DKS - Earnings call transcript Q2 2024 | DICK'S Sporting Goods, Inc.

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Operator

Good morning. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the DICK'S Sporting Goods Second Quarter 2023 Earnings Conference Call. [Operator Instructions] Nate Gilch, Senior Director of Investor Relations, you may begin your conference.

Nathaniel Gilch

Good morning, everyone, and thank you for joining us to discuss our second quarter 2023 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 our 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 risk XX-K and our this with statements various release statements to statements obligation in earnings conjunction differ factor annual information. forward-looking filings these no during or the discussions last to our report made of update call. assume SEC, and including We on any Form such cautionary

website tentatively to your find our to non-GAAP call. our of our in Relations are measures for third And XX, XXXX finally, results refer we reconciliation planning Investor financial purposes, on the referenced November today's earnings XXXX. publish quarter scheduling to future Please

that, with the call now I turn Lauren. over to will And

Lauren Hobart

Nate, everyone. and morning, good you, Thank

our growth. sales We sales with and X.X% comp quarter. robust to $X.XX strong increased pleased performance billion, our second for increased by driven Total are sales transaction the X.X%

We country their on athletes DICK'S gain needs. share, to throughout continue to are demonstrating that meet market the increasingly relying

when Within the our opened we newest and back-to-school quarter, House off sales accelerated Sport kicked significantly the in July season of location. when

prior comparable confident delivering X%, remain year, store in our the For to we of outlook. in positive the sales full unchanged from range flat

EPS profitability take second outlook. and XXXX a revised context, moment to to quarter With this our I our want address

originally of was significantly due was gross primarily which, to expectations. levels, than XX.X%, While anticipated. still our we of This EBT delivered second our pre-COVID lower while quarter margin, was lower profitability above double-digit short margin

Two quarter to impacted expectations. our gross original factors second relative our margin key

Based on shrink on of physical QX the theft increasingly most our issue the and to retailers. recent the year. in of go-forward meaningful higher both Organized results shrink. the inventory our was our balance for of serious theft first impacting was general, an expectations our impact from the many The and inventory cycle, retail crime results impact

We the and athletes and teammates, our keep to stores, address problem are can we doing safe. everything

also second, excess action beyond we're was inventory key fresh outdoor is down And X% our And and at shrink, in of the receipts us operating decisive and philosophies. quarter. particularly our to Keeping end in remains well ensure to our inventory on we of allow the our took new products, the that category positioned. bring vibrant one pleased inventory

expect remain XXXX very margin which revised $XX.XX as levels a the for back guidance account into note non-GAAP we in important to on well It's shrink. but our half year, Our EPS significant we views to as including of XXXX, our gross full the increase $XX.XX margin to the latest gross to includes still half. QX confident, the results higher for of back of takes year increase compared

have for extending we industry. well we're is billion so business growth we to in long-term a enthusiasm investments our have say gaining positioned making been We're our share continue never be leadership $XXX an that have bright future the understatement. To and our stronger. would fragmented in and transformative The confidence opportunities our

details his Navdeep overall about charges related growth. business this capture share most how talent, in years, organizational going the we more spending success support determine structure and to while will aligning opportunities. design are plans also anticipate we doing and most forward our and optimization on costs. extensive our Following our on growth better associated our to strategies in critical to optimize includes tremendous several that significant our laser-focused our We're over to capitalizing our the This last of best remarks. streamlining business work

omnichannel experience our concepts our have and newest at strategies, successful future. growth proven DICK'S the to part a our athlete heart within and of the of are is key Innovating be tremendously

First, results. powerful of Sport is House DICK'S yielding

we're locations, and additional opened have new earlier to X opened QX, this During X we excited month, locations.

to compared the XXXX, the to Sport had continue visit their experience stores now the XX in same prior of With have throughout the House and across total that many these XXXX, I XXX July, strong and XX and I've with stores open are locations stores to square to footage. will plans delivered providing. left by we during open team inspired another combo well proud store of by comp These of incredibly XX recent country. expect each and visit double-digit we doing opportunity athlete locations to months, between our growth they're

by House similar our a with out revolutionizes In completely and House service enhanced concept most which next-generation Sport, Sport addition model, we're and to of inspired our is to of elevated continue store premium XX,XXX expressions. excited store, rolling DICK'S square foot This our experiences, assortment format. visual typical

opening, been the of of concept Sport of DICK'S is is and stores. great results, driving XXXX. we've locations, prototype our strong. X XX,XXX and and we're of exceptionally by the our end new House the of additional The another foot now one-two overall to locations square This our first opened on X excited Building future success punch open sales have

We're year. We're Galaxy also in about X extremely golf, Golf open DICK'S opportunity new enthusiastic excited this and Galaxy. centers to both our performance Golf at long-term

Beyond continue this year, XXXX. growing Golf Galaxy our with locations approximately new will footprint XX for we planned

quarter, our integrated our remains experience offer experience. stores, to of dicks.com. past DICK'S and This omnichannel excited were And on in to continue strengthen our with our we service athletes' combination part on app In extend technology and delivery model invest digital omnichannel white-label success. now we to the same-day an fulfillment integral our our

