DKS - Earnings call transcript Q2 2022 | DICK'S Sporting Goods, Inc.

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Operator

Hello, all, and a warm welcome to the Q2 2022 DICK'S Sporting Goods Earnings Call. My name is Lydia, and I will be your operator today. [Operator Instructions] It's my pleasure to now hand you over to Nate Gilch, Senior Director of Investor Relations. Please go ahead when you're ready.

Nate Gilch

Good morning, everyone, and thank you for joining us to discuss our second quarter 2022 results. be Navdeep our Officer. Gupta, will Executive and call and Officer; our today's Lauren President Hobart, Chief On Chief Financial playback investors.dicks.com will Relations call of in A Investor our be website approximately for archived at XX months. located today's

in making materially will to and Any be statements from could these reminder, that which actual our considered risks statements, with should be statements. a are forward-looking in cautionary As results uncertainties cause we subject various to statements conjunction release differ factor last with report cautionary risk earnings to the of forward-looking SEC, call. on and update filings our in our obligation these this statements and discussions XX-K assume during including annual statements or no any We information. our made Form such

call, share will per to eliminates we basis, which our earnings discussing in on issued impact notes non-GAAP QX morning's of items diluted the be XXXX. convertible During certain related a this senior

this XX, turn on additional please Lauren. call or we referenced earnings scheduling on are measures to on reconciliation purposes, our tentatively with non-GAAP for financial a I find Investor over that, your And Relations today's to November quarter our future For XXXX And third now finally, details results website. publish of XXXX. call, planning to will to refer any the

Lauren Hobart

morning, Thank you, and Nate, everyone. good

past core the very pleased over the and strategies foundational our years. demonstrate which our improvements of business are We made strength with our results, second the we've across quarter X

of in XXXX. as In delivered fact, we did same we fiscal in all the QX approximately EBT

well. quite DICK's macroeconomic consumer environment held Goods up the uncertain, the Sporting While remains has

activities, capitalize we fitness, lifestyle secular changes on sports remain made uniquely the Over and on focused lasting to they've health years, these trends. positioned past and and outdoor X

with is improved inventory in-stock categories. key levels well positioned in and Our healthy

contemplates which margin outlook, an the at Importantly, macroeconomic and midpoint. level environment given to year incorporate are raising our approximate appropriate an XX.X% of full caution, continues today's we EBT

results. our to Now

favorable of from XXXX, sequential sales highlight actions sales and behavior pre-COVID durable, included behavior QX athlete of success capitalize comparable second XX% shift is It's are on shift just key this strong inclusive a across we to that quarter. retention, the for our and levels. that board I a continue of earlier first in omnichannel new and As the we the compared $X.X morning, store consumer acquisitions, run elevated improvement repeat purchasing billion. sales to the to delivered up versus our quarter mentioned levels, yielding to athlete results. represented reinforcing Notably, our substantially above announced year, metrics, X.X% expected, that important decline This as are this pre-COVID

increasingly our drive differentiated to and assortment, and strong favorable disciplined mix product sophisticated with product merchandise combined continued strategies margin. pricing Our

the as maintain Our majority rate QX basis the XXX that was margin past merchandise margin drove XXXX we points we expansion versus years. over the of merchandise up X

in susceptible Before we and the a emphasize heat me distributed product therefore, not find It's ago. the what than content that is point. critical to product The the we X marketplace continuing, higher narrowly is different from carry years and promotions. it more let carried today you'll as very of that

addition, than In sophisticated years they more were to have are promotions surgically significantly ago. tools adjust pricing the and we several today

above company approximately the continue grow shifted hunt structurally margins product brands. vertical toward we points to basis And in points Lastly, had which basis We've have currently between X,XXX XXX our average mix has to brands, reduced national our which the categories. materially exposure, XXX XXXX. margins higher-margin below

merchandise EBT QX XX%, sustainable these non-GAAP margin to double-digit $X.XX this and we in business. approximately margins XXXX basis we of profitability per in margin. higher remain our fiscal sales, our earnings operating Looking QX Xx delivered on of improved share efficiencies With ahead, compared of merchandise compared EBT our total, very foundational is levels diluted to for to nearly $X.XX achieved due levels, XXXX. structurally In that our we year to annual and margin will be entire pre-COVID the meaningfully expanded confident pre-COVID compared higher that an changes

we better athletes. journey, our athlete and on business strengthen develop the these a is our in-store further we model profitable to our strategies existing engaging As to continue focused heart core of to highly transformational continue we serve strategies are experience, our long-term service At to and drive enhancing our growth.

highly are Our focused athletes on are by for confidence trained finding our and for product creating them. teammates best the

our Cages. full-service highly experiential Shops, Technology such Soccer Elevated Golf have Decks, elements Simulators, premium HitTrax now also Footwear stores Batting as Our and

House of and elevated DICK'S while examples sports and power concepts and retail. experiential Galaxy Center the us Performance are new of tremendous service with sales profitability. Golf redefining of retail Sport learnings new are strong also Our and providing These valuable driving model stores

In technology through and addition, enhancing to relevant our athlete at focused on science the most experience. with marketing, the digital our capabilities elevate our digital personalization our experiences investments we prioritize in remain data products we and in one-to-one relationships the athletes part time. advancing them our an success, ensuring continue right integral to of our We're and serve

