

▪Weather-related disruptions, unusual seasonal weather patterns and the overall seasonality of our business, as well as the current geographic concentration of DICK’S Sporting Goods stores;

▪Our pursuit of strategic investments or acquisitions, including the timing and costs of such investments and acquisitions;

▪We are controlled by the holders of our Class B common stock, which includes our Executive Chairman and his relatives, whose interests may differ from those of our other stockholders;

▪Risks related to our indebtedness, including the senior notes due 2032 (the “2032 Notes”) and senior notes due 2052 (the “2052 Notes” and together with the 2032 Notes, the “Senior Notes”)~~, the Convertible Senior Notes and the related bond hedge and warrant transactions;~~;

▪Our current anti-takeover provisions, which could prevent or delay a change in control of the Company; and

▪The issuance of ~~special or~~ quarterly cash dividends and our repurchase activity, if any, pursuant to our share repurchase programs.

The foregoing and additional risk factors are described in more detail in Item 1A. “Risk Factors” of this Quarterly Report and other reports or filings filed or furnished by us with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended January ~~29, 2022,~~28, 2023, filed on March 23, ~~2022~~2023 (our ~~“2021~~“2022 Annual Report”). In addition, we operate in a highly competitive and rapidly changing environment; therefore, new risk factors can arise, and it is not possible for management to predict all such risk factors, nor to assess the impact of all such risk factors on our business or the extent to which any individual risk factor, or combination of risk factors, may cause results to differ materially from those contained in any forward-looking statement. The forward-looking statements included in this Quarterly Report on Form 10-Q are made as of the date hereof. We do not assume any obligation and do not intend to update or revise any forward-looking statements whether as a result of new information, future developments or otherwise except as may be required by securities laws.


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OVERVIEW

We are a leading omni-channel sporting goods retailer offering an extensive assortment of authentic, high-quality sports equipment, apparel, footwear and accessories. In addition to DICK’S Sporting Goods stores, we own and operate Golf Galaxy, ~~Field & Stream,~~ Public Lands, Moosejaw and Going Going Gone! specialty concept stores, and offer our products both online and through our mobile apps. We also own and operate DICK’S House of Sport and Golf Galaxy Performance Center, as well as GameChanger, a youth sports mobile app for scheduling, communications, live scorekeeping and video streaming. When used in this Quarterly Report on Form 10-Q, unless the context otherwise requires or specifies, any reference to “year” is to our fiscal year.


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~~Over the past five years,~~Since 2017, we have transformed our business to drive sustainable growth in sales and profitability. During this time, we meaningfully improved our merchandise assortment ~~as our~~through strong relationships with our key brand partners, which provided access to highly differentiated ~~product.~~product and our vertical brands. We also enhanced our store selling culture and service model and incorporated additional experiential elements and technology into our stores to engage our athletes. Finally, we invested in technology and data science to improve our pricing strategy, digital marketing and ~~personalization.~~personalization capabilities. Consumers have also made what we believe to be lasting lifestyle changes in recent years, ~~increasing their focus on health~~prioritizing sport and ~~fitness, sports and outdoor activities.~~maintaining healthy, active lifestyles, which has increased demand for our products. As a result of our core strategies, foundational improvements and ~~favorable~~these strong secular consumer trends, net sales increased ~~40.5%~~41.3% in fiscal ~~2021~~2022 compared to fiscal 2019, ~~while merchandise margins increased 626 basis points as a percentage of net sales~~and reflected growth in ~~the same period-to-period comparison.~~our key priority categories including footwear, athletic apparel, team sports and golf.

Our profitability is primarily influenced by growth in comparable store sales, the strength of our merchandise margins ~~derived from our omni-channel platform~~ and ~~our~~ ability to manage operating expenses. In addition to the structurally higher sales compared to pre-COVID levels, our merchandise margins increased over 300 basis points as a percentage of net sales in fiscal 2022 as compared to fiscal 2019, as we have maintained the majority of the merchandise expansion that we drove over the prior two years with our differentiated product assortment, combined with our disciplined pricing strategy and favorable sales mix. We have also experienced meaningful leverage on fixed occupancy costs and selling, general and administrative costs, due to the significant sales increase. With our structurally higher sales, expanded merchandise margins, and operating expense leverage, our pre-tax income as a percentage of net sales ~~has grown~~grew from 4.7% in fiscal 2019 to ~~16.2%~~11.2% in fiscal ~~2021.~~2022 and our earnings per diluted share grew from $3.34 in fiscal 2019 to $10.78 in fiscal 2022.

~~Macroeconomic Outlook~~Business Environment

The macroeconomic environment in which we operate remains uncertain as a result of numerous factors, including ~~inflation~~inflationary pressures, the expiration of student loan payment deferments, and the potential ~~risk~~impact of ~~recession. In addition, the continued disruption of~~ global labor markets and supply chains due to COVID-19 and other factors, including factory closures and port congestion, has resulted in longer transit times and elevated container and transportation costs that we expect will continue in the near term. Although we have successfully managed these issues thus far, the longer-term effect of these challenges mayrising interest rates, which could impact consumer discretionary spending behavior and the promotional landscape in which we operate. ~~Our revised~~In addition, disruption of supply chains, including factory closures and port congestion, resulted in apparel overages in fiscal 2022 ~~outlook contemplates~~from late arriving inventory and elevated container and transportation costs which began to moderate during the second half of fiscal 2022. We took actions during the third and fourth quarter of fiscal 2022 to address these targeted inventory overages.

Overview of current trends affecting 2023

•We have experienced higher markdowns compared to the prior year, following our decisive actions on excess product to maintain vibrant and well-positioned inventory. For the remainder of the year, we expect our merchandise margin to improve compared to its respective prior year period, which included our actions during the third and fourth quarter of fiscal 2022 to address apparel overages from late arriving inventory.

•Within merchandise margin, we are experiencing higher inventory shrink relative to historical levels, which has been noted throughout the retail industry. As a percentage of net sales, we expect inventory shrink to be approximately 50 basis points higher than fiscal 2022 on a full year basis.

•We also expect supply chain costs to remain lower than fiscal 2022 for the remainder of the fiscal year.

•For the remainder of the year, we expect our selling, general and administrative expenses to be over 200 basis points higher than fiscal 2022 as a percentage of net sales due to investment in our growth strategies.

The Company’s current expectations described above are forward-looking statements. Please see the “Cautionary Statement Concerning Forward-Looking Statements” in this ~~uncertainty.~~Form 10-Q for information regarding important factors that may cause the Company’s actual results to differ from those currently projected and/or otherwise materially affect the Company.


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Business Optimization

We are conducting a business optimization of our organization to better align our talent, organizational design and spending in support of our most critical strategies while also streamlining our overall cost structure. As part of our business optimization, we eliminated certain positions primarily at our customer support center on August 21, 2023 for which we expect to incur approximately $20 million of severance expense in the third quarter of 2023. Related cost savings are expected to be largely offset by strategic talent investments over the next twelve months.

While we have not committed to specific additional actions at this time, we currently expect the business optimization to be completed during fiscal 2023, and may result in additional one-time charges of $25 million to $50 million.