In recently to reinvention the profitable omnichannel partnership of announced invest have Baseball. and we're deep and continue to We conjunction to drive between and innovate multiyear experience, continue with a growing proud our our engagement. brand and GameChanger in business, also we rapidly Major League GameChanger very

Lives Sports Carmelo In their Mike Nike XX second change Alex Change This Jordan, their we who how of of Trout, Morgan stories including iteration with Anthony, spotlighting and campaign. past share quarter, lives. athletes, iconic we're sports launched partnership our personal the and

In app. addition captured stories, we athlete to connected the our that exclusive content on to Nike DICK'S behind-the-scenes and DICK'S available the is members

marketing nearly billion the moments, and run We've has seen date, including extremely summer's has media. the finals, X.X the in Stanley to playoffs World Women's most campaign work relevant positive athlete NHL in NBA this sentiment. And Cup impressions The our achieved sports Cup.

efforts the Sporting DICK'S their our commitment outstanding of to company for and across continued all thank to want I Goods. teammates

incredible our across drivers they are business, have the every We an here team important our area success. most of of and

final has We're share to enthusiasm have comp and never thoughts potential. for on stronger. DICK'S want our we sales I long-term growth business been significant and our growth in The have concluding, Before driving we opportunities the some gaining confidence positive share.

of moderating ahead the will we concept, our EBT which long-term rate. our year, of our we growth Despite deliver this have foot of expectations, and next-generation prototype, is Sport XX,XXX DICK'S the of XXXX House double short still EBT extraordinary. XXXX square our And approximately margin powerful is on new nothing double-digit us opportunity results based

growth I our over turn that, to said, in early XXXXs." With since quote, the to I share Ed financial these like call seen public more the "we haven't Navdeep we and detail. will As results opportunities in went

Navdeep Gupta

Thank everyone. you, Lauren, and good morning,

begin our results. quarter review a brief Let's with of second

a in locations our driven to are sales by increase quarter market The Moosejaw. gain consolidated We at and roughly transactions, increased offset warehouse of we Comp X.X% this sales sales billion ticket. pleased by report average as to $X.XX decline a XXX partially by in X.X% points noncomp X% share. driven X.X% basis of to a was growth sales continue increase

As of considerably in a Lauren as built strong back-to-school combo X start locations stores. Sport previously new converting closed said, and our the we by sales July House saw season reopened to momentum

We to stores report reopened these results. are yielding are excited tremendous that

continued flagship saw category vertical In apparel, extremely brands, share of gain sports brands. key including across did Nike significant well. terms In and footwear to our and performance, we team strength and

in was points. merchandise margin was by basis or and of Gross basis sales to points $X.XX compared XX.XX% the second driven declined XXX of XXX last lower decline This profit quarter billion net year.

discussed, product, our the positioned. in particularly category well to decisive outdoor took we inventory keep excess Lauren actions on As

In margin decline. merchandise addition, of we was basis experienced This points. a meaningful X/X headwind from lower offset our higher-than-expected which supply shrink, by with partially represents XXX costs chain

basis year. sales. and by points compared factors. was SG&A X dollars expenses last was planned or This were XXX deleveraged XX.XX% and of $XXX.X to $XXX.X million increased net SG&A driven deleverage key million

basis points service First, technology approximately experience, to deleverage. invest in store. including These and XXX drove wage hourly rate, we continue a athlete better create investments our our levels in to elevating of talent

new second major to House history. the made opening of we a in highly impactful marketing our as the campaign successful X of Second, stores Sport quarter most this support Lives investments in Change in as of Sports brand well campaign, our phase

marketing drove points Our of approximately investments deleverage. XX basis

deleverage changes income. we is the the net from XX increase in which of offset basis approximately fully in compensation our points of due to third, And other values saw the expense investment deferred plan,

of in last SG&A increase were noting an Lastly, associated included our of to recent to Sport support including acquisition. $XX.X period expense expenses million X quarter Moosejaw increase with our same of compared our conversions, openings. worth QX House support a million, that it's of full This $XX.X expenses Preopening was the advertising the year.

to was savings to these $XX.X the inducement decrease expense year and was year our last $XX.X prior decrease the year. to senior interest million, primarily exchange compared of the of due of a million in the from This Interest convertible related notes retirement charges the notes. incurred period this expense same

increase compared increase million interest by same last a $X.X income totaled result to $XX.X which million cash average year. interest as income in in rates I mentioned income higher expense the our period $XX.X our the cash the This expense SG&A in included our million on $XX.X increase earlier. Other the offset million a of also Other was expense income plans, deferred $XX.X million equivalents. and from reduction compensation changes in fully of driven

we earnings last share million share compares XX.X% or or was of of EBT compares $X.XX. diluted non-GAAP year. In EBT of per This total, $X.XX sales. $XXX.X net million an of net earnings delivered a This to of diluted per in to sales XXXX. $XXX.X XX.XX%

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

of levels decreased QX inventory last X% quarter-end year. to Our compared

Our inventory for is back-to-school important the positioned well season.