We And that Our personalization million years. active a quarter, in are approximately generated platform, as members, second has athlete hub the year. is stores members us. well over loyalty by growing last during period cohort basis the our important ScoreCard fueled grown XX% now valuable recent from and loyalty of have which an ScoreCard over our our Furthermore, program competitive for same a robust total and ScoreCard strategies our database. total XX our XXX points features omnichannel advantage sales, up

of sales, and for providing both quarter, stores total XXX distribution over forward XX% fulfillment. of enabled over our our During points serving in-store the omnichannel our athletes second

is And us that for Next, within multi-branded our a a shopping look athletes portfolio approximately fact, to active our merchandising, brand data our tells XX% in asset. experience. of tremendous DICK'S

creating the vertical brands relationships develop emerging new and are At to with our key VRST continuing and and are than disruptive stronger CALIA, and with relationships brands. ever, Importantly, growing we like DSG. time, brands remain we same

able Our and meet to assortment -- we across all is needs we trend of of ensures the wide on range are price categories, our athletes. points

a reflect assets, maintain teammates our differentiator to competitive a experience. be continue work. and we athlete are great market of engagement deliver Our our and our a our attract invest well strategies our are believe to and fragmented teammate in confident long-term drive for which and taking retain focus We're in a Through strong and key efforts of We're leader earnings and large place remains to remain our positioned industry, we on in and needs -- to talent working, service and growth. though to ability athletes. the advantage current sales we to high the continue the teammates the culture meeting and see extending share to market we proud environment levels we our clear closing, top-tier are our In will We'll macroeconomic ability model uncertain, continue as our enhanced lead. to us. our macro a our greatest

the Before dedication want to thank to all our to and turn outlook more detail. review I Navdeep and in hard to results I'll concluding, of now our financial unwavering business. their over teammates our call for work

Navdeep Gupta

everyone. morning, good and Lauren, you, Thank

to of with X% base sequentially and, store to approximately a Consolidated first the increased structurally pre-COVID begin sales When compared to levels. compared X.X% billion. sales our $X.X the our quarter. quarter decreased sales higher brief from XX%, Let's decreased second sales expected, as review Comparable sustainability XXXX, results. of demonstrating accelerated

portfolio, versus our Gross Within billion year. As in stack of ticket hardlines, apparel points profit our of or a expectations. and was while and XXX X.X% X-year with were second declined X performed increased footwear categories QX. average X.X%. we quarter net XX% basis the in reminder, line generally a in of sales XX.XX% approximately last lapping primary $X.XX our each the increase comp declined Transactions of

and points, our sophisticated As margin expected, XXXX, chain mix. driven by rate driven lower this occupancy basis deleverage increasingly assortment, expanded of merchandise supply from our to basis pricing product costs differentiated and XXX was favorable product sales. combined disciplined by on strategies XXX Compared decline fixed and with decline our margin points, higher rate costs merchandise

these expenses $X.X because $X.X share million to by to continued in issued expense and the the $XXX.X compares was merchandise or a of $X.XX or to compared per of basis the due of delivered compares charge rate our was last QX current by on also points margin sales higher GAAP last XX.XX% second our share on rates earnings last notes. our to efficiency quarter mentioned, primarily primarily to hourly we This sales, non-GAAP XX.XX% XXX year, of levels X.XX% support increase of deleveraged increase quarter in investment million diluted non-GAAP interest non-GAAP convertible related expense to driven billion structural inducement XXXX. of sales million per our expect net $X.XX. and of $XXX Driven $X.XX drivers, SG&A of talent notes Lauren $XX.X strategies. XXXX. compared dollars earnings to principal due be growth of to This related period EBT sales. or of we continue $XXX to year. were diluted share increase per net was to than our EBT in of was senior same wage pre-COVID basis of diluted merchandise The earnings the pre-COVID million an $XX.X and $XX.X XXXX. exchange million of $XXX.X million in total, operating Interest our This compared million, to structurally to an year SG&A of As basis. In meaningfully of senior higher million levels, decrease during and expanded The margin sales. our annual outstanding in included

and our our and QX unsecured no credit on $X.X balance sheet. ended cash equivalents approximately billion facility. of looking to with cash billion borrowings We $X.X Now

to levels quarter-end last QX year. inventory compared increased Our XX% of

our disruptions. However, inventory last XXXX, our is QX relatively in with chain comparison were XX% sales. in in A increase of significant supply where we better year XX% inventory was increase line chasing against amid

said, Lauren well is and positioned. inventory As our healthy

we continue excited are chain the rest important environment season, the and are supply the back-to-school navigating through dynamic to a year. we assortment place have of in global for the We about prepared

to were quarter our million, and $XX.X Turning expenditures quarterly $XX.X Net dividends. second capital allocation. paid capital million in we

hedge corresponding million our shares for and X.X note of quarter, of senior we cash of of XX% the then-outstanding warrants the approximately million principal stock. $XXX or our convertible for the exchanged During convertible and unwound portion common notes

we $XXX aggregate principal Following this exchange, in amount million have outstanding.

also million million at of an price our $XXX of we stock shares quarter, average $XX.XX. the for X.X During repurchased

Now up let outlook with our me wrap XXXX. for

are with year of and continue half performance our profitability meaningful the first over XXXX. growth sales to and pleased in the We deliver

QX our XXXX position raising season, are inventory As of and performance for improved guidance. a we our result back-to-school important the

macroeconomic the backdrop, our Importantly, environment dynamic as appropriate level incorporate Lauren indicated, and updated continues the caution, geopolitical to chain. around an the given supply outlook of global uncertainty

expect negative negative of For the store year, to in to compared we X% the comparable negative expectation X%. now our to sales X% range between negative prior X%

diluted we now to of $XX our addition, in compared expect non-GAAP $XX.XX. earnings per share $XX prior the to In expectation $X.XX of to range

through outlook we XX.X% is at is dependent margin $XXX expected as upon million to to not continue midpoint, the progresses. rate. opportunistic year beyond the repurchases more XXXX our share be While than approximately EBT of will end our QX, executed the double the be