How We Evaluate Our Operations

Senior management focuses on certain key indicators to monitor our performance, including:

▪Comparable store sales performance – Our management considers comparable store sales, which includes online sales, to be an important indicator of our current performance. Comparable store sales results are important to leverage our costs, which include occupancy costs, store payroll and other store expenses. Comparable store sales also have a direct impact on our total net sales, net income, cash and working capital. A store is included in the comparable store sales calculation during the ~~same~~ fiscal period that it commences its 14th full month of operations. Relocated stores are included in the comparable store sales calculation from the open date of the original location. Stores that were permanently closed during the applicable period have been excluded from comparable store sales results. ~~See~~For further discussion of our comparable store sales, inrefer to the “Results of Operations and Other Selected Data” section herein.

▪Earnings before taxes and the related operating margin – Our management views operating margin and earnings before taxes as key indicators of our performance. The key drivers of earnings before taxes are comparable store sales, gross profit, and our ability to control selling, general and administrative expenses.

▪Cash flows from operating activities – Cash flow generation supports our general liquidity needs and funds capital expenditures for our omni-channel platform, which include investments in new and existing stores and our eCommerce channel, distribution and administrative facilities, continuous improvements to information technology tools, potential strategic acquisitions or investments that may arise from time-to-time and stockholder return initiatives, including cash dividends and share repurchases. We typically experience lower operating cash flows in our third fiscal quarter due to increased inventory purchases in advance of the holiday selling season ~~which typically normalizes in~~and anticipated higher cash flows during our fourth fiscal quarter. ~~See~~For further discussion of our cash flows, inrefer to the “Liquidity and Capital Resources” section herein.

▪Quality of merchandise offerings – To measure effectiveness of our merchandise offerings, we monitor sell-throughs, inventory turns, gross margins and markdown rates at the department and style level. This analysis helps us manage inventory levels to reduce working capital requirements and deliver optimal gross margins by improving merchandise flow and establishing appropriate price points to minimize markdowns.

▪Store productivity – To assess store-level performance, we monitor various indicators, including new store productivity, sales per square foot, store operating contribution margin and store cash flow.

CRITICAL ACCOUNTING POLICIES

As discussed in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s 2022 Annual Report, we consider our policies on inventory valuation, goodwill and intangible assets, and impairment of long-lived assets to be the most critical in understanding the judgments that are involved in preparing our consolidated financial statements.


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~~CRITICAL ACCOUNTING POLICIES~~

As discussed in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s 2021 Annual Report, we consider our policies on inventory valuation, business development allowances, goodwill and intangible assets, impairment of long-lived assets, self-insurance reserves and stock-based compensation to be the most critical in understanding the judgments that are involved in preparing our consolidated financial statements.

RESULTS OF OPERATIONS AND OTHER SELECTED DATA

Executive Summary

•▪Net sales ~~decreased 5.0%~~increased 3.6% to ~~$3.11~~$3.22 billion in the current quarter from ~~$3.27~~$3.11 billion during the second quarter of ~~2021,~~2022, which included ~~a decrease~~an increase in comparable store sales of ~~5.1%~~1.8% following a ~~20.2% increase~~5.1% decrease in the same period last year. ~~When compared to the second quarter of 2019, net sales increased 38%.~~

•▪In the current quarter, we reported net income of ~~$318.5~~$244.3 million, or ~~$3.25~~$2.82 per diluted share, compared to ~~$495.5~~$318.5 million, or ~~$4.53~~$3.25 per diluted share, during the second quarter of ~~2021.~~2022.

•▪Earnings per diluted share ~~for~~in the ~~current~~second quarter of 2022 excluded $8.0 million of interest expense, net of tax, and included 13.9 million diluted shares related to the ~~Convertible~~convertible senior notes due 2025 (the “Convertible Senior ~~Notes,~~Notes”), which together decreased earnings per diluted share by ~~$0.43. In fiscal 2022, earnings per diluted share reflects~~$0.43 in the ~~adoption of ASU 2020-06, which requires the assumption~~prior year quarter. Although we were required to assume that our Convertible Senior Notes ~~will~~would be settled in shares of our common ~~stock. Due to~~stock in accordance with the “if-converted method” under generally accepted accounting principles, we have fully settled our ~~intent to settle the principal of the~~ Convertible Senior Notes inwithout dilutive effect, due to cash ~~and the~~payments for principal, shares ~~we expect to receive~~received from our convertible bond hedge ~~which is designed~~and share repurchases to offset ~~dilution, we do not expect~~ the ~~Convertible Senior Notes will have a dilutive effect upon conversion.~~share settlement of the remaining $59.1 million principal during the first quarter of fiscal 2023.

•Net income in the second quarter of 2021 included $5.7 million of non-cash interest expense, net of tax, and earnings per diluted share included 10.7 million shares related to the Convertible Senior Notes that are designed to be offset at conversion by our bond hedge, which together decreased earnings per diluted share by $0.55 in the prior year quarter.

•▪During the second quarter of ~~2022,~~2023, we:

•▪Exchanged $100 million aggregate principal amount of our 3.25% Convertible Senior Notes and unwound the corresponding portion of the convertible bond hedge and warrants for $100 million of cash and 1.7Repurchased 1.6 million shares of common stock for a total cost of $202.7 million under our ~~common stock;~~share repurchase program;

•▪Declared and paid a quarterly cash dividend in the amount of ~~$0.4875~~$1.00 per share of our common stock and Class B common stock; ~~and,~~

•▪~~Repurchased 3.9 million shares~~Opened seven new DICK'S House of ~~common stock for a total cost of $318.9 million under our share repurchase program.~~Sport locations.


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•▪The following table summarizes store ~~openings and permanent store closures~~activity for the periods indicated:


		Fiscal 2022			Fiscal 2021				26 Weeks Ended July 29, 2023				26 Weeks Ended July 30, 2022
		DICK’S Sporting Goods (1)	Specialty Concept Stores (2)	Total	DICK’S Sporting Goods (1)	Specialty Concept Stores (2)	Total		DICK’S Sporting Goods		Specialty Concept Stores (1)	Total (2)	DICK’S Sporting Goods	Specialty Concept Stores (1)	Total (2)
Beginning stores	Beginning stores	730	131	861	728	126	854	Beginning stores	728		125	853	730	131	861
Q1 New stores	Q1 New stores	—	1	1	2	—	2	Q1 New stores	—		—	—	—	1	1
Q2 New stores	Q2 New stores	1	1	2	1	1	2	Q2 New stores	—		1	1	1	1	2

Stores acquired (3)								Stores acquired (3)	—		12	12	—	—	—
Closed stores	Closed stores	1	3	4	—	1	1	Closed stores	3		3	6	1	3	4
Ending stores	Ending stores	730	130	860	731	126	857	Ending stores	725	(4)	135	860	730	130	860

Relocated stores	Relocated stores	3	1	4	7	—	7	Relocated stores	10		1	11	3	1	4

(1)~~Fiscal 2021 includes two DICK'S House of Sport stores and fiscal 2022 includes three DICK’S House of Sport stores.~~

~~(2)~~Includes our Golf Galaxy, ~~Field & Stream,~~ Public Lands, Going Going Gone!, and other specialty concept stores. As of July 29, 2023, we operated 97 Golf Galaxy stores, 7 Public Lands stores, 16 Going Going Gone! stores, and ~~excludes temporary Warehouse Sale store locations.~~other specialty concept stores. In some markets, we operate DICK’S Sporting Goods stores adjacent to our specialty concept stores on the same property with a pass-through for our athletes. We refer to this format as a “combo store” and include combo store openings within both the DICK’S Sporting Goods and specialty concept store reconciliations, as applicable. As of July ~~30, 2022,~~29, 2023, the Company operated 2516 combo stores.