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

million year, we this stock far -- $XXX.XX. of We million at repurchased a Thus an average shares our stock. $XXX.X have X.X of also total common or of million price worth purchased our of $XXX.X repurchased

to for turning outlook our XXXX. Now

for of We are the flat expectations plus be X%. to range in sales reaffirming our to comparable store

to the We continued continue resumption considering At the be XXrd on Including including noncomp approximately this for which midpoint our is the a measured period week, increase student implies points growth XXX flat, macroeconomic expectation, uncertainties we comp our be top of back will half of year. range year. basis sales X% same of of loan the the comp roughly last approximately in full in repayments. of upcoming expect

approximately As our the to continues XXrd the per on prior now QX to of be our earnings $XX.XX to coming for include to we latest back expectation This gross performance and of result $XX.XX. a in the views week. diluted to $XX.XX compared expect from of share $XX.XX margin range $X.XX non-GAAP our half,

non-GAAP expected to benefit meaningfully improve the year, we anniversary expect improvements in be XXXX improving expectation to full the period freight expenses. and expectations, as in the of our Despite for of approximately XX.X% in which the from half At prior compared back we EBT gross to our same moderating will is continue clearance margin activity midpoint, XX.X%. from year margin

an gross our our now vibrant keep includes will inventory which expectation full basis approximately compared as to higher XX continued This margins XXXX fresh. and reduce as emphasis points well year by of strength, our to

primarily investments will year drive to in and also due we to expect profitability expect for long-term our expenses SG&A growth which We the deleverage full sales continue growth. strategy, to proactive the

deleverage the prior slightly half, to to basis SG&A the XXX midpoint the Specific at of points versus guidance, back our over year. we expect

We in back with expenses increase year growth half. expect moderating year-over-year for full preopening the a will

our effective rate Our an diluted approximately average XX XX% earnings compared on average tax and to shares is guidance million of of shares approximately XX based outstanding. diluted expectation approximately million outstanding prior

of expect As severance which part today's expense $XX we certain optimization, charges our of made to non-GAAP to decision difficult for center, primarily third business the outlook. we customer quarter. support the approximately eliminate excluded in incur million These at positions from were the

the are talent savings expected months. investment largely next strategic offset by Related over XX to be cost

expect While we as non-GAAP from actions our charges business to on a excluded million additional result complete have may $XX These part during any at time, additional actions be results in potential of not currently today's XXXX, outlook, this specific and plans to we will of basis. committed to million. were fiscal which optimization not related contemplated $XX charges our

the In addition, to our our core expectation maintaining capital based between of $XXX $XXX in on year. confidence for are strategies, million continued net million for we our expenditures

prepared line questions. you DICK'S in for concludes Thank This you now comments. Sporting open the interest our may Operator, your Goods. for

Operator

of Morgan [Operator Simeon Gutman the from Instructions] Your from first Stanley. question line comes

Simeon Gutman

then was gross And think merch quarter X/X margin Simeon remainder My would question decline Gutman. the is It's shrink. the to clarify I in margin the be then or first just can actions due and what if of or the looking? was And to actions. category categories within it decisive remaining quantify the that's pressure the how outdoor are you percentage what correct,

Navdeep Gupta

perfect -- to the I was is fact that. decline, Outdoor continue keeping in around inventory we decisive you as right. was of be prepared The of a driver out my our the characterized called in commentary, This clean. largest yes, that it example

So how was. about discuss willing big outdoor I'm further to the details not any

decisive about peak the clean to of way purpose And was we that outdoor is is be about an inventory to and purposeful outdoor -- the right, category. the mid think made that around our that there that But the decision keep part QX. happens,

biggest The QX for thought of shrink. we in had primarily from We adequately it. the impact for surprise came reserved terms

anticipated, our QX number that as the the However, organized of in and impact retail incidents we came higher and results crime impacted than well. significantly

Lauren Hobart

said, through about that. We excess Simeon, want add was I outdoor a had in category. -- which marketplace. couple window the of Navdeep very there And in to sell short there's just the a inventory things as to

doesn't the we so but on in general. change were it outdoor And aggressive, expectations category our

This very are experience. outdoor and We issue consumer excited was delivering reinventing about a category quarter. past short-term the a great this

Simeon Gutman

maybe some what then well guess, was I it. there's last is, follow-up markdown call This And Okay. year, as there you'd some, the as activity. year,

so keeping pre-COVID than So a sustainably think what actions that do take that excuse gross -- How that? think margin this it's you key prevent me, part you I do happening? continually about you of the from -- higher Because levels.

