Dick's Sporting Goods Inc

Q4 2022 Earnings Conference Call


spk_0: hello everyone and welcome to the dick's sporting goods que for twenty twenty two earnings conference call my name is emily and i'll be coordinating yokels day after the presentation you will have the opportunity to ask any questions for printing stop followed by one on your telephone keypad and we ask that you please limit yourself to one question and won't follow up question only oh now time the call over to our host make jokes senior director investor relations please go ahead
spk_1: the money one event you for joining us to discuss or fourth or the year twenty twenty two results ontario all to be learned about a president shoot executive officer and that he picked up a chief financial officers the playback of today called will be elkhart our does relations website located at investors tactics data for approximately twelve months as a reminder you'll be making are looking statements which are subject to various risks and uncertainties because our actual results to differ materially from the status any such statements to be considered in conjunction with cautionary statements now earnings release and respect to discussions are filings with the fcc including our last annual report on formed nk and cautionary statements made during the school we assume no obligation to update and he was overlooked and statements or information please refer to are better relations website to find the reconciliation or non gap financial measures reference in today's call and finally your future steadily purposes your tentatively planning to publish or first quarter twenty twenty three earnings results on may twenty third twenty twenty three with that outer the all over to learn
spk_2: thank you need and good morning everyone we are very pleased with our twenty twenty two results which demonstrate the continued success and strength arpanet as we realize the benefits of our long term transformation to focus strategies and strong execution our athletes are passionate about healthy active lifestyles and they continue to prioritize sport and rely on dick's sporting goods to meet their needs importantly we continue to gain market share at an accelerating pace with considerable growth and our largest and most important categories or fourth quarter with a strong and into another strong year if queue for we achieved record or early sales of three point six billion dollars an hour comps increased five point three percent this strong cop was on top of a fixed point six percent cop last year and nineteen point three percent cop and twenty twenty and a five point three percent cop and twenty nineteen and for this what what are we delivered non gaap fps have two dollars and ninety three thousand significantly ahead of any pre coated queue for in our history for the full year we achieve fails twelve point four billion dollars or non gaap abt margin with eleven point four percent and we delivered non gaap atheist of twelve dollars and force them to put this in context when you look at our twenty twenty two performance vs twenty nineteen our sales increased forty one percent or three point six billion dollars or merchandise margin increased more than three hundred basis points or non gaap b t margin more than doubled and are non gaap dps is more than three times higher than twenty nineteen are strong performance and financial strength decision as to increase the rate of investment in our business to fuel long term growth opportunities and also returned significant capital to shareholders the step change increase in our dividend that we announced today more than doubling or any life pay out to four dollars per share or a dollar on a quarterly basis clearly refer up reflects our strong conviction structurally higher sales and earnings profile of our business and are ongoing focus on delivering shareholder value with twenty twenty three marking our company seventy fifth anniversary this is an incredibly exciting time for dick's sporting goods our company was founded in nineteen forty a dick stuck with a dream and three hundred dollars from his grandmother's cookie jar under as leadership it's grown from a small bait and tackle shop to become the preeminent sporting goods retailer in the country i've had the honor of working alongside ad for over a decade and we will continue partnering to drive the business forward while while we will take the time to celebrate our heritage we believe it's just as important to use this milestone as an opportunity to look forward our future is extremely bright and we have great momentum as we write the next chapter in our growth story or twenty twenty two results provide a strong foundation upon which we will build and twenty twenty three and then the years ahead and twenty twenty three we will grow both are sailed and awning through positive comp a return to square footage growth and higher margin like margin we expect are comparable store sales to be in the range of flat a positive two percent we expect our earnings per diluted share to be in the range of twelve dollars and ninety cents to thirteen dollars and eighty cents which at the midpoint is up eleven percent versus twenty twenty two we will continue to create and define our future and as the largest us boarding that's retailer we are well positioned to extend our lead and continue gaining share in a fragmented one hundred and forty billion dollar industry i'd like to thank all of our teammates were delivering another strong year and for their passion aren't work and dedication to our business addicts it is are people who make us great and none of what we will have a cup what we would have accomplished none of what we have accomplice kids they would have been possible without are exceptional team on out on the call it enough deep to review our financial results outlook and capital allocation in more detail
spk_3: and good learn and good morning everyone