Goods. very diluted your earnings our tax future the rate we interest we our for the for about and you and million of results, QX concludes on approximately may Operator, are This closing, remain DICK'S. average now Sporting with Our open outstanding. assumes XX% questions. line you approximately very In shares comments. an effective prepared guidance is of XX in DICK'S based enthusiastic pleased Thank

Operator

of today Gutman Simeon first Instructions] [Operator Stanley. Our Morgan from question comes

Simeon Gutman

question. have meant short gone I have have stayed and The the longer-term year this performance quarter gone same guidance. up in is on the theory, or The a the short-term could maybe or, term better a then could down. that

why uncertainty, confidence up when kept the nudge it given just even have more to the you slightly back the So conservative? half could

Lauren Hobart

-- back our and back-to-school QX, the that the that QX July within take the Guidance, I'll as that our the adjust range guidance up. half it had inventory in take wanted the more the we momentum we and season had we one. and comp momentum. of That a in to started low been feel into moved QX, thus, sequentially to like lot was Simeon, we we before, appropriately accelerated be of felt, end we're given fact and strong into question. your the sequential short-term our stock with And than going

Navdeep Gupta

going freight months, had remaining and they're EPS in rise. just not they the would of on remain contemplated year kind EPS was foreshadowed what and the of that we Simeon, continuing our fast say in and expectation continuing not versus we the year. driven if to at were for the going end the it, up that raised we X you some also seen And have EPS basis, that QX, by, are were that as last, our recall I was fuel of expectations, call expenses last favorability that adjustment as before, And but to -- they of the full elevated

Simeon Gutman

thoughts the longer okay. little the longer-term remarkably the up even comp demand some is I move stacks, question continue subside. that? COVID eventually more top the information categories, guess, that any the how bit declined Do are The quarter [the rebases we this think post up holding some about levels to and And this little. bull], guess post then in get Got have I stacks, it, non-skeptic, COVID, of as demand you think, strong as to going we new it's though would reversion say a on guess is you say, is the line digestion a skeptic going and normal would than higher. at holding forward? I to

Lauren Hobart

Simeon, we Yes, agree.

is that, more they -- structural would in completely years our to than market getting a also very as higher pre than outdoor doesn't lifestyle and believe that nothing product there of access because both consumers it products, structural fact bigger to strongly business. in higher-heat assortment significantly changes have adopted in got distributed we're nature, almost and COVID, to promotions. that as ago. nearly is now structurally There's were of our narrowly active I We've pressures was but same share many different that our the and the are comps more business Our and that, there several are was. susceptible point a healthy we isn't pricing

very, reduced XXX was X,XXX having the meaningfully We're our long-term to our then much marketing entire much the our in And XXX whole more to have from mix our vertical to meaningfully do basis more print-based with one all success to margin. and is data more we We've exposure real-time, advance had we on promote, personalized, and points what I toward even below so to make sale. changed and moved hunt that. be much decisions average Our leverage product higher have on can where how that pricing can effort, has points years, higher-margin important don't products. website past over we to wanted moved put surgical, the have hunt business that be which with basis specific be we brands, whole we've multiple we our store most and where weeks We our that the months very digital marketing capability, science a used price think to things effort or than average. of a

ago, as longer to looking and that bump this was we will different years ever several nor So a business structurally are going was it COVID we at absolutely is return. agree you. The with than no

Operator

Kate Sachs. Our next today Goldman comes McShane from question of

Kate McShane

there any the between to QX between a taking. had you margin we much then margin. question break if and inventory environment is and We and holiday? just promotional I half, if think around around down, in the units cost should and cadence any the gross inventory was be back-to-school and difference maybe second the second you how and gross expect way question earlier it And might our around QX that receipts wondered about

Navdeep Gupta

a the of X. I cost balanced between say terms breakdown Definitely on would and more the the bit little pretty units, side. elevated the in cost a Kate, it's

it I the where Lauren? would unit of comparable our look growth and XXXX you call in the because lot it's, much on to different. inventory commentary, last versus the versus and said a the makeup, view. looking of how much, the if is year, is important categories year we at XXXX, thing and makeup like again last chasing today. but very about And in-stocks it, of the at were cost a the last feel basis, on was -- that's we say this look a is just better So inventory year We right,

Lauren Hobart

Yes.

are As back-to-school and slightly we promotion and we look holiday, to more the promotional anticipating pricing for environment. environment normalized a

versus an is look But that We're you of all it benign incredibly reflected pricing year, last surprises our If environment. was guidance. go-forward any expecting promotion in not there.

Operator

next Our from Adrienne comes Barclays. question today of Yih

Adrienne Yih

RTV? with of Congratulations that about that about I'm how are your or on talked Can of about you. another expecting We've current notion with Lauren, And vendor forward it of say, day any you it's the going return really peak solid it seeing money more markdown obviously period. to competitive start some pretty for branded inventory more is XX% evolving? is then regard you're talk to And guidance? How levers, quarter. Navdeep, that significant a you or in advantage. always

wondering might the at at So inventory probably like the end what end the of third and importantly, more year. the of quarter look

Lauren Hobart

Thanks, Adrienne.

is with assortment got a for relationships strategic us. advantage competitive absolutely brand fantastic Our We've partners. our

doing We We our strong always with work really, our partners vertical are job with brands. also levels. our on a managing inventory core really

how Going, work really -- through have quickly product return we we including there yes, to elevated overages. inventory? best a to Gone! clearance product. we to really determine have, about any RTVs, case, in concept, but also really through move if our allows And our work Navdeep, certain which move new So Going, us are levers, process, real-time to