Lauren Hobart

Yes.

to And a very this the So heavy year. there year. of I you spring marketplace. last basis and activity. situation We the XXX late take dropped in in inventory at in year, did want very the at back of acknowledged receipts was the to it's a from margin and just quite get different then clearance points came last end our time we ton last year, into

over to the the year we last clean. the year way Importantly, a keep half are we And acting this through fresh year, we and aggressive. we back inventory sequentially improve increase full go of gross and basis as to on year. to margins being do would our surgical expect We're and

important return us fresh. really to surgical way, half for not to And understand grow promotional it's environment This any shape is back or expect and in margin keeping full a the and So gross year. in to a is being inventory our form. we the this

Operator

from from the question comes next of Yih Barclays. line Adrienne Your

Adrienne Yih-Tennant

can concept you that economics, At any any as us Sport the metric for any us qualitative maturation, quantitatively of point, anything and want the think share share this with it's addition to you kind well? store I helpful of Lauren, to more X-wall comments payback. stay on get on the wanting to House new But color in prototype. to

gross you promotional, a and of implies Do are this fourth sticking should understandably How once that very and the reversal in do year? but going on Do to margin of quarter the it X year? inventory more then the year? sort And composition of positive we of about a next then not think accrue And then, a quarters twice you get it we an get next to Navdeep, for that nice inventory write-down kind clean do fresh. shrink?

Lauren Hobart

on Starting first Adrienne. House Sport. your with Thanks, of question

quarter, we was in that in remarks, really our strong. As back-to-school the up of July picked and because off mentioned prepared starting significantly

we importantly, on of significant doing they incredibly compare growth. same well. stores. are we square footage X It's to that But had also and combo were the are easy now opened, remodels or Sport we our versus these Houses them because basis combo And largely relocations stores of seeing --

this on very very, are bullish We concept.

the very, classic doing Sport. with the by XX,XXX DICK'S Similarly, well. XX,XXX inspired redesign, of it's feet very -- square And House it's

I Navdeep that growth talk emphasize turn will incredible ahead these but margin, with an want to about opportunity over to I of X So us to have do we concepts. it

now optimistic got so them. quarter. XX opened that feel about We -- more this we we've And X

say open We in doing So they incredibly XX can there's are that total. confidently well.

Navdeep Gupta

I'll up said Lauren mall the maybe response well is the from brand summed Adrienne, add Yes. as our owners opening of to that are as the just to House what really we that I seeing would one but more say well. positive. Sport because exceptionally sentence she athlete partners not it

So the are as bringing we athletes. the excited are that that to are mall bringing we really to well changes we as our assortment about the

right physical around that, actually our a we of so in -- terms the that's count, we the our we ahead of year. the of and physical results. of your answering shrink, the conduct levels inventory QX and do season, In that inventory back-to-school booked quantified question elevated when once that impact We

And assuming a for like that we this longer prepared us with I trend that is remain to a is going remarks, said in are my time.

expectations year gave of for for shrink an our outlook the have this baked elevated XXXX. further pressured we we of that back level that So in half

But wanted we this and wanted that risk the right wait out to we conservative, there. and about see be to still potential have We'll when now, to be prudent reverse. be may does

Operator

from comes question next line Bank America. Ohmes Robby from the of Your of

Robert Ohmes

questions during gone deeper what work. my on little maybe we're color going back-to-school margin as to Maybe commentary on have, more worked maybe but for happened decline what EBIT the you and outlook a save categories more as Has I'll didn't quarter. get call the follow-up on well the expected?

decline the ticket just mix? through us trade was There that second that Was quarter. Was Maybe a that in sort walk of happened. things down? different the

Lauren Hobart

Robby. Yes. Thanks,

a consumer X.X% comp, to well. to total that So would proof number had very really doing very, is starting on we our And X.X% a I with our comp that. and sales. note important different total of a It's point points

First From across all, growth income across saw we each you're different other is single we demographic, saw companies. income our consumer what to growth hearing every of from lowest income I demographics, higher which one. our know from

We down better see good to did We a or X.X%. best from grow trade not to saw products. better transactions

athletes So average our overall, come in came our was join And decline total. while often, and more more we database, there they some spend in they had into ticket, fold. more

running, it our become has what is a as So lifestyle, voting healthy, clear wallet a consumer their things. consider that want really I these that's sports, category well. very note think of important they doing with something all and discretionary used to they're maintain we to and that to them to active And is something walking, team important very

overall, the really consumer So many quarter terrific really, for quarters and for now.

Navdeep Gupta

build that. I'll on maybe Robby,

tail seeing in at the results our of more the July. that the couldn't quarter, of what especially excited we month be are end the terms we July, the we about and are seeing In in of of month momentum

Two big reasons for that.

of out that in started called season out very early the back-to-school tail QX. You

excited about very season of ahead of start of go the to still the us. plenty season, We are

And QX X we month we now and opened out generation that momentum and aspect locations Sport July. well the is in XX,XXX of coming next stores that X results seeing have our House we second X the square in as of of of the are them. actually we the those The locations open, as feet

that's that guidance a well seeing how resonating made, us for how have excited resonating, and we that And the saw service more are momentum we on from couldn't well about. you assortment full is we what comp collective the the investments year basis. our be reiterating sales The is

Robert Ohmes

clarify, the to the Did quarter, impact second taken on just they actions And an in inventory the ticket? have the they traffic? did support

Navdeep Gupta

no. the say was It we targeted would I portion actions that small took. of a

those indicated, with happy the to fact actually category. We our was down outdoor like highly year, X% are primarily Lauren were targeted. actions focused inventory finished that our And last it around but compared

Operator

next Your question of McShane Kate from line Goldman from the comes Sachs.

