Dick's Sporting Goods Sees Golf Turnaround in 2015 -- Update

By Sara Germano And Tess Stynes 

After a difficult year, Dick's Sporting Goods Inc. said Tuesday it expects its golf business to turn around in 2015.

Dick's executives said they expect the golf business to hit bottom during the fourth quarter--winter is traditionally a slow period for the category--before returning to profitability next year.

The sporting-goods retailer's Golf Galaxy division has been hurt by weak demand, leading Dick's to cut hundreds of jobs in the division earlier this year. Comparative same-store sales at Golf Galaxy locations dropped 8.9% for the period ended Nov. 1, while namesake stores posted growth of 1.7%.

Still, Chief Executive Edward Stack reiterated that the specialty chain, acquired by Dick's in 2007, is profitable despite negative comparable sales.

"We have been very clear about this, we are not exiting the golf business, we are not exiting the Golf Galaxy business," he said.

Already, some golf-equipment vendors are hoping for a turnaround. TaylorMade, a golf division of Germany-based Adidas AG, for the first time unveiled its entire 2015 collection of clubs at an event in New York last week. By unveiling its lineup all at once, TaylorMade said it would help better gauge future demand, which is important after both golf retailers and manufacturers were stuck with excess inventory this year.

Dick's said it was "cautiously optimistic" about new products it was receiving from golf manufacturers and called out new Titleist 915 drivers as having promising pre-sale orders.

The Pittsburgh-based retailer's earnings fell 1.5% to $49.2 million for the period compared with a year earlier. Revenue grew 9% to $1.53 billion.

Dick's, which had announced a shift to allocate more store space to growing categories like women's and youth athletic apparel, said it took approximately 1,000 square feet of space per single-level store away from golf merchandise earlier this year. Some space also was taken from fitness and bike merchandise sections, executives said.

That bet on women's and youth athletic apparel has begun to pay off, with sales increasing in the double-digits for two consecutive quarters, the company said.

Mr. Stack said Dick's hunting business, weakened by a decline in sales of both guns and ammunition, is "not rebounding as quickly as we had anticipated," though they expect sales to be flat next quarter as comparisons begin to ease from a record hunting sales surge in 2013.

Gross margin fell to 29.6% from 30.3%, as overhead costs rose 7.2%. Dick's said it expects fourth-quarter margins to face pressure from an expected promotional holiday period as well as higher shipping costs related to its e-commerce business.

Dick's raised the lower end of its fiscal-year earnings estimate by a 5 cents a share and said it now expects a profit of $2.75 to $2.85 a share for the year. But the company also trimmed the upper end of its forecast for same-store sales growth by a percentage point and now expects a rise of 1% to 2%.

Write to Sara Germano at [e-mail] and Tess Stynes at [e-mail]

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