Navdeep Gupta

for guidance for inventory an an on outlook year. the full provide for won't we Adrienne, QX or

inventory our inventory levels We feel itself. well right important especially the and is I positioned our we overall right? to It's called about really the the make about healthy. comments, into very back-to-school inventory and the of her in want composition good that that, now feel said head We point very like where as out season. having Lauren good However, really, is,

the So feel we as go year. of we very half optimistic back into this

Operator

of today comes of The Ohmes America. next Robby question Bank from

Robby Ohmes

outlook. quick Great couple of A quarter and questions.

that Just color said, second little on -- excluding X% -- up with quarter, decelerating around the things and categories going it think transactions the could of was you ticket And happening more I got Maybe color you ticket guys transactions kind back-to-school? customers And in that if some some around the maybe as quarter, a what's give the any and outperformed around down I would growth, on there. right, there think X%. I first versus is your color around trade-down mean well?

Lauren Hobart

Robby. Thanks,

success But that businesses, driving spring see even the in the products sequentially very we shipments had significantly were assortment is remains success in because across flowing incredible some in some really teams and So best-in-class, to it apparel that July, getting in and absolutely in comp our the with strong. absolutely slightly well. incredible and back of and was starting into that's flowing, with in our started our lead with within the in categories. all products strong, our apparel, QX categories given pleased as started that done the above job customers. outperformed were is only an apparel accelerated improve business once They athletic really product have actually Athletic that where Sports we business top Footwear, with stores, Team there really came QX, apparel, particular, was the core our QX products. our tremendous was of back-to-school challenged of business, is of in were and have on in line key golf and QX been which still versus XXXX. significantly We expectations.

categories. question. turn the really, really I'll So to ticket the strong it answer Navdeep to overall, across

Navdeep Gupta

breakdown So a a let again. give me of bit little

declined QX, X.X% in was ticket declined up the our and The X.X%. X.X%. comps average actually So transactions

therefore, kind as the up well as in were markets the you data, there's the on of noise if reopening versus the imagine, of actually meaningful the more that comp the if kind line the change a grew you going payments QX timing were last you look on versus stimulus transactions -- can you QX the as quarters, transaction a of both we out -- given in XXXX, at However, of because basis. against we are in they And QX. especially COVID. at year as comparison And the see look that transactions QX might versus and transactions -- much different

in hopefully, of that terms transaction the answer So the trends. gives

Robby Ohmes

And of environment, shifting if the That consumers' helps. does. high behavior trade any color that really inflation in just That kind in just your you're of a seeing sort stores? and down stuff around

Lauren Hobart

trade we down. Yes. actually Robby, are not a significant seeing

consumer products. Our to better people We're well. to to not and from best trade very up better best better and -- better is good from seeing holding

across income similar. the demographics, are all In fact, pretty trends

just that think portfolio the that speaks for everybody. I to our fact something has

got brands premium have really you, DSG is technical price like you're and really, has looking or cleats, and that value our we've of piece for also but well If fashion equipment doing most the for tremendous to brand, point which we it. opening

board, meaning is our the consumer So -- across no holding well. very up

Operator

Our question comes Warren Cheng today ISI. of next Evercore from

Warren Cheng

categories I dragging you follow-up has of performed Simeon's been Great are or few kind in those us on Or they normalizing to that winter job, Can pandemic going still think how how comp? not categories, the overall normalize some how quarters? on had Just a stack particular, here. and comps stable. color from and give drag have drag on question the in to stabilize? and the to Are started guys. remarkably that on through dig last trying and it's on comp

Lauren Hobart

XXXX pandemic-winning way, categories, so of levels. footwear including incredibly Warren, of the and those in strong, were specific apparel, outdoor winners a line fact, are lot fitness by are equipment or more acting like pandemic-winning remain the the bikes, with and, some still significantly expectations and which in pandemic our above there categories,

adjustment the in some those to they higher significantly are is year-to-year businesses, going than on surge there pre-pandemic. they due while So were

Warren Cheng

you follow-up. in And prepared guys comment my made remarks. Got thought an your it. interesting I

If product material we promos expansion basis the mix merch called heat more higher-margin higher narrowly-distributed more or shift product, material the been you've step more component, has high at more achieved points lower the You some margin back since and XXX the look merch out has that heat, been a product, of has that has margin. the that shift driver to and lower mix been markdowns driver XXXX, driver? of

Navdeep Gupta

we categories of benefit coming Warren, the of balanced, well, especially gotten called you carry, benefit, lack it, and mix is the benefits all The bigger Yes. apparel seeing say would products seeing what one, that I twofold: merch are It's in are out, rates this key look we that because right? like shift the also because margin this -- is have as a is from hunt product, it that we is at which promotion the footwear things is -- If in the because from the we actually that category. is used these to of both are have lower of as rate, allocated driver X,XXX brands our those well like XXX vertical basis product. out, coming is driving of XXX the of acceleration margin as points mix. margins you basis that the as points highly with X higher. to combination you called And down going of premium of

Operator

Christopher of Morgan. Our next comes from JP today question Horvers

Christopher Horvers

out change back revisited in talked you the did the back-to-school. internal the thoughts and quarters, cadence? XQ know And momentum but the the You for any you on and to expectations don't I XQ? about business versus half guide in called July your guidance, as