Katharine McShane

and footwear like quarter, I with do case? team it have the the sounds to a but with that or there? know you little And else flagged strength more maybe did something in bit. it apparel Is -- in underperformed outdoor sports

Lauren Hobart

And in apparel soften. to growth the Thanks, in out is level, was was and apparel did to strong. brands vertical correct, apparel at And did tremendous that I market positive, Kate. saw gain footwear. an And importantly, team one flagship We our you're want thing share. softening extremely industry Nike sports business about The our point we very strong. continue very also were

So very going bullish forward. about and optimistic apparel we're

Katharine McShane

question about flagged to wanted I a ask the in release. press what you And guys

are. Ed said and wondered bit since that in being the statement you about quote his more best could XXXXs. means a early what what drill opportunities if just think opportunities on gone I down little We growth you've the the public and

Lauren Hobart

Yes.

the has of is increasingly we what and revolutionizing technology and us enablement retail innovation about And retail. become So that technological completely have about innovation. ahead of

we're our of We've to to our and experiences. business eComm from chain concept, every how XX,XXX square And in our arm new fantastic our into of technologically we're feet, of stores. enable to our investing So got House service. we assortment, run into leaning and all teammates Sport that's aspect leaning our supply teammates. We're

have had I ahead so to early growth but us. in here since we back the Ed XXXXs I much wasn't public, we went been this There quote opportunity has not an notable. of because and

Operator

Your of from Horvers comes next the line JPMorgan. from question Chris

Christopher Horvers

up follow wanted to question. just I the on cadence

So you mentioned momentum. House to addition of in Sport

talk Sport the And little saw maybe over a the in what out cadence. Is the bit parse about maybe House season. you of can more you So comp? comp

Navdeep Gupta

remodel store of earlier answer And the across this question, QX all & our the combo saw it's base our a Field yes, just is a of your comp the in Sport is we in an Chris, of to months X And because ones an of of positive that quarter. the were opened House were locations. existing Stream existing remodel comps or Yes, location. here of relocation

Christopher Horvers

there Understood. And I'm merchandise on as the was the then of impact, an impact the accrual margin margin, second touched in the first it X/X quarter to just the but to Was sure like, year. as looks relates we not shrink, try actually if to the be parse a in quarter. point out given XX it what was expecting earlier, the back shrink half for you're this gross or that basis the

Navdeep Gupta

it's an well. there No. Yes. we at the end that Chris, Yes, as question. good of had accrual QX a incremental was

done number hit where store and the the the elevated quantification physical seeing incidents clear We inventory go However, quantify of part we of the up, of had season, shrink that's the that. process. that of became inventory our level ahead when of been actually back-to-school could as gets physical but to us,

yes, elevated was be as based headwind on that in half to QX we in was basis there QX. able back tail which points, of QX. and you the expectations, full year And where catch-up in of a you a the to well are should finished saw as QX, compared So there quantify expectations XX QX, the

Christopher Horvers

in accrued for you that half Meaning bigger the what second the quarter? the in than impact second is

Navdeep Gupta

and elevated we prudent conservative shrink expecting risk of being about are being just elevate. see elevation level levels to continue, level some we that Yes, this to of continue -- potential

Operator

TD comes question from line next of John Kernan Cowen. Your from the

John Kernan

what this across you an you're I have you're go here. think into appropriate do we given on of solution level as at the you currently long-term sector? seeing? of year, to the And the couple a just is Lauren, reserves think do shrink, topic what next

Lauren Hobart

John. Yes,

and it's stories, As honestly, you a trade to our with It's together shrink quite issue. that we partners, something government, an problem industry entire our what's going on our our need organizations all to We've country. level -- on. seen the alarming continue problem. actually all work to for And it's shrink the is with with know, address and it's

keep point. partners. So our into to fight conservative with to we with our appropriately reserved and as stores yes, security And point, been with can industry working back enforcement we at and athletes half, local but our we have lock-up, to are believe cameras, safe. we we've this we go law increased the extent To teammates, Navdeep's with our and going that's the

John Kernan

then and your And of you as points the guidance changed the of XXX is half think change into basis in you obviously through SG&A at Understood. of Navdeep, SG&A we I the back guidance around What's said get midpoint got much. didn't comp thinking as new QX? the deleverage. year The

does there's this on -- deleverage but more So at feel it there going point. is -- like

So maybe can talk you to that?