(2)Excludes Warehouse Sale store locations that are temporary in nature, which the Company operated 38 and 19 as of July 29, 2023 and July 30, 2022, respectively.

(3)Represents Moosejaw store locations acquired by the Company during the first quarter of fiscal 2023, which average approximately 4,000 square feet per store.

(4)As of July 29, 2023, includes ten DICK'S House of Sport stores, including seven new openings during the second quarter of fiscal 2023, which were converted from prior combo store locations.


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The following tables present selected information from the unaudited Consolidated Statements of Income as a percentage of net sales and the changes in the percentage of net sales from the comparable ~~2021~~2022 period, and other data, and ~~are~~is provided to facilitate a further understanding of our business. These tables should be read in conjunction with Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the accompanying unaudited Consolidated Financial Statements and related notes thereto.
Basis Point Change in Percentage of Net Sales from Prior Year 2021-2022
13 Weeks Ended
July 30, 2022 July 31, 2021
Net sales (1)
100.00 % 100.00 % N/A
Cost of goods sold, including occupancy and distribution costs (2)
63.97 60.09 388
Gross profit 36.03 39.91 (388)
Selling, general and administrative expenses (3)
21.12 19.55 157
Pre-opening expenses (4)
0.12 0.10 2
Income from operations 14.79 20.26 (547)
Interest expense 0.82 0.42 40
Other expense (income) 0.24 (0.21) 45
Income before income taxes 13.73 20.05 (632)
Provision for income taxes 3.50 4.92 (142)
Net income 10.23 % 15.13 % (490)
Other Data:
Comparable store sales (decrease) increase (5)
(5.1 %) 20.2 %
Number of stores at end of period (6)
860 857
Total square feet at end of period (6)
42,394,897 42,278,449


						Basis Point Change in Percentage of Net Sales from Prior Year 2022-2023 (A)
	13 Weeks Ended
	July 29, 2023 (A)			July 30, 2022
Net sales (1)	100.00	%		100.00	%	N/A
Cost of goods sold, including occupancy and distribution costs (2)	65.58			63.97		161
Gross profit	34.42			36.03		(161)
Selling, general and administrative expenses (3)	24.06			21.12		294
Pre-opening expenses (4)	0.69			0.12		57
Income from operations	9.67			14.79		(512)


Interest expense	0.45			0.82		(37)
Other (income) expense	(0.88)			0.24		(112)
Income before income taxes	10.11			13.73		(362)
Provision for income taxes	2.53			3.50		(97)
Net income	7.58	%		10.23	%	(265)



Other Data:
Comparable store sales increase (decrease)	1.8	%		(5.1	%)
Number of stores at end of period (5)	860			860
Total square feet at end of period (in millions) (5)	42.4		(6)	42.4


						Basis Point Change in Percentage of Net Sales from Prior Year 2022-2023
	26 Weeks Ended
	July 29, 2023			July 30, 2022
Net sales (1)	100.00	%		100.00	%	N/A
Cost of goods sold, including occupancy and distribution costs (2)	64.75			63.77		98
Gross profit	35.25			36.23		(98)
Selling, general and administrative expenses (3)	24.23			21.89		234
Pre-opening expenses (4)	0.51			0.12		39
Income from operations	10.51			14.22		(371)


Interest expense	0.49			0.88		(39)
Other (income) expense	(0.76)			0.28		(104)
Income before income taxes	10.78			13.06		(228)
Provision for income taxes	1.73			3.10		(137)
Net income	9.05	%		9.96	%	(91)




Other Data:
Comparable store sales increase (decrease)	2.6	%		(6.6	%)
Number of stores at end of period (5)	860			860
Total square feet at end of period (in millions) (5)	42.4		(6)	42.4

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Basis Point Change in Percentage of Net Sales from Prior Year 2021-2022 (A)
26 Weeks Ended
July 30, 2022
July 31, 2021 (A)
Net sales (1)
100.00 % 100.00 % N/A
Cost of goods sold, including occupancy and distribution costs (2)
63.77 61.32 245
Gross profit 36.23 38.68 (245)
Selling, general and administrative expenses (3)
21.89 20.16 173
Pre-opening expenses (4)
0.12 0.13 (1)
Income from operations 14.22 18.40 (418)
Interest expense 0.88 0.44 44
Other expense (income) 0.28 (0.23) 51
Income before income taxes 13.06 18.19 (513)
Provision for income taxes 3.10 4.34 (124)
Net income 9.96 % 13.84 % (388)
Other Data:
Comparable store sales (decrease) increase (5)
(6.6 %) 52.2 %
Number of stores at end of period (6)
860 857
Total square feet at end of period (6)
42,394,897 42,278,449

(A) Column does not add due to rounding.

(1)Revenue from retail sales is recognized at the point of sale, net of sales tax. Revenue from eCommerce sales, including vendor-direct sales arrangements, is recognized upon shipment of merchandise. A provision for anticipated merchandise returns is provided through a reduction of sales and cost of goods sold in the period that the related sales are recorded. Revenue from gift cards and returned merchandise credits (collectively the “cards”) is deferred and recognized upon the redemption of the cards. The cards have no expiration date.

(2)Cost of goods sold includes: the cost of merchandise (inclusive of vendor allowances, inventory shrinkage and inventory write-downs for the lower of cost or net realizable value); freight; distribution; shipping; and store occupancy costs. We define merchandise margin as net sales less the cost of merchandise sold. Store occupancy costs include rent, common area maintenance charges, real estate and other asset-based taxes, general maintenance, utilities, depreciation and certain insurance expenses.

(3)Selling, general and administrative expenses include store and field support payroll and fringe benefits, advertising, bank card charges, operating costs associated with our internal eCommerce platform, information systems, marketing, legal, accounting, other store expenses and all expenses associated with operating our customer support center.

(4)Pre-opening expenses, which consist primarily of rent, marketing, payroll, recruiting and ~~recruiting~~other store preparation costs are expensed as incurred. Rent is recognized within pre-opening expense from the date we take possession of a site through the date the store opens.

(5)Beginning in fiscal 2022, we revised our method for determining comparable store sales calculations to include relocated store locations. Prior year information is revised to reflect this change for comparability purposes. See additional details as furnished in Exhibit 99.2 of Form 8-K, which was filed with the Securities and Exchange Commission on March 8, 2022.

~~(6)Includes our DICK’S Sporting Goods, Golf Galaxy, Field & Stream, Public Lands and Going Going Gone! stores.~~ Excludes temporary Warehouse Sale store locations.

(6)Includes square footage from three Field & Stream store closures as we plan in the near-term to convert them into DICK’S House of Sport stores, expanded DICK’S Sporting Goods stores, or other specialty concept stores.