Navdeep Gupta

if back-to-school And called the tail early of were of season. the July, kind we out, right, end you finished. pleased you the at season the like look X quarter it's way of Chris, with the

early that But you we that position you season, and we also that. look season, very as the back-to-school If guide are testament back-to-school inventory important back-to-school the levels the we of we the going season. the in-stock have, -- called are where inter-quarter pleased expecting trend. are for into that start to with at correctly very happy we one out yes, the we And a of with are the

guidance saw minus benefit expectation, definitely, the of had the end holding if you better optimism of end the the bringing low -- to factored that year, at In did end look guidance end into QX terms X% we the of from trend up the raising of we And also for guidance only around the at than been the QX. flowed the the the of of kind low our to consumer well, has lower at up the minus we that of X%. what feared internal but not of that full kind

Christopher Horvers

also promotional then And normalization. you at some expectation XQ, on have the mentioned Understood. you'll

So how does it are third referenced that degradation but versus you quarter? any that very 'XX, XQ about stack quarter? in third margin thinking Do still we second for Obviously, that the you in see the strong in the quarter? lessen

Navdeep Gupta

that Yes, that called I what What been Chris, fact has look we into back our is don't will don't factored think is in we guidance. we like. in is what And our going the up. the promotions be anticipate guidance will landscape the out our out know that called half we what overall promotional

we continue be appropriately and in the we those there will half. as for like be environment, benign a that around are to the a if are actual go Lauren products So indicated, QX. certain say, heavier we where There results bit will like, into see a apparel, are, we into activating factor back categories

really has into contemplated year. However, even full been we the given for our that and guidance, strongly that we impact so the feel guidance have about

Lauren Hobart

we Chris, structurally, long the the couple very that years. term, than will -- margin confident past our we that we've of still over maintain gotten of I that gains would more add feel just half

Operator

UBS. Lasser comes in the of question from The Michael next queue

Atul Maheswari

Michael on Atul for is This Lasser. Maheswari

on quarter and in half. the the a half, midpoint, quick second implies question that geometric the the First, first back decelerate At comp so relative guidance. it X-year to stacks the X-year the CAGR, the

So half saw you you back with does does in respect what for this remarks quarter? guidance? the assume the the reflect Lauren, further prepared to decelerate cited demand from the in comp in guidance categories your caution second your that, that And the

Navdeep Gupta

remain say as challenge. I geopolitical as we And expectations like Yes. macroeconomic cautious in our to would called situation fall. appropriately right, for the are about the out we continue being prepared situation our well comments,

has high yes, of the look the So minus guidance, to those and at you guidance. end high the to contemplated midpoint But that are in low need what year. it of expecting the is. trends, X% end And we the full the cognizant if our is be be end of for at is the the of there, guidance, been comp we and guidance

Lauren Hobart

making also year very Yes. the we includes I comparison in versus point XXXX. out that were the that fact promotional XXXX you're would of very, triple

and as be that the will comps So pricing well X-year promotion are some impacting normalized be while that the could on there stack. half, contemplating we a in back

Atul Maheswari

do Got If XXXX, very to your there room follow-up helpful. levels lot event to SG&A granted of back believe are remain is, that are operating and manage levels it. That's comp cut being I mean, there leveraged XXXX is current in current reasons profitability? despite my how P&L, then And question expenses the I not the at the comps but really margin versus sustainable, that on sales to pressured higher. a that has much in look much your XX% sales

your come but back would year, love think there on next thoughts costs would room as cut under to one pressure, that it get is well. So on to should sales

Navdeep Gupta

Yes.

discretionary really we not looking mean, here you just XXXX optimistic situations of into aside. if P&L, We we look look right? flexibility, amount you called But sales into we hypothetical talking feel down our very you then about variable only case the So even out, really because in we it, doing the thing we first like tremendous our first I called have out, fixed today anything like in -- about are P&L keeping our macroeconomic expenses. are hiding industry the and expenses. flexibility a be The well. said, the thing share the flexibility lastly, X% we the is, as at business, And to we'll that. are there and extent is a our have is would And that in strong in

as and trends into key investments to could optimistic need the of ensure the profit categories So well, we being long-term we if of capabilities the driving. key be the investments trajectory potentially look aggressive the in are in But terms sales business. And long-term we the in very be. our sustainability to about have been feel that those of able we and

Operator

comes of Citigroup. The from question next Paul Lejuez

Paul Lejuez

you could also, little an versus to product, footwear is and if customers about Curious to in something what your app that hear new new love fact, color your if, product that update customer in talk with Nike the about bit linkage you doing your the be that's might if might terms more of into more a non-Nike the give app on. in would bringing category. it And willing be Nike on Curious network. performance acquisition in of I

Lauren Hobart

incredibly doing Thanks, well Paul. board. Footwear Other very doing across the are doing is Nike brands well. well. is

assortment general, was it products have business that than so type by being and quality very So of that, before just the of is our really we in to the well different meaningfully is consumers. responded

Our connected membership fruitful. with be Nike really continues to

are we through working starting that connection, chain the well. jointly to together. improve, and quarter each past continues higher-heat meaningfully, as customers DICK'S as are Nike We this that some supply to quarter product connected get are and We're growing new to going starting

Paul Lejuez

just a follow-up. And then it. Got

but don't out performance growing thinking update thinking you if I some I to of sorry any year, the year? younger in how for next just the about quarter, are missed growth know you Just -- concepts, next you gave on if

Lauren Hobart

Yes.

very, with So It's business. very doing. stores now. compared We're Public pleased DICK'S small, how -- that's we the large obviously, very X to Lands has

responding Performance The of that have business to new channel. to and rethinking the chain. concept of rest more great taking continue in we're obviously Gone! That as the very very, more invest Centers bringing how And is consumer doing to Going, of through House Our built significantly going experience. Sport are be that but Sport significantly but and from growing experience. channel. months, and of is learning past is to right Golf in House well environment. that kind we're the now continues well. warehouse go channel finding Going, concept very service the do We've Galaxy we're We're lessons Golf last very also similarly, forward, also well our learnings we experience. experiences even Performance the redeveloping, reinventing more that We'll inflationary It's Center, entire the that throughout really the Galaxy can with in consumer well we the improve to an and and chain

