On Dec 1, 2015, Zacks Investment Research downgraded leading full-line sporting goods retailer, DICK'S Sporting Goods Inc. DKS to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
The primary reason for the downgrade is the negative trend seen in DICK'S Sporting’s earnings estimate revisions after the company reported dismal third-quarter fiscal 2015 results on Nov 17.
The Zacks Consensus Estimate declined 16.8% to $1.19 for the fourth quarter of fiscal 2015, 8.2% to $2.93 for fiscal 2015 and 6.2% to $3.32 for fiscal 2016 over the past 30 days. Further, the company’s shares have dropped 4.4% since its third-quarter earnings announcement.
DICK'S Sporting’s quarterly adjusted earnings of 45 cents per share fell short of the Zacks Consensus Estimate by a penny, but jumped 9.8% year over year. Further, the bottom line only managed to meet the lower end of the company’s guidance range of 45–48 cents per share.
Though net sales advanced 7.6% to $1,642.3 million in the reported quarter, the figure missed the Zacks Consensus Estimate of $1,667 million.
Moreover, comparable store sales (comps) edged up only 0.4% in the quarter compared with management’s expectations of 1%–3% growth. This was attributable to sluggish sales trends witnessed toward the end of the quarter, which resulted from warm weather.
Further, given the weaker-than-expected third-quarter results and a slow start to the final quarter due to unfavorable weather, management lowered its guidance for fiscal 2015.
For fiscal 2015, the company now expects earnings to range from $2.85–$3.00 per share, compared with $3.12–$3.21 per share expected earlier. The company now envisions comps for fiscal 2015 to range from flat to 1% increase, down from the prior projection of 1%–3% comps growth.
Together, these factors raise concerns about DICK’s Sporting’s future results.
Stocks to Consider
Some better-ranked stocks in the same industry include Regis Corp. RGS, CST Brands, Inc. CST and ULTA Salon, Cosmetics & Fragrance, Inc. ULTA. While Regis Corp. sports a Zacks Rank #1 (Strong Buy), both CST Brands and ULTA Salon hold a Zacks Rank #2 (Buy).
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