Yahoo Finance Gun Restrictions Don't Dampen Dick's Sporting Goods, Inc. (DKS) Stock
Dick's Sporting Goods Inc. (NYSE: DKS) stock rocketed higher by nearly 25 percent on Wednesday after the company's first-quarter earnings report revealed Dick's recently-imposed new gun restrictions didn't impact sales as much as feared. Analysts still see a challenging environment for Dick's in the quarters ahead, but things may not be as bad as they seemed.
Dick's reported first-quarter earnings per share of 59 cents on revenue of $1.91 billion. Both numbers topped consensus analyst expectations of 45 cents and $1.88 billion, respectively. Revenue was up 4.6 percent from a year ago.
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Investors breathed a sigh of relief at Dick's revenue growth after the company announced in February it would no longer sell assault-style rifles in response to the deadly school shooting in Parkland, Florida.
Dick's same-store sales declined 2.5 percent in the first quarter. Analysts had expected just a 1.4 percent drop. Same-store sales numbers may have been negatively impacted by the new gun sale restrictions, but the company said bad weather also delayed the beginning of outdoor sports and activity season this year.
"Our strong first quarter earnings reflect improved execution against our merchandising strategy, which resulted in higher merchandise margins," CEO Edward Stack says in a statement. "Product newness, strength in our private brands and a more refined assortment led to a much healthier business, with fewer promotions and cleaner inventory throughout the quarter."
Looking ahead, Dick's raised its full-year EPS guidance from a previous range of between $2.80 and $3 to a new range of between $2.92 and $3.12.
Part of Wednesday's big move could be buying volume from short sellers closing their positions. Short interest in DKS stock is up 14.2 percent in the past three months. According to FactSet, nearly 15 percent of the company's public float had been sold short prior to the earnings report.
CFRA analyst Victor Ahluwalia says Dick's has an uphill climb in the long term.
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"We expect the company to face difficulty in growing sales comps in [fiscal 2019] amid excessive discounting in the physical sporting goods retail environment," Ahluwalia says. "We note that e-commerce for DKS is currently margin-dilutive."
CFRA has a "hold" rating and $34 price target for DKS stock.
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