Operator

of D.A. Davidson. question comes next Michael from The Baker

Michael Baker

Okay.

the pandemic. to during -- comment you at margin to the want -- gained least I go maintaining the the back about So of comment XX%

And so XX.X%. if about I look something implies a that at it XX.X%, on the EBT line, bit of little north

think obviously, is here they last down to based comment? on go that start in a Your XX.X%. going we up this Is but year, margin that or year, XXXX. that guidance sort be to and can this versus of assumption bottom imply Does that is year back reasonable you infer

Navdeep Gupta

are driven look of Yes. And at going majority of that we the if over we you maintaining a again, are to guide have you guidance, Mike, XXXX. not midpoint we're the right that yes, margins term. macroeconomic very unknown, around to think business the trajectory about condition. XXXX. the Like earnings confident we 'XX, the The we said, is sales you are and over biggest if the long the of the about

is aside, those really if trajectory over We the profit long business -- the the optimistic sales on. term. about of feel keeping the thesis and spot macro So the your

Michael Baker

Great. Fair Okay. enough.

in of you color the expense you can after our one As piece, but for the some about We missing the non-GAAP we on or How think How components if year some a P&L. expense own follow-up, half of make back interest year? think should the about estimates, gave -- interest good we -- the should would. full adjustments that obviously color convert?

Navdeep Gupta

have notes doing year-over-year outstanding today. look you Yes. is if the long-term comparison sheet that variable if biggest the that The we at didn't again, it, on the balance factor, fact the senior have you're we

a -- as keep company. we the if for right So capital that you and believe us is structure

we like that is The will a nature. in QX corresponding that QX, the a if over both it earlier is -- cost to million, convert second But the just that than you of is transaction in is associated of be piece. had look half, notes make settlement due. onetime and tune do and in $X that It's there So if piece convertible we the in cost. with another the in structural with the associated just of unwinding onetime

Michael Baker

you you would just give it number? told putting can certainly to Or together, we non-GAAP it but care easier the expect interest quarter. figure us that out, non-GAAP fourth just us in be and interest third expense to might a all if for everyone how So

Navdeep Gupta

of Yes, the non-GAAP million interest expense would QX, be for onetime pretty we exception much cost. with in the out that called $X.X transaction the with line

Operator

Kernan. Cowen's Next today is John

John Kernan

like fairly the vendors assumptions in apparel, balance moved inventory the sheets it mats. to The of vendors costs They maybe look margin high. merchandise high the away from Wanted particular, units looks for to and all look back store. go -- some expectations. in Promotions look on

year? category the what's into the normalized be assumption apparel do the go through in as a half year? in think you move for promotional as back we next athletic So we'll we that environment When of apparel

Lauren Hobart

Thanks, John.

with working that you're are apparel We make to the closely clear really working is where vendors. right we're to due category product. through a our And that through all fleet sure we

are into down to we a and reflected well through DICK'S have hard that system. That's know our in the activity. through normalized our we'll clearance some anticipate included right moving do when are It's channel, guidance, that through everything and activity, also guidance We now. but through apparel Going, Going, our exactly we marking see Gone! promotional moving it's we our

in So the for we're hoping term. near improvement

John Kernan

balance costs into of the we maybe the Maybe inventory a of sheet with lot for inventory just right should sheet? year? over product on your a costs How into with balance should the be units it. now that's current expect think costs now. we associated Obviously, How follow-up sheet some and Got question year carry on vendors? the inventory higher. you associated of end the both just of piece and elevated, to balance freight next the Could need some inventory to is balance some this on the of moving about the cost the earlier on

Navdeep Gupta

that will into next would say Yes, continue I that well. year cost some of as

As this have that will imagine, time some cost inventory. been can it for the to that sell us to through year, be taken increases able you take

cost the that next is The year. So will of into landscape year. of balance chain especially, that you the how We this we cost increases, until months from versus ago it, second overall that an X continues I about piece we as better felt, the would of with is pressure, part as to the early QX. unknown remain freight us, say, how look the call end half at are remain supply going feel for

navigate cost we this through to as pressures balance continue year. So we'll have go the of that to

John Kernan

luck congrats Best this success helpful. year. on that's and Okay, the of through

Operator

Williams comes next The Sam Trading. Poser of question today from

Sam Poser

having And of the I that and happened towards -- July question. started have markdowns -- regard MAP can you with the on on that more month that? the us end what give of holiday last the some to are follow-up in any a the helped being the you In holiday? color you MAP absorb to are if associated

Lauren Hobart

Yes.

them. We our July in strong so participated absorbed overall the partners. we month, at the in month the brand we have of the do business that rates and an a apparel, throughout as portion So end in MAP of did appropriate

So there. meaningful about nothing talk to

Sam Poser

you bit of and flexibility -- help may concerns to evolving have next how Can in digital, conversation good help in about is talk what investments doing appears improvement about these or the lot a about the how going what in it the online is And in helped secondly, the can you then had you store and consumer that the happen both of all do. to about and about some macro. talk you may in And both overcome the engagement, you're times? bad you and may of not that's consumer to