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13 Weeks Ended July ~~30, 2022~~29, 2023 Compared to the 13 Weeks Ended July ~~31, 2021~~30, 2022

Net Sales

Net sales ~~decreased approximately 5.0%~~increased 3.6% to ~~$3,112.4~~$3,223.6 million in the current quarter from ~~$3,274.8~~$3,112.4 million in the quarter ended July ~~31, 2021,~~30, 2022, due primarily to a ~~$164.1~~$54.7 million, or ~~5.1%~~1.8%, ~~decrease~~increase in comparable store sales. The ~~decrease~~remaining $56.5 million increase in net sales was primarily attributable to temporary Warehouse Sale and Moosejaw stores. The increase in comparable store sales included ~~an 8.4% decrease~~a 2.8% increase in transactions, offset by a ~~3.3% increase~~1.0% decrease in sales per transaction, and ~~reflects an~~ ~~anticipated sales normalization in certain categories, including fitness and outdoor equipment, as well as inventory constraints affecting apparel, partially offset~~was driven by growth in footwear and team sports. Sales in fitness and outdoor equipment continued to decline post-pandemic, although these categories continue to remain above fiscal 2019 levels.

Additionally, we experienced declines in apparel while continuing to gain market share and strength across key brands.

Income from Operations

Income from operations decreased to ~~$460.2~~$311.8 million in the current quarter compared to ~~$663.6~~$460.2 million for the quarter ended July ~~31, 2021.~~30, 2022.

Gross profit decreased to ~~$1,121.4~~$1,109.5 million in the current quarter from ~~$1,307.1~~$1,121.4 million for the quarter ended July ~~31, 2021~~30, 2022 and decreased as a percentage of net sales by ~~approximately 388~~161 basis points. ~~Merchandise margins decreased 197~~As a result of higher markdowns from our decisive actions on excess product to maintain vibrant and well-positioned inventory and an 84 basis ~~points, as we strategically introduced some item level pricing offerings, and higher~~point increase in inventory shrink due to increased ~~theft. In addition,~~theft, merchandise margins decreased 254 basis points. Merchandise margin declines were partially offset by a 115 basis point decrease in supply chain costs, which included elevated supply chain related costs in the prior year due to global disruptions following the start of the COVID-19 pandemic. Our occupancy costs increased ~~approximately 92~~$11.2 million and deleveraged five basis points ~~primarily due to continuing global disruptions, and occupancy deleveraged 71 basis points.~~as a percentage of net sales. Occupancy costs, which after the cost of merchandise represents the largest item within our cost of goods sold, are generally fixed on a per store basis and fluctuate based on the number of stores that we operate. ~~Our occupancy costs increased $9.1 million compared to the prior year quarter.~~ The remaining decrease in gross profit as a percentage of net sales was driven by an increase in eCommerce shipping expense.

Selling, general and administrative expenses increased to ~~$657.4~~$775.6 million in the current quarter from ~~$640.3~~$657.4 million during the second quarter of ~~2021,~~2022, and increased as a percentage of net sales by ~~157~~294 basis ~~points~~points. The $118.2 million increase was primarily due to ~~the decrease in net sales. The $17.1~~$51.5 million ~~increase was driven by~~of investments in hourly wage rates, talent and ~~talent~~technology to support our growth strategies, ~~offset by~~ a ~~$17.8~~$25.6 million ~~net cost reduction~~increase in marketing expense due to higher brand-building marketing and marketing to support DICK’S House of Sport store grand openings, and a $20.9 million expense increase compared to ~~the prior year quarter~~fiscal 2022 related to changes in the investment values of our deferred compensation plans, ~~for~~ which ~~the corresponding investment change was recognized~~is fully offset in Other ~~Expense.~~Income.

~~Interest Expense~~

~~Interest expense~~Pre-opening expenses increased to ~~$25.5~~$22.1 million in the current quarter from ~~$13.8~~$3.8 million ~~in the prior year quarter.~~ ~~The increase was primarily due to $13.8 million of interest expense related to the aggregate $1.5 billion~~ ~~Senior Notes~~ issued during the fourth quarter of 2021. Current quarter interest expense also included $6.6 million of inducement charges related to the exchange of $100 million aggregate principal amount of the Convertible Senior Notes, which were primarily offset by a reduction in non-cash interest expense due to our ~~adoption of ASU 2020-06; see Part I. Item 1. Financial Statements, Note 1 – Description of Business and Basis of Presentation~~ for ~~additional details.~~

~~Other Expense (Income)~~

Other expense totaled $7.4 million in the current quarter compared to other income of $6.8 million in the prior year quarter. The change was primarily due to changes in our deferred compensation plan investment values, which we account for by recognizing investment income or expense and recording an offsetting charge or reduction to selling, general and administrative costs.

~~Income Taxes~~

~~Our effective tax rate increased to 25.5% in the current quarter from 24.5% in~~ the quarter ended July ~~31, 2021.~~

~~26 Weeks Ended July~~ 30, ~~2022 Compared to~~2022. Pre-opening expenses in any period fluctuate depending on the ~~26 Weeks Ended July 31, 2021~~

~~Net Sales~~

~~Net sales were $5,812.6 million in the current period, a 6.2% decrease from net sales~~timing and number of ~~$6,193.6 million reported for the prior year period, due primarily to a $403.2 million, or 6.6%, decrease in comparable~~new store ~~sales, partially offset by a $22.2 million increase in net sales primarily attributable to new stores.~~openings and relocations. The decrease in comparable store sales included a 7.4% decrease in transactions offset by a 0.8% increase in sales per transaction, and reflects an anticipated sales normalization in certain categories, including fitness and outdoor equipment, along with last year’s favorable sales impact following government stimulus payments, and inventory constraints affecting apparel, partially offset by growth in footwear and team sports.

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current year period includes pre-opening expenses to support seven DICK’S House of Sport store conversions. Pre-opening expenses are expected to moderate during the back half of fiscal 2023 while remaining higher than fiscal 2022.

Interest Expense

Interest expense decreased to $14.4 million in the current quarter from $25.5 million in the prior year quarter, primarily driven by lower interest expense on the Convertible Senior Notes due to their retirement during the first quarter of fiscal 2023. The second quarter of fiscal 2022 also included a $6.6 million inducement charge related to the exchange of $100.0 million aggregate principal amount of the Convertible Senior Notes.

Other (Income) Expense

Other income totaled $28.5 million in the current quarter compared to expense of $7.4 million in the prior year quarter. This $35.9 million increase in income was primarily driven by a $14.9 million increase in interest income as a result of higher average interest rates on cash and cash equivalents during the current quarter and a $20.9 million expense reduction from changes in our deferred compensation plan investment values driven by performance in equity markets. The Company recognizes investment income or investment expense to reflect changes in deferred compensation plan investment values with an offsetting charge or reduction to selling, general and administrative costs for the same amount.

Income Taxes

Our effective tax rate decreased to 25.0% in the current quarter from 25.5% in the quarter ended July 30, 2022.

26 Weeks Ended July 29, 2023 Compared to the 26 Weeks Ended July 30, 2022

Net Sales

Net sales were $6,065.8 million in the current period, a 4.4% increase from net sales of $5,812.6 million reported for the prior year period, due primarily to a $145.3 million, or 2.6%, increase in comparable store sales. The remaining $107.9 million increase in net sales was primarily attributable to temporary Warehouse Sale and Moosejaw stores. The increase in comparable store sales included a 2.9% increase in transactions offset by a 0.3% decrease in sales per transaction, and reflects growth in footwear and team sports, offset by declines in fitness and outdoor equipment.