Navdeep Gupta

frankly, first the guided at you This I XXX deleverage. back it's SG&A is and that Yes, quite the deleverage year. to we beginning basis of with the in look saw year points, in this actually of half if at line of half you John, the would perspective. what over SG&A deleverage the And we slightly contemplated in say there's change actually, no our thinking expected an that from

the making that driving whether our we and making our is can and CapEx, long-term Ed of the about what about required. growth, a no such said the profitability the back goes prudent talent within stores provide than has sales service technology and investments opportunity talent, it in significant what in what ahead as Lauren the This that guided these we is us of to that and the is have investment we And are as in talked investments business growth in different we whether well terms it are GameChanger opportunities platform.

examples. the all are Those

expectations an continue with is our invest. so And we previous your going coming be be to back to where area line that to our continue in guidance question, this will to

would a know I question. I'll this foreshadow be and

from to We moderate expect expectations. growth line in point. this But right is our in XXXX our XXXX SG&A with

Operator

Your next Warren Cheng ISI. question comes from from the line Evercore of

Warren Cheng

incremental the expectations in -- XQ you into X to half your you're forward I what to can baking to the you versus the just that headwinds and QX half? between delta how carrying ones unique were buckets that for second missed want clarify margin and just ago, much the you're clarify, months second

Navdeep Gupta

said, buckets Warren, say much apparent hit levels called biggest the the the expectation would store. the the to I Lauren elevated was out, assumed, shrink not results. our are the I assumed the that have And inventory this trend going here that to have we us abate of when pretty against our original surprise Yes. same inventory became physical is expectations. with physical versus that like Like we

and in shrink baked as keep Sport some took sure to we able the to this keeping activity inventory that these we decisive XX,XXX because half in right well to to was in half the we the of in moderation inventory And our and the and to level bring of of claims, the continuously our want our And able be the that location assortment clean are make outdoor. inventory we our elevated some you growth well example the in elevated. the to to action positioned is keep in in innovation -- House back we And gave assortment fresh have our fuel have our of some different next-gen back be and assumed have is this we expectation driver So the to of second locations. expectations. continue

Warren Cheng

what beyond -- stay. state very this The back environment. in we ask is And here promotional shrink Maybe year, we're how X follow-up, step margins to point typical leverage below clearly costs. you you uncharacteristically obviously of if just would a for is I be to comp X high your fixed in for wanted say my the to

much temporary factors pressure And pressures? just together, these are But year these at about of year? look how we of this if how on this think you XXXX on of should sort specific kind business margins normalized all facing profitability beyond you the

Navdeep Gupta

billion top we Yes. that sales Maybe fragmented that with growth continue and industry, from and We about intact, with absolutely share long-term the XX,XXX. we more line business sales excited gain or confidence the the of it ingredients from perspective opportunities are I'll the doing be ability the that could of $XXX begin growth to work see Sport our bottom The we is [ long-term not in a profitability to whether our have. line House rate in next-gen ] profitability. remain our

that ingredients out have continue remain. the the called or recipe around Our we to margin

gives is giving line the than gross our confidence higher narrowly a that and that's can to with this that to year, confidence very XXXX. we the us the basis, to that our coming that and grow grow from years -- that's your in basis will line margin the what And on is margins. extremely to -- shrink us distributed. is what a are continue full guiding can year product top in continue what And the Our of total differentiated we Quite frankly, come. be headwind we back question, points XX bottom the

Operator

question Michael next from Lasser line comes Your of the from UBS.

Michael Lasser

is like at shrink of that the least around issue this what first given next that anticipate until that it you anniversary, the first half is you should greater shrink we going in take inventories and year, second until sounds into being impact the you year in So the fully middle the it was than impact half, right? the to half don't physical of of

Navdeep Gupta

had year. are we we that revisiting learnings inventory Michael, the on process this based Yes, have our physical

situation. So share year. little at inventory counting the keep may like our but we us be anticipate be frequently a actually sampling don't stores we we the of did will risk, close one doing more to least large tab a I count or Considering stores this bit more, on level

Michael Lasser

continue on of related then full the for last questions the really couple in And how to the and well necessary Sport, in X both as the much bigger store what's and quarters growth of is House one, customer Number year you're store build that cost as center of support these Okay. structure, in fixed SG&A expecting support the the related greater here. to to locations? a out

in comp last Knoxville locations for And have chain? existence, at the opened couple Rochester of the periods in I look are, the the the if compared longest the overall you comps how which the believe, the locations, first to did been to and those at and

Navdeep Gupta

Michael, Yes, great question.

let's locations. have XX of We context. put all, in this of First only House Sport

I when think pretty say of impact SG&A, would So in the insignificant. about it's magnitude you overall

right the the the center is building XXXX in to at appropriately here we -- terms talent -- in at the corporate But bringing be that optimization and the in able capabilities of support us. capabilities the and technology business exercise need find resourcing for finding are to opportunities that's right that finding and what the XXXX, about to It's talent, grow the into built. then to be

have of And results location, be time question, now. that to it's we stores locations would to be the excited from out So well. the I couldn't we Sport about your pretty overall as excited answer sales the impact those some SG&A for small. of we say about more more from results open in and And now on not could profitability absolute our of see the continue been terms that House of opening

Operator

Brian question next line comes from Your from the Nagel of Oppenheimer.