Lauren Hobart

you, Sam. Thank It's Yes. great question. a

past several our entire been have over We experience the omnichannel improving years. on working

service of they ScoreCard mentioned personalized. And Gold our don't completely DICK'S I digitally X that more stores find first We've when we And Galaxy sales. much yet, we database. think, stores you be athlete that I of who our you consumer right now the and so and elevated them. levels, can that consumer thing can is product you're much strong customers our think our is the all we million which seeing that bring at transformed experiences the contributing look savvy that so responding all, of haven't that our on are call to; XX% more see are One the into so marketing well us, valuing really our is are for Golf also

in So contribution are we and they their engagement growing the our terms with of which fact their that customers. speaks creating again are to mix,

So from is experience in-store, both meaningfully and online ago. standpoint, customer the it entire from was what years a several improved

Sam Poser

-- on you're in a follow-up. really just much much is versus your the consumer of to is look of have macro? the question how -- I times and the do But and sort is you what much bad? doing what do. you good how going doing to happening control everybody this of my believe what's this both do so sort you at of is quick when what about How feel, consumer of again, you and what in asks that control Because keep consumer coming have on,

Navdeep Gupta

a and drivers structural done Sam, good really what to we our this would is about look be think me, of to at the control, job the way to really, have in around.

our in we couple trajectory is, high years, of have million Lauren the why we over very And distributed reasons terms heat engage definitely the drives long-term things sales consciously the is structural years the about new narrowly really at, that company. of to the have the margin So in athletes a profitability to optimistic and those look, we able very, like of lot with last than And differentiated players that differentiation few look made feel more then the have basis, gotten the of over very acquired business I drivers that out we mentioned, much we to of the that looking and much if them kind are be approach the a you the really the on quite the we product alone. in P&L are frankly, that And to of called improvements similarly is the XX that and have control. you also rate improvement ability access we industry. more look last in when the then that that our

Lauren Hobart

product and that from that, essential. to that and in mix that's add you would of consider kids our to sure worn business it to And are our cleats may down. need some making at while are I your everything your discretionary, outside to there right you that your running things on shoes our assortment, perform that equipment feet you're are the their if have best

the So points fact our we have is in control. recessions products offer prior do levels have that in different something and price well we that held everybody different up for and

Operator

of Gordon Haskett. The Chuck next question Grom comes from

Chuck Grom

of the across On promotions, decline you changing the guide, can any the given inventory a levels today? retail gross you there's if played are other can remind lot unpack elevated and And merch, items margin quarter? for us expectation occupancy, then how e-comm between into on that XQ, the

Navdeep Gupta

your first come back question. I'll then I'll take and the to second Chuck, question first

contemplated we -- may have in back Not what your a XXXX. the points are of it more versus we to expected the maintaining was deleverage When in so -- and -- year. promotional beginning gross negative in landscape then, -- cost within we cost of basis at that be me, to it we the out, not probably was and XXX continuing we look you go may of time first terms make into you the to back and gross and merch can the of the or XXXX. right, the frame we that, the at expecting structural or biggest we we the as pressure, as there be supply definitely that's decline, changes our expectations, expect, to the what the had this guidance, -- contemplated chain that from but to declined freight that comps. half. normalized benign vast will sure question deeper a second XXXX And margin like the if are called decline, occupancy margin have as and the majority you we saw was is the think Coming in of it because margins to the driver. de-comp because are What have to about it is guided So profit way promotional not look made the of as

what in our guidance. So is been contemplated that has

Chuck Grom

margin Great. that tools a a you better you to the building pricing. one elaborate follow-up, And that key little bit more Can merchandise control bit? improvement. think blocks then talked zone the on as color. I about Is of a Just that's little been on And pricing?

Lauren Hobart

do looking Yes. pricing, can and We've consumer. really that optimize capability science item we and to consumer strong item real-time and data by by a market developed we're where

we've that So over time. that advantage key a built is

Operator

Justin Our Kleber question queue of from in Baird. next the comes

Justin Kleber

going of at sales, it be XX% If up about guidance that to on your look assumes I the you're from midpoint 'XX.

which outpacing you number share growth I Just your is sector have the XXXX. the mentioned I It bridge in gains. seems deck know, market curious between is how gap the the same just for in investor Navdeep, earlier, think you industry. X% versus growth share you like that your

any thoughts So updated today? on where share stands

Navdeep Gupta

Yes.

the have our you we the driven the especially categories golf. about this Justin, gained share team it, of key have, well year. have for we will as we sports differentiating performance which we we in as categories think able footwear, of at capabilities to is are and half in are if And with we be kind pleased to this share, gain expectation -- core continue definitely first through apparel, where of us that and with first that half that the And year. the look

Justin Kleber

internal environment. thinking were Okay. this a what merch to on from margin a the just year you And your back you half quick the expectations relative in back Have over guys of follow-up perspective promotional May? changed

Navdeep Gupta

a it's biggest things. combination the those of say the Yes, of would unknown. are both I internal capabilities

do the midpoint be with external the guidance, environment to internal In our to terms more expectations. versus of continues of the

Operator

Next, Feldman from Group. Joe Advisory we'll of Telsey question a take

Joe Feldman

Congrats on the quarter.

order goods how among getting you fulfilled? apparel you won't get days more order the -- you and full the getting hardware? to things inventory, the of still versus differences you goods you than versus flow seeing orders the in of Are finding on anticipate is seeing of you are or time? are you Are the kind of because need these accelerate I hardlines. and mean, footwear terms flow In Like categories

Lauren Hobart

Yes. Thanks, Joe.

there's just in concerned important I our overall, that not restate Our healthy do we think it's and is inventory, to our inventory inventory. are that very we -- toxicity not

is It's last a moving X.X our flow Our there challenge different and it hardline the and significantly comes sales have that apparel, we improved I series through, of buying well. just next was -- has goods -- we outdoor we to was that backlog recent of around mentioned, is of are years. is as of working for affecting -- clearing as -- bought through say, year. and When we we're are challenges. inventory it we that category that throughout by some have the categories, The there lot fitness been that most a now, but equipment, our category and

with And issues footwear So no flow been good. pretty there. has

good. is every few there's So years, It's challenge just flow -- X.X is new the over something -- a last months.

that's we're managing So how it.