Income from Operations

Income from operations decreased to ~~$826.7~~$637.4 million in the current ~~year-to-date~~ period, compared to ~~$1,139.4~~$826.7 million in the prior year period.

Gross profit ~~decreased~~increased to ~~$2,106.1~~$2,138.1 million for the current period from ~~$2,395.7~~$2,106.1 million for the prior year period ~~a decrease~~and decreased as a percentage of net sales by 98 basis points. As a result of ~~245 basis points, primarily due to~~higher markdowns from our decisive actions on excess product and a 9857 basis point increase in inventory shrink due to increased theft, merchandise margins decreased 198 basis points. Merchandise margin declines were partially offset by a 112 basis point decrease in supply chain ~~related costs, primarily due to continuing global disruptions and 81 basis points of occupancy deleverage. Our occupancy costs increased $15.5 million compared to the prior year period and decreased gross profit as a percentage of net sales due primarily to the decrease in net sales.~~ costs. The remaining decrease in gross profit as a percentage of net sales was ~~primarily~~ driven by ~~lower merchandise margin and higher~~an increase in eCommerce shipping ~~expenses.~~

expense. Our occupancy costs increased $23.1 million and were flat compared to fiscal 2022 as a percentage of net sales.

Selling, general and administrative expenses increased to ~~$1,272.7~~$1,469.5 million in the current ~~year-to-date~~ period from ~~$1,248.6~~$1,272.7 million for the prior year period, and increased as a percentage of net sales by ~~173~~234 basis ~~points primarily due to the decrease in net sales.~~points. The ~~$24.1~~$196.8 million increase was driven by $106.2 million of investments in hourly wage rates, talent and ~~talent~~technology to support our growth strategies, ~~along with~~a $27.2 million increase in marketing expenses due to higher brand-building marketing ~~expenses, offset by lower incentive compensation expense~~and marketing to support DICK’S House of Sport store grand openings, and a ~~$34.8~~$31.0 million ~~net cost reduction~~expense increase compared to ~~the prior year period~~fiscal 2022 related to changes in the investment values of our deferred compensation plans, ~~for~~ which ~~the corresponding investment change was recognized~~is fully offset in Other ~~Expense. In addition, selling, general and administrative expense included approximately $15 million of COVID-related costs in the prior year-to-date period.~~Income.

~~Interest Expense~~

~~Interest expense~~Pre-opening expenses increased to ~~$51.1~~$31.2 million in the current period from ~~$27.2~~$6.7 million in the prior year period. Pre-opening expenses in any period fluctuate depending on the timing and number of new store openings and relocations. The ~~increase was~~current year period includes pre-opening expenses to support seven DICK’S House of Sport store conversions.

Interest Expense

Interest expense decreased to $29.4 million in the current period from $51.1 million in the prior year period, primarily driven by lower interest expense on the Convertible Senior Notes due to ~~$27.6 million of interest expense related to the aggregate $1.5 billion Senior Notes issued~~their retirement during the ~~fourth~~first quarter of ~~2021. Current~~fiscal 2023. The prior year period ~~interest expense~~ also included $12.3 million of inducement charges related to ~~three~~the exchange ~~transactions totaling $200~~of $200.0 million aggregate principal amount of the Convertible Senior Notes, which were primarily offset by a reduction in non-cash interest expense due to our adoption of ASU 2020-06; see Part I. Item 1. Financial Statements, Note 1 – Description of Business and Basis of Presentation for additional details.Notes.


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Other (Income) Expense ~~(Income)~~

Other ~~expense~~income totaled ~~$16.4~~$46.2 million in the current period compared to other ~~income~~expense of ~~$14.1~~$16.4 million for the period ended July ~~31, 2021. The change~~30, 2022. This $62.6 million increase in income was primarily ~~due to~~driven by a $31.5 million increase in interest income as a result of higher average interest rates on cash and cash equivalents during the current period and $31.0 million expense reduction from changes in our deferred compensation plan investment values ~~which we account for~~driven by ~~recognizing~~performance in equity markets. The Company recognizes investment income or investment expense ~~and recording~~to reflect changes in deferred compensation plan investment values with an offsetting charge or reduction to selling, general and administrative ~~costs.~~costs for the same amount.

Income Taxes

Our effective tax rate decreased to ~~23.7%~~16.1% for the current period from ~~23.9%~~23.7% for the same period last year.The current year effective tax rate was favorably impacted by a $48.0 million increase in excess tax benefits, resulting from a higher number of employee equity awards vesting and exercised in the current year at a higher share price than the prior year period.

LIQUIDITY AND CAPITAL RESOURCES

Our cash onon hand atas of July ~~30, 2022~~29, 2023 was $1.90 billion. We believe that we have sufficient cash flows from operations and cash on hand to operate our business for at least the next twelve months, supplemented by funds available under our unsecured $1.6 billion ~~Credit Facility,~~credit facility (the “Credit Facility”), if necessary. We may require additional funding should we pursue strategic acquisitions, ~~settle all or a portion of the Convertible Senior Notes,~~ undertake share repurchases, pursue other investments or engage in store expansion rates in excess of historical levels. We had no revolving credit facility borrowings during the current or prior year-to-date period.

The following sections describe the potential short and long-term impacts to our liquidity and capital requirements.

Leases

We lease substantially all of our stores, three of our distribution centers, and certain equipment and storage under non-cancellable operating leases that expire at various dates through ~~2033. Over two-thirds~~2039. Approximately three-quarters of our DICK’S Sporting Goods stores will be up for lease renewal at our option over the next five years, and we plan to leverage the significant flexibility within our existing real estate portfolio to capitalize on future real estate opportunities.


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Revolving Credit Facility

We have ~~available to us~~ a $1.6 billion Credit Facility, which includes a maximum amount of $75 million to be issued in the form of letters of credit. Loans under the Credit Facility bear interest at an alternate base rate or an adjusted secured overnight financing rate plus, in each case, an applicable margin percentage. As of July ~~30, 2022~~,29, 2023, there were no borrowings outstanding under the Credit Facility, and we have total remaining borrowing capacity, after adjusting for $16.1 million of standby letters of credit, of $1.58 billion. We were in compliance with all covenants under the Credit Facility agreement at July ~~30, 2022~~.29, 2023.

Senior Notes

As of July ~~30, 2022~~,29, 2023, we have $750 million principal amount of 2032 Notes and $750 million of 2052 ~~Notes.~~Notes outstanding. Cash interest accrues at a rate of 3.15% per year on the 2032 Notes and 4.10% per year on the 2052 Notes, each of which are payable semi-annually in arrears on January 15 and July 15.

As of July 29, 2023, our Senior Notes have long-term credit ratings by Moody’s and Standard & Poor’s rating agencies of Baa3 and BBB, respectively.