Brian Nagel

so product regard product took outdoor to is of that that you product, selling basically over So year? that anticipate in balance to is first the this the the question, inventory down, sold? so -- just you that my product still product now is with here -- clearly, adjustment the wrote Or QX, we understand the

I write-down then, Or what been did for second talking what necessitated in there a now? question some now? And about but outdoor do why is we've the -- you while, guess, it the weakness

Lauren Hobart

Yes. Thanks, Brian.

it And So such is pack we well, we QX majority where don't do away. a to to in a we place got that. we've have product were that of it and to the with going -- to sold heading were very moved through we aggressive have

very, we're moving very it's and through So pleased how sold on. with

is we're selling Obviously, there's But weeks in business there's that categories whole now, product full about, weeks. the sub peak category. for talking X the year the peak through go outdoor business. the a X Why

you strike X% we away. exactly the don't pack does very and the so that the and it have to cleaner. iron decided inventory And that's what at hot, I year, am because is our make We're decision to of again, And have we do. down end it happy with while to

Brian Nagel

my release you And Okay. little the the second just look question, inventory But today, it's we a bit discussed. going at and have picture. issue maybe to bigger we be

is the you've extent, rather which then force. labor that your rightsizing, significant. obviously we've have also And here, issue been discussing some You to shrink

lot So happening QX. in a here there's

still -- potential very different So given DICK'S, of upbeat and that the DICK'S taking about business? get But nearer-term the model. -- is the the a underlying you your for health you this you're perspective a or have everything question I DICK'S are on different outlook the and I do we're longer-term have for in comments, learning today,

Lauren Hobart

No, we point margin. EBT doubling I to are Absolutely not. not. Absolutely would our

are sales pre-pandemic. Our XX% they higher were than

Our was. EPS is Xx it what

We cleaned some a we up have shrink issue, inventory. outdoor and

We are completely of long our confident short term and business. in future the term

Operator

from comes the Lejuez question Citi. Paul next of from Your line

Paul Lejuez

How there House much pickup. or move the the the to July in the was -- stores Sport comp related addition And XQ? of all that, of of a of the opening you said

I think significantly. it you said picked up

it how So as did a much specifically July? driver act of

comp and July were up you talking much every promotions the very How quickly. change. was up you're you significantly. said also, you that through outdoor And And said really just drive positive month, I comps? picked about moving think did July but X only

having little than your assumptions thought And then you So of understand sales bit count? less result not did that any inventory I half adjust second as inventory from a a just of want to you that better.

Lauren Hobart

it's we several just to of note we're not had to stores. the Sport, I exactly House Paul. get Thanks, impact in important on closed while going into point want to that really out July, overall,

these the in it drain stores on was to quarter, And a note. that's so net-net, in despite did and July, how important comps great

cities. a really tale of So X

closed that openings. exactly Navdeep great did we turn we other them the We open so have is could it what to them fanfare, grand I'll for with great with which questions.

Navdeep Gupta

Yes.

our have these we And QX comp last July, saw of higher. had of the July. would not Lauren the literally said, we and weeks the opened In been stores terms impact grand in acceleration, like in in closed these few stores,

overall and the very in in impact actually, quite So QX is July, frankly, small.

are And are us is stores the we for opportunity and seeing. the that this that have the back what about outlook half opened that that acceleration about grand of excited we excitement the these we have what the And that's gives year. now we see

would I less inventory terms the to was line the where with pretty of In actually of assumptions in we did wanted inventory, no, any end with the quarter. The say sales at the clean. adjust is be we X%

season in us. is right as that actually for actions to in So upon as to we the took innovation bring bring the product decisive the the us positioned and that holiday be back-to-school able well QX in season well the

Paul Lejuez

inventory do less have Right. have a you you thought, previously issue Because anticipated? than to shrink had sell you you bigger than

Navdeep Gupta

experience. assortment not product stores. availability you And the then have to Well, make but you're and you're shrink that right customer to the buying is our sure within able the unfortunate, the impacting be

Operator

of question Baker Your the Mike Davidson. next comes from from line D.A.

Michael Baker

in Can I try the the to clarify change guidance. margin

the factors are year because leading back because as XXX EBT the that What's same because markdowns same? think markdowns down sales just the the a the margin linger the the it rest of little Is took it's about shrink. lower is that the as said to it? the is I Are bit. of and that for you points. second -- guidance half well of of is the expected I of combination quarter those in going are XX think higher basis Navdeep said that's you the to SG&A the

Navdeep Gupta

results right. in The with expectations is from Mike, our back coming change as discussed Yes. actions besides that we're here margin flowing you're the we shrink merchandise through half, in moderated keeping well as in QX just the -- we the QX. line our

now. bring growth the and bringing the that ability and the we we see make want of to fresh marketplace just to us in keeping exciting innovation are available that are are some sure wanting that down, We our positioning are and to opportunities brands the make we our including in to are coming -- that sure inventory vibrant

Michael Baker

higher are than were structurally The idea whole And be will thought. still they your guidance, picture Okay. based pre-pandemic. question. margins Bigger they some That that than maybe is so less people helps. the just have here on

of otherwise that to issue, much shrink that the in longer-term are question is The than just the margins impact does inventories you This margin? mean How that second prior quarter? to less going this. thought doing physical longer these would term be your have

Navdeep Gupta

say Yes. a Goods Sporting what is Like the like answer not we in yes we and challenge. able are shrink based retail foreshadow the this would on see look future. a just This said, challenge. DICK'S I is to would is now, Lauren can't what collective

So of what community of -- community large for out would can this term, us. at we remain the now, this the quite will collective and I resolve the if near don't push we frankly, risk But will for anticipate know with retail do be.