Joe Feldman

guys seeing what of a kind And and especially from helpful. know we I distribution and what season? keep this Got there, need about distribution are hearing gearing are stores days just you you guys it staffing hard centers. it. then labor Yes, have Do you you these to Like that's the get up wage how is perspective? I'm at from holiday seeing talent, wondering your centers. And pressures for

Lauren Hobart

market the labor improved. of years now. in a couple Labor, It been has shortage Yes. for there has

to that able We being maybe terms some have not people in staff of having not been other having appropriately. issues are

remained fully have stores Our staffed.

think costs a that competitive But our meaningful our we place -- do great a think centers being importantly, high. work gone that's and distribution engagement, obviously, as advantage well. and has. is that, wage have a Our made to the operating is we to teammate speaks staffed us. I more for wage this a everybody's our fun are And have and fact all-time up an And I improvement that meaningfully in engagement employee us competitive at area for that

Operator

of from comes Seth question next Wedbush Securities. Basham The

Seth Basham

key what relative on X differential to mix to mentioned give and average, you a distributed the Could expansion what margin products it on and the sales high us the narrowly is? years. sense last heat relative is of XXXX of for being driving products margin your margin products those question those is you differential to realized is that My

Navdeep Gupta

And as Seth, significantly the definitely, those key within to of of products, it where mix the was terms realized It's us and you higher. margin like -- is the categories is net the on if the our drive the how said. the -- products distributed that margin XXXX. are that footwear, margin well. in intensity promotional mix compared helps they margin, also in higher combination, we -- margin incremental those look The like a also narrowly in

Seth Basham

Got talking we high it. provide more X,XXX point mix can quantification? in XXXX? But basis products any difference heat narrowly in distributed relative Are and you to

Navdeep Gupta

Yes.

between product it's as narrowly that well we we mix view the brands, the benefit As heat Lauren called between talked the penetration mix about as have. out, pricing hunt, that a capabilities higher very lower have the proportional and vertical the distributed have that we of the driven

all levels. of balanced it's those X between So

Seth Basham

not quarter, of or normally can is store quarter? cadence don't a just, sales the or it, know talk on you transactions improved And give follow-up basis okay. my Got growth the much through your you question whether about a traffic I us but sense too in comparable

Navdeep Gupta

would balanced, year. overall It's we back at it versus even at is the The looking as of QX if very, this timing look of of the year-over-year year. XXXX, pretty traffic you to and of the were because look stimulus pleased very on the it into from it and way last look basis I stimulus was with trajectory impact -- noisy a

Operator

we a from Jim Next, have Stifel. of question Duffy

Jim Duffy

the business. around apparel few A

you environment, curious. to Or do I'm back spring in late given have favorable the you given pushed spring product, the buying carry that apparel spring the And Will business? the opportunities inventory you to then the 'XX? for dynamic deliveries? of vendors, 'XX foresee over On

Lauren Hobart

Thanks, Jim.

business of to some appropriate the of over is and -- -- to be some in fiscal looking apparel is business seasonal are seasonal the carry well, We won't 'XX.

our seasonal holiday. where is needs right of or to mostly, appropriate work it together now our get clear product any to and/or to with late But working move cancel before vendors We isn't that any that through now appropriate. RTV. into are Some we we overages,

could So where -- I think be yes, see opportunities do we in for them. we buying 'XX, favorable now and buying spring

Operator

our Brian And question finally, from Oppenheimer. Nagel last comes of

Brian Nagel

quarter. for to my I, congratulations too, would another solid like add extraordinarily

kind happening really longer understand The guess have. So what's I nature. just I of look when what's to here. questions the really I business, congrats. they're at we -- mean term in But

your to stronger restrengthened is over in business years. as comments few prepared we've of Your mentioned in the and the past clearly, a response question, you years here clearly couple

as the DICK'S to spending weaker does seeing your it, particular more susceptible make function but took products, follow-up render business extent you've that's shifted higher or on side? on the in changes now look a more question internal But I think that that clearly, is now, to in hold DICK'S end So a mean, that you have of for right that, potentially you it initiatives, I the consumers behavioral product, we're environment? of pandemic do then better more no the indication or this merchandising of at during these the the -- part

Lauren Hobart

Brian. Thanks,

certainly more place transformed. So in strengthened, I say function the And years past that of is make over we strategies you put our business a has business have this the our would as to completely said. X

more just You our outdoor cannot notice At completely fortunate look time, we've not it lifestyle, at has active. chosen healthier a more lifestyle, our same a different how merchandising is. been that consumer assortment and the

is past we've growing. look that business. I pie in the the the over bigger is so say But you the several the strategies put would if And place change, in years,

and money them people are desirable. these to With spend what's on the important highly products, high-end products

-- tougher now it's even So we're frame. a inflationary though an seeing that it's time

happy be delighting in product to that to consumers So and have that way. we're

Operator

queue questions I'll so Lauren no in Hobart, call CEO, President the back have today, turn for further to We and closing the remarks.

Lauren Hobart

Thank your talking look Goods. in will you, you and Sporting for everybody, forward I next and thanks, DICK'S interest Thank quarter. you. seeing to

Operator

This Thank joining. concludes today's call. you for

You may lines. disconnect your now

DICK'S Sporting Goods (DKS) 23 Aug 222022 Q2 Earnings call transcript