Convertible Senior Notes

Following our exchanges ~~totaling $200 million principal amount in cash~~ during ~~the 26 weeks ended July 30,~~fiscal 2022, we ~~have~~had an aggregate remaining principal amount of ~~$375~~$59.1 million of Convertible Senior Notes ~~outstanding. Cash interest accrues at a rate~~outstanding as of ~~3.25% per annum, payable semi-annually in arrears on April 15 and October 15. We currently anticipate that~~January 28, 2023. During the first quarter of 2023, we ~~will repay~~retired the remaining principal ~~amount of the~~and accrued interest. Refer to Part I. Item 1. Financial Statements, Note 5 – Convertible Senior Notes in cash, whether in connection with an early conversion of such notes or repayment at maturity, using excess cash, free cash flow or borrowings on our Credit Facility to minimize share dilution. However, we may need to pursue additional sources of liquidity to repay the Convertible Senior Notes in cash at their maturity date in April 2025 or upon early conversion, as applicable.

~~As of~~ ~~July 30, 2022~~, the stock price conditions under which the Convertible Senior Notes could be convertible at the holders’ option were met. However, we have not received any material conversion requests through the filing date of this Form 10-Q. There can be no assurance that any capital required to repay our Convertible Senior Notes will be available on terms that are favorable to us, or at all.for further information.

Capital Expenditures

Our capital expenditures are primarily allocated toward the development of our omni-channel platform, including investments in new and existing stores and eCommerce technology, while we have also invested in our supply chain and corporate technology capabilities. Capital expenditures for the 26 weeks ended July ~~30, 2022~~29, 2023 totaled ~~$167.7~~$248.6 million on a gross basis and ~~$138.4~~$217.6 million on a net basis, which includes tenant allowances provided by landlords.


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We anticipate that fiscal ~~2022 gross~~2023 capital expenditures will be in a range of ~~$400~~$550 to ~~$425~~$600 million, ~~and $340 to $365 million on a~~ net ~~basis, which includes~~of tenant allowances provided by landlords. We expect our capital expenditures to be concentrated on new store development, relocations and remodels, including nine DICK’S House of Sport stores and eleven Golf Galaxy Performance Centers, improvements within our existing stores, including converting approximately 100 stores to premium full-service footwear decks, and ~~new store development, as well as~~ continued investments in technology to enhance our store fulfillment, in-store pickup and other foundational capabilities.

Share Repurchases

From time-to-time, we may opportunistically repurchase shares of our common ~~stock.~~stock under our $2.0 billion share repurchase program authorized by the Board of Directors on December 16, 2021. During the 26 weeks ended July ~~30, 2022,~~29, 2023, we repurchased ~~approximately 4.4~~2.0 million shares of our common stock at a cost of ~~$361.1 million. We currently operate under~~$260.4 million, a ~~$2.0 billion share repurchase program that~~portion of which was ~~authorized by~~repurchased to offset the ~~Board~~dilution from our settlement of ~~Directors on December 16, 2021.~~the remaining $59.1 million principal outstanding of the Convertible Senior Notes in shares. As of July ~~30, 2022,~~29, 2023, the available amount remaining under the December 2021 share repurchase authorization was ~~$1.5~~$1.2 billion.

Any future share repurchase programs are subject to authorization by our Board of Directors and will be dependent upon future earnings, cash flows, financial requirements and other factors.

Dividends

During the 26 weeks ended July ~~30, 2022,~~29, 2023, we ~~have~~ paid ~~$82.9~~$189.1 million of dividends to our stockholders. On August ~~22, 2022,~~21, 2023, our Board of Directors authorized and declared a quarterly cash dividend in the amount of ~~$0.4875~~$1.00 per share of common stock and Class B common stock, payable on September ~~30, 2022~~29, 2023 to stockholders of record as of the close of business on September ~~9, 2022.~~15, 2023.

The declaration of future dividends and the establishment of the per share amount, record dates and payment dates for any such future dividends are subject to authorization by our Board of Directors and are dependent upon multiple factors including future earnings, cash flows, financial requirements and other considerations.

Supply Chain Financing

We have entered into supply chain financing arrangements with third-party financial institutions, whereby suppliers have the opportunity to settle outstanding payment obligations early at a discount. We do not have an economic interest in suppliers’ voluntary participation and we do not provide any guarantees or pledge assets under these arrangements. Supplier invoices are settled with the third-party financial institutions in accordance with the original supplier payment terms and our rights and obligations to our suppliers, including amounts due and scheduled payment terms, are not impacted by these arrangements. Liabilities associated with the funded participation in these arrangements, which are presented within accounts payable on the Consolidated Balance Sheets, were $38.1 million, $40.1 million and $86.1 million as of July 29, 2023, January 28, 2023 and July 30, 2022, respectively.

Cash Flows

Changes in cash and cash equivalents are as follows:


	26 Weeks Ended
(in thousands)	July 29, 2023		July 30, 2022
Net cash provided by operating activities	$	693,493	$	101,744
Net cash used in investing activities	(268,779)		(171,012)
Net cash used in financing activities	(447,172)		(678,413)
Effect of exchange rate changes on cash and cash equivalents	(25)		(3)
Net decrease in cash and cash equivalents	$	(22,483)	$	(747,684)

Operating Activities

Cash flows provided by operating activities increased $591.7 million for the 26 weeks ended July 29, 2023 compared to the same period in the prior year, primarily due to working capital changes resulting from last year’s inventory replenishment following supply chain disruptions caused by the COVID-19 pandemic, year-over-year changes in incentive compensation accruals and corresponding payments, and the timing of payments for deferred compensation plans, rent and income taxes. These increases were partially offset by lower earnings.


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~~Supply Chain Financing~~

We have entered into supply chain financing arrangements with several financial institutions, whereby suppliers have the opportunity to settle outstanding payment obligations early at a discount. In turn, we settle invoices with the financial institutions in accordance with the original supplier payment terms. Our rights and obligations to our suppliers, including amounts due and scheduled payment terms, are not impacted. Our liability associated with the funded participation in the arrangements, which is presented within accounts payable on the Consolidated Balance Sheet, was $86.1 million and $76.0 million as of July 30, 2022 and January 29, 2022, respectively.Investing Activities

Cash ~~Flows~~

~~Changes~~used in ~~cash and cash equivalents are as follows:~~
26 Weeks Ended
(in millions) July 30,
2022 July 31,
2021
Net cash provided by operating activities $ 101.7 $ 1,030.8
Net cash used in investing activities (171.0) (177.1)
Net cash used in financing activities (678.4) (275.0)
Effect of exchange rate changes on cash and cash equivalents — —
Net (decrease) increase in cash and cash equivalents $ (747.7) $ 578.7

~~Operating Activities~~

~~Cash from operating~~investing activities ~~decreased~~ ~~$929.0~~increased $97.8 million for the 26 weeks ended July 30, 2022 compared to the same period in the prior year. The decrease was primarily due to a $465.4 million increase in cash payments for inventory and accounts payable to replenish inventory levels after a 28.3% sales increase in fiscal 2021 and supply chain disruptions following the start of COVID-19, which resulted in inventory growth relatively in line with sales growth compared to fiscal 2019. The remaining decrease in cash from operating activities was primarily driven by a $278.2 million decrease in earnings during the current period as compared to the same period last year, and a $126.0 million decrease in accrued expenses as a result of year-over-year changes in incentive compensation accruals and corresponding payments, and the timing of marketing and deferred compensation plan payments.

