Dick's Sporting Goods Inc

Morning and welcome to the Dix Sporting Goods Second Quarter Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Nate Gilch, Senior Director of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us to discuss our second quarter of 2020 results. On today's call will be Ed Stack, our Chairman and Chief Executive Officer, Lauren Hobart, our President, and Lee Bulitsky, our Chief Financial Officer. A playback of today's call will be archived in our Investor Relations website, located at investors.dix.com for approximately 12 months. As a reminder, we will be making forward-looking statements which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. Any such statements should be considered in conjunction with cautionary statements in our earnings release and risk factor discussions in our filings with the SEC, including our last annual report on the Form 10-K and cautionary statements made during recall. We assume no obligation to update any of these forward-looking statements or information. please refer to our Investor Relations website to find the reconciliation of any non-GAAP financial measures referenced in today's call. And finally, a couple of admin items. First, a note on our same-store sales reporting practices. Our consolidated same-store sales calculation includes stores that were temporarily closed as a result of COVID-19. The method of calculating comp sales varies across the retail industry, including the treatment of temporary store closures as a result of COVID-19. Accordingly, our method of calculation may not be the same as other retailers. Furthermore, recall during our Q4 call, we announced our intent to move away from providing e-commerce sales growth and e-commerce penetration metrics beginning in Q1. Given the circumstances surrounding our store closures, we provided these metrics last quarter and are continuing to provide these metrics for Q2. We will revisit this decision for the third quarter. And lastly, for your future scheduling purposes, we are tentatively planning to publish our third quarter 2020 earnings release before the market opens on November 24th, 2020, with our subsequent earnings call at 10 a.m. Eastern time. And with that, I will now turn the call over to Adam.

Thanks, Nate. Good morning, everyone. As announced earlier this morning, we had an exceptionally strong second quarter in which we delivered our highest ever quarterly sales and earnings. We achieved record consolidated sales of $2.71 billion, Consolidated same-store sales increased 20.7%, even with approximately 15% of our stores closed on average during the period. This followed our 3.2% comp increase last year. Our second quarter non-GAAP earnings per diluted share of $3.21 represented a 155% increase over last year and was also an all-time record. Before we get into the details, I want to take a moment to thank our teammates, whose hard work and dedication to our company and to the athletes we serve made these significant results possible. Concurrent with our strong business performance, I'm pleased to report that during the quarter, we returned our teammates from furlough, restored previously reduced salaries, and repaid teammates for their lost wages. Now back to our Q2 results. Our 20.7% comp sales increase was driven by the continued success of our industry-leading omnichannel experience. Our e-commerce sales were tremendous, increasing nearly 200%. More than 75% of our online sales were fulfilled by our stores, which serve as localized distribution points and are the hub of our omnichannel experience. By the end of June, we reopened 100% of our stores to the public, while continuing to prioritize the health and safety of the teammates and the athletes we serve. We saw increases in both average ticket and transactions, as well as growth across each of our three primary categories of hard lines, apparel, and footwear. Lastly, our private brands continue to be a significant source of strength and growth, outperforming the company average by approximately 500 basis points. This broad-based performance is a testament to the flexibility and dedication of our teammates who reacted quickly to meet favorable shifts in consumer demand throughout the quarter. During this pandemic, the importance of health and fitness has accelerated. Participation in socially distant outdoor activities has increased, and there has been a greater shift toward athletic apparel and active lifestyle products with people spending more time working and exercising at home. The majority of our assortment sits squarely at the center of these trends. Over the past few months, the partnerships demonstrated by our strategic vendors has been unparalleled. During Q2, we leveraged these strong vendor relationships and our private brand supply chain to aggressively chase product in the most in-demand categories. Certain categories in the marketplace were supply constrained, therefore less promotional, and our margin rates increased by 325 basis points during the quarter. This merchandise margin expansion drove significant improvement in gross margin, which increased 456 basis points. Now let me touch on our third quarter performance. The favorable shifts in consumer demand that drove our strong comps during Q2 have continued into Q3, partially offset by softness in the key back-to-school categories. With the significant part of back-to-school already behind us, through the first three weeks of Q3, our consolidated camp sales have increased 11% with continued margin rate expansion. As I look at our business, we're in a great lane right now. We have reopened our stores and remain committed to the procedures to protect our teammates and athletes' health and safety. We have enhanced our e-commerce offering with curbside pickup and faster shipping. Our product assortment is well-tailored to the recent consumer trends, supported by strong relationships with our key brands. And importantly, we're in a strong financial position, having paid our line of credit to zero and have approximately $1 billion in cash. We're really in a great position. In summary, we're extremely pleased with our Q2 results and look forward to the remainder of the year. I'd now like to turn the call over to Lauren.