Lauren Hobart

absolutely right our Yes. out, and are That that margins you said, you're than point pre-pandemic. higher structurally

place And not if And shrink that higher take improved does a does they where right, than structurally so we they this change. slightly, story down overall are pre-pandemic. you're significantly were operating are in

Michael Baker

baselining. you'd And last talked it's the year, always baseline. be margin about So the supposed to

EBT Now other clearly issue the XX.X% this I the the you Is think guess last year is things. because this? that's shrink year, do I the margin the not and baseline can new ask baseline? of

Lauren Hobart

So go ahead, Navdeep.

Navdeep Gupta

will actually for believe a if XXXX. We higher full absolutely absolutely. the our at margin year, No, even total total than look Yes. margins you be

with of this So will our higher. headwind shrink, even total margins be

that are to We and expecting into growth our SG&A next the SG&A we moderate called is year. a investment, planned out

the expectations the long-term basis. sales both and in profitability confident absolutely on yes, So

Operator

next of Your Justin Baird. comes from the question Kleber line from

Justin Kleber

rate. X headwind shrink and you the sits shrink, basis Curious pre-pandemic point XX mentioned your versus 'XX. clarifications. On margin where Just that versus gross

does I Navdeep, just in the last that but charge XXX the year's basis to assume exclude exclude across secondly, then deleverage XQ Stream? that Field does half, of points it And second on SG&A onetime -- related &

Navdeep Gupta

baseline of the I'll the had our last I level elevated year the versus the start Justin, would pre-pandemic did inventory It closer level, when The with pre-pandemic of shrink. late physical -- to significantly So is say kind stores. shrink. we we the

used XX we the is of a So to pretty kind acceleration from original levels at. points significant basis be the this

we SG&A not Field In have onetime associated deleverage, terms charge did of & with the Stream. a

this guided an this this can for and half year. SG&A The be you. is of with deleverage I clarify take points like have back basis offline So maybe over you we and XXX the to apples-to-apples basis on slightly

Operator

from of line Feldman Advisory from comes next Group. Telsey the Your question Joe

Joseph Feldman

in your market and footwear gains, and related much ask you're versus I footwear. I changes that wanted assortment changes How on share to is your seeing possible, assuming your stores you've to I'm the distribution of in on strength side? guess, made the overall category the

Lauren Hobart

the the footwear level related -- category to shrink get by guiding change but... our Well, didn't into we is not the in Yes. in

Joseph Feldman

No, about no, I no. the strength was category. the talking of

Lauren Hobart

strength. you. I'm misunderstood the sorry, Oh, I

Joseph Feldman

was much changes to -- How yes. versus related the your industry just and

Lauren Hobart

it. Got

Okay. Yes. you. Thank

in brands, full-service the have fact growth better we footwear to we ever is that fact importantly, changes access we that than footwear have very So are meeting those definitely premium the but the needs related and that our with and consumer footwear, our more in is to our interested the before. decks assortment consumer

So it's of that. overall us all of experience, assortment a changes, combination distribution for changes,

Joseph Feldman

where But described are it. Got mean that as And a back should in levels times. also in-stock they then it's just few to very broadly inventory clean I position be, your -- a know you're speaking? the you've question again. does

how inventory the year? of think end down year about growth back last do the think level with should second comes we year-over-year? for the about should in guess, it back Or will the And I little to of you Or inventory a half? Like half? we rate, bit it think how kind

Navdeep Gupta

as Yes. the well. if top to will the would with guide down know that both back-to-school expectations higher actually I with look continue of terms if the inventory footage we to basis, it happy on for season we I I on we a would on want in slightly I very our basis results a say don't necessarily square of year. say -- fact is finished for season. you depend currently are full the the line year-over-year all positioned results X% the the per at and -- inventory I'm that holiday where it. happy But

Lauren Hobart

start partly the strength stock that's and And quite levels us are in Yes. with good, what's made July. such season back-to-school

Operator

Chuck Our Grom Gordon final comes Haskett. question of line from from the

Charles Grom

quick one one me. for Just

which X-year much, On basis, the should half that multiyear, quarter. your I on healthy. in are August we with a back-to-school the they're the tie third in of is similar. the about phasing pretty the of comparisons how strong, But back presume also being a the in On relatively harder think much mean And about that in commentary year? comps I'm guide, would July to trying

Navdeep Gupta

know would don't if comps, if [indiscernible] a we give I both collective you And as Chuck, they I'll valuable. are in Yes. about season about holiday QX our I look we season. basis, pretty But as details the are optimistic our QX, back-to-school that. at were further any and on equally

half sales the back overall So very expectations. excited about

Operator

go Hobart, CEO, Lauren final with and ahead President remarks. please

Lauren Hobart

in everybody, DICK'S your Well, Goods. interest for thank you, Sporting

seeing all next at to the look forward you. quarter call. will We Thank you

Operator

participation, today's may you you disconnect. for concludes conference Thank now this And call. and your

DICK'S Sporting Goods (DKS) 22 Aug 232024 Q2 Earnings call transcript