~~Investing Activities~~

~~Cash used in investing activities decreased $6.1 million for the 26 weeks ended July 30, 2022~~29, 2023 compared to the same period last year. Gross capital expenditures for ~~the current period include~~fiscal 2023 includes investments in ~~our~~current and future DICK’S House of Sport stores and ~~technology,~~higher investments in store enhancements and facilities. Cash used in investing activities for the 26 weeks ended July 29, 2023 also includes our acquisition of Moosejaw, a digitally-focused leading outdoor retailer, offset by ~~last year’s investments in merchandise presentation, space optimization~~proceeds received from the sale of our Field & Stream trademark and ~~investments to enhance the fitting and lesson experience in our golf business.~~other intellectual property.

Financing Activities

Financing activities have historically consisted of capital return initiatives, including share repurchases and cash dividend payments, cash flows generated from stock option exercises and cash activity associated with our Credit Facility, or other financing sources. Cash used in financing activities ~~increased $403.4~~decreased $231.2 million for the 26 weeks ended July ~~30, 2022~~29, 2023 compared to the prior year period, primarily driven by ~~higher share repurchases and~~ the exchange of ~~$200~~$200.0 million aggregate principal amount of our Convertible Senior Notes ~~during~~in the prior year period. Additionally, the current ~~year.~~year includes higher cash payments for minimum tax withholding requirements as a result of the vesting of employee equity awards and higher dividends paid compared to the prior year period, which were offset by lower share repurchases and changes in the bank overdraft balances between periods.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in the Company's market risk exposures from those reported in the Company's 2022 Annual ~~Report on Form 10-K for the fiscal year ended January 29, 2022, filed with the Securities and Exchange Commission on March 23, 2022.~~Report.


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ITEM 4. CONTROLS AND PROCEDURES

During the second quarter of fiscal ~~2022,~~2023, there were no changes in the Company’s internal controls over financial reporting that materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

During the quarter, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q, July ~~30, 2022.~~ 29, 2023.

There are inherent limitations in the effectiveness of any control system, including the potential for human error and the circumvention or overriding of the controls and procedures. Additionally, judgments in decision making can be faulty and breakdowns can occur because of simple errors or mistakes. An effective control system can provide only reasonable, not absolute, assurance that the control objectives of the system are adequately met. Accordingly, our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our control system can prevent or detect all errors or fraud. Finally, projections of any evaluation or assessment of effectiveness of a control system to future periods are subject to the risks that, over time, controls may become inadequate because of changes in an entity’s operating environment or deterioration in the degree of compliance with policies and procedures.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is involved in various proceedings that are incidental to the normal course of its business. As of the date of this Quarterly Report on Form 10-Q, the Company does not expect that any of such proceedings will have a material adverse effect on the Company’s financial position or results of operations.

ITEM 1A. RISK FACTORS

~~There~~Except as identified below, there have been no material changes to the risk factors affecting the Company from those disclosed in Part I, Item 1A. “Risk Factors” of the Company’s ~~2021~~2022 Annual Report. The discussion of risk factors sets forth the material risks that could affect the Company’s financial condition and operations.

If we are unable to protect against inventory shrink, our results of operations and financial condition could be adversely affected.

Our business depends on our ability to effectively manage our inventory. We have historically experienced loss of inventory (also referred to as inventory shrinkage) due to damage, theft (including from organized retail crime), and other causes. We are experiencing elevated levels of inventory shrink relative to historical levels, which have adversely affected, and could continue to adversely affect, our results of operations and financial condition. In addition, sustained high rates of inventory shrink at certain stores could impact the profitability of those stores and result in the impairment of long-term assets.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

As previously disclosed by the Company in a Current Report on Form 8-K dated June 23, 2022, the Company entered into Exchange Agreements (the “June Exchange Agreements”) with certain holders of the Company’s Convertible Senior Notes due 2025 pursuant to which such holders exchanged, in the aggregate, $50 million aggregate principal amount of Convertible Senior Notes for shares of the Company’s common stock plus cash based upon the volume-weighted average price per share of the Company’s common stock during an averaging period that commenced on June 24, 2022. As a result of that valuation, the Company delivered to the exchanging holders an aggregate amount of 984,444 shares of its common stock plus an aggregate of $50 million in cash in exchange for an aggregate principal amount of $50 million of Convertible Senior Notes. These exchange transactions closed on June 29, 2022. The shares of common stock were delivered in reliance on an exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933 in a transaction by an issuer not involving a public offering.

As previously disclosed by the Company in a Current Report on Form 8-K dated July 8, 2022, the Company entered into Exchange Agreements (the “July Exchange Agreements”) with certain holders of the Convertible Senior Notes pursuant to which such holders exchanged, in the aggregate, $50 million aggregate principal amount of Convertible Senior Notes for shares of the Company’s common stock plus cash based upon the volume-weighted average price per share of the Company’s common stock during an averaging period that commenced on July 11, 2022. As a result of that valuation, the Company delivered to the exchanging holders an aggregate amount of 995,180 shares of its common stock plus an aggregate of $50 million in cash in exchange for an aggregate principal amount of $50 million of the Convertible Senior Notes. These exchange transactions closed on July 15, 2022. The shares of common stock were delivered in reliance on an exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933 in a transaction by an issuer not involving a public offering.

The shares of common stock and cash delivered pursuant to the exchanges described above were obtained by the Company from financial institutions (each, a “Hedge Counterparty”) as part of the partial early unwinds of a portion of the convertible note hedge transactions and related warrant transactions (collectively, the “Hedge Transactions”) pursuant to early unwind agreements between the Company and each Hedge Counterparty (collectively, the “Hedge Early Termination Agreements”) relating to a portion of the Hedge Transactions corresponding to the amount of Convertible Senior Notes exchanged by holders thereof pursuant to the June Exchange Agreements and the July Exchange Agreements, respectively. In connection with the Hedge Early Termination Agreements, the Company received 155,639 shares and 148,718 shares as part of the June and July exchange transactions, respectively.

The foregoing description does not purport to be complete and is qualified in its entirety by reference to the full text of the forms thereof, copies of which were filed with the Company’s Current Report on Form 8-K dated June 23, 2022 as Exhibits 10.1, 10.2, and 10.3 (corresponding to the June exchange transactions) and with the Company’s Current Report on Form 8-K dated July 8, 2022 as Exhibits 10.1, 10.2, 10.3, 10.4, and 10.5 (corresponding to the July exchange transactions), respectively, each of which is incorporated herein by reference.

During the quarter ended July 30, 2022, the Company also issued 20 shares of its unregistered common stock to holders of the Convertible Senior Notes upon conversion of an immaterial aggregate principal amount of such notes. This share amount represents the conversion value of the Convertible Senior Notes in excess of the principal amount converted. These shares of our common stock were issued in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act, and were offset by the receipt of 20 shares of common stock pursuant to the exercise of certain convertible bond hedge transactions.


~~Table of Contents~~

The following table sets forth repurchases of our common stock during the second quarter of ~~2022:~~2023:

Period
Total Number of Shares Purchased (a)
Average Price Paid Per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b)
Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs (b)
May 1, 2022 to May 28, 2022 3,483,146 $ 80.06 3,467,942 $ 1,535,222,307
May 29, 2022 to July 2, 2022 1,352 $ 80.78 — $ 1,535,222,307
July 3, 2022 to July 30, 2022 480,740 $ 86.96 477,142 $ 1,493,693,282
Total 3,965,238 $ 80.90 3,945,084


Period	Total Number of Shares Purchased (a)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b)	Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs (b)
April 30, 2023 to May 27, 2023	1,066,917	$	129.30	1,056,402	$	1,234,045,124
May 28, 2023 to July 1, 2023	513,561	129.26		513,434	$	1,167,681,532
July 2, 2023 to July 29, 2023	5,423	128.80		—	$	1,167,681,532
Total	1,585,901	$	129.28	1,569,836

(a)Includes shares withheld from employees to satisfy minimum tax withholding obligations associated with the vesting of restricted stock during the period.

(b)Shares repurchased under our five-year $2.0 billion share repurchase program, which was authorized by the Board of Directors on December 16, 2021.

ITEM 5. OTHER INFORMATION

Trading Arrangements

During the quarter ended July 29, 2023, none of the Company’s directors or “officers,” as defined in Rule 16a-1(f) of the Exchange Act, adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” as each term is defined in Item 408 of Regulation S-K.


Table of Contents

ITEM 6. EXHIBITS

The following exhibits are filed or furnished (as noted) as part of this Quarterly Report on Form 10-Q.

Exhibit Number

Description of Exhibit

Method of Filing

~~10.1~~3.1

~~Form~~Amended and Restated Certificate of ~~Note Hedge Early Termination Agreement, dated as of June 23, 2022, by and between DICK’S Sporting Goods, Inc. and the applicable call option counterparty.~~Incorporation

Incorporated by reference to Exhibit ~~10.1~~3.1 to the Registrant’s Registration Statement on Form S-8, File No. 333-100656, filed on October 21, 2002

3.2

Amendment to the Amended and Restated Certificate of Incorporation, effective as of June 10, 2004

Incorporated by reference to Exhibit 3.1 to the Registrant’s Form 10-Q, File No. 001-31463, filed on September 9, 2004

3.3

Amendment to the Amended and Restated Certificate of Incorporation, dated as of June 9, 2021

Incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K, File No. 001-31463, filed June 14, 2021

3.4

Amendment to the Amended and Restated Certificate of Incorporation, dated as of June 14, 2023

Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, File No. 001-31463, filed on June ~~24, 2022.~~16, 2023

~~10.2~~

~~Form of Warrant Early Termination Agreement, dated as of June 23, 2022, by and between DICK’S Sporting Goods, Inc. and the applicable warrant counterparty.~~

~~Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, File No. 001-31463, filed on June 24, 2022.~~

~~10.3~~

~~Form of Exchange Agreement dated as of June 23, 2022, by and between DICK’S Sporting Goods, Inc. and the applicable Noteholder.~~

~~Incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K, File No. 001-31463, filed on June 24, 2022.~~

~~10.4~~

~~Form of Note Hedge Partial Early Termination Agreement, dated as of July 8, 2022, by and between DICK’S Sporting Goods, Inc. and the applicable call option counterparty.~~

~~Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, File No. 001-31463, filed on July 11, 2022.~~

~~10.5~~

~~Form of Warrant Partial Early Termination Agreement, dated as of July 8, 2022, by and between DICK’S Sporting Goods, Inc. and the applicable warrant counterparty.~~

~~Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, File No. 001-31463, filed on July 11, 2022.~~

~~10.6~~

~~Form of Note Hedge Early Termination Agreement, dated as of July 8, 2022, by and between DICK’S Sporting Goods, Inc. and the applicable call option counterparty.~~

~~Incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K, File No. 001-31463, filed on July 11, 2022.~~

~~10.7~~

~~Form of Warrant Early Termination Agreement, dated as of July 8, 2022, by and between DICK’S Sporting Goods, Inc. and the applicable warrant counterparty.~~

~~Incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K, File No. 001-31463, filed on July 11, 2022.~~

~~10.8~~

~~Form of Exchange Agreement dated as of July 8, 2022, by and between DICK’S Sporting Goods, Inc. and the applicable Noteholder.~~

~~Incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K, File No. 001-31463, filed on July 11, 2022.~~

31.1

Certification of Lauren R. Hobart, President and Chief Executive Officer, dated as of August ~~24, 2022~~23, 2023 and made pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed herewith

31.2

Certification of Navdeep Gupta, Executive Vice President - Chief Financial Officer, dated as of August ~~24, 2022~~23, 2023 and made pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed herewith

32.1

Certification of Lauren R. Hobart, President and Chief Executive Officer, dated as of August ~~24, 2022~~23, 2023 and made pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Furnished herewith

32.2

Certification of Navdeep Gupta, Executive Vice President - Chief Financial Officer, dated as of August ~~24, 2022~~23, 2023 and made pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Furnished herewith

101.INS

XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

Filed herewith

101.INS

XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

Filed herewith


~~Table of Contents~~

101.SCH

XBRL Taxonomy Extension Schema Document

Filed herewith

101.CAL

XBRL Taxonomy Calculation Linkbase Document

Filed herewith

101.DEF

XBRL Taxonomy Definition Linkbase Document

Filed herewith

101.LAB

XBRL Taxonomy Label Linkbase Document

Filed herewith

101.PRE

XBRL Taxonomy Presentation Linkbase Document

Filed herewith

104

Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101).

Filed herewith

2925


Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report on Form 10-Q to be signed on August ~~24, 2022~~23, 2023 on its behalf by the undersigned, thereunto duly authorized.

DICK’S SPORTING GOODS, INC.

By:

/s/ LAUREN R. HOBART

Lauren R. Hobart

President and Chief Executive Officer

By:

/s/ NAVDEEP GUPTA

Navdeep Gupta

Executive Vice President – Chief Financial Officer

(principal financial and principal accounting officer)

3026


			Page Number

PART I. FINANCIAL INFORMATION			3

Item 1. Financial Statements			3
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			1513
Item 3. Quantitative and Qualitative Disclosures About Market Risk			2423
Item 4. Controls and Procedures			2523

PART II. OTHER INFORMATION			2624

Item 1. Legal Proceedings			2624
Item 1A. Risk Factors			2624
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			2624
Item 5. Other Information			24
Item 6. Exhibits			2825


INDEX TO EXHIBITS			2825

SIGNATURES			3026


	Last Day of Fiscal 2021		Adoption of ASU 2020-06		First Day of Fiscal 2022
Balance sheet line item
Convertible senior notes due 2025	$	449.3	$	114.0	$	563.3
Net deferred tax assets	$	35.0	$	29.3	$	64.3
Additional paid-in capital	$	1,488.8	$	(119.0)	$	1,369.8
Retained earnings	$	3,956.6	$	34.2	$	3,990.8


(in millions)	July 30, 2022		January 29, 2022		July 31, 2021
Principal	$	375.0	$	575.0	$	575.0
Debt discount	(6.5)		(125.7)		(141.5)
Carrying amount	$	368.5	$	449.3	$	433.5
Equity component (*)	N/A		$	160.7	$	160.7