spk_2: let's begin with the brief review of are fully or twenty twenty two results consolidated sales increased zero point six percent to a record setting one point three seven billion and the comparable store sales decreased zero point five percent when compared to twenty nine teen sales increased forty one point three percent or three point six two billion demonstrating the sustainability of are structurally higher sales compared to be covered levels importantly if you look at the modest live that we have inserted an odd and matter deck you will see that approximately eighty percent of our growth was driven by sales and are proud to decry degrees or put their athletic apparel team sport and golf their be gained considerable marketshare these games
spk_3: the direct results are differentiated products and hansa others an elevated experience we provide to our athletes on an ongoing basis gross profit for the polio was four point two nine billion or thirty four point six five percent of net sales and decline three hundred and sixty eight basis points from last year
spk_2: however a gross profit increase five hundred and thirty one basis point or twenty nineteen on a non gaap basis as expected the euro would you decline was driven by merchandise majid rate decline of three hundred and three bases one when compared to twenty nineteen our merchandise margin great was up three hundred and eight basis points it's important to highlight that we maintain the majority of the merchandise margin expansion that we drop over the prior two years the also saw a significant leverage or three hundred and six basis points and occupancy costs due to the are structurally higher sales an ongoing basis as any expenses what to one seventy billion or twenty two point four five percent of net sales and deal average seventy eight basis points from last year as you earn a dollar increase hundred and twelve million primarily due to investments and hourly wage rates talent and technology to support a growth strategy this was partially offset by lord and cent of compensation expense when compared to twenty nineteen on a non gaap basis as jenny leveraged hundred and seventy eight basis point you to the significant sales and interest expense was ninety five point two million an increase of sixty eight point two million on or non gaap basis compared to the same period last year this increase was primarily due to fifty two point eight million of interest expense related to the one point five billion sooner note issue during due for a twenty twenty one the current year also included twenty three point three million of inducement charges that was partially offset by cash into savings both related to our exchange of approximately five hundred and sixteen million a principle of our convertible seen animals driven by are structurally higher sales expanded merchandise margin and operating efficiencies compared to peak ordered levels non gaap a bit was one point for one billion eleven point four three percent of net sales that compares to unknown got you beat you up four hundred and forty point five million or five point zero three percent of net sales and twenty nineteen an increase of close to a one billion dollars a six hundred and forty basis points as a percentage of net sales
spk_3: the additional supplies that we have included in an investor deck i like the few drivers are structurally higher to do today was is free called it these include significant leverage a fixed costs due to are structurally higher sales base a structurally hi of merchandise margin due to undifferentiated product assortment more granular pricing management and the merchandising max benefits
spk_2: the improved ecommerce profitability but is now in line with the total company a b t margin
spk_3: in total the delivered non gaap earnings per diluted share of twelve dollars and or sense this compares to a non gaap earnings per diluted share of fifteen dollar than seventy cents last year and is more than three times or twenty nineteen non gaap earnings per diluted share a five down outside three dollars and sixty nine cents
spk_4: now moving to ask you for those
spk_3: we're very pleased to report a consolidated sales increase a seven point three percent to three point six billion dollars
spk_2: this was the largest sales quarter in the history of deck sporting goods comparable store sales increased five point three percent on top of a six point six percent increase in the same period last year and nineteen point three percent increase in fuel for of twenty twenty and a five point three percent increase in to for a twenty nineteen or strong comps one driven by a seven point six percent increase and transactions partially offset by two point three percent decline in average ticket
spk_3: the do not portfolio a priority categories did very well driven by a differentiator assortment across footwear athletic apparel and team sports when compared to twenty nineteen sales increased thirty seven point nine percent or nine hundred and eighty eight point one million on an ongoing basis gross profit in the fourth quarter was one point one seven billion or thirty two three or four percent of net sales and decline five hundred and fourteen basis points was the last year however a gross profit increase three hundred and eighty four basis points or what you for appointee nineteen on or non gaap basis the year over year decline was driven by merchandise margin trading decline of six hundred and forty basis points and partially offset by law supply chain cost as planned during the holiday season be provided or athletes that a series of compelling item level deals additionally we continue to address targeted inventory over just due to the late arriving spring product
spk_2: as a result of these auctions or inventory inventories in great shape as we start when he twenty three we're taking a new receipts and could not be more excited about a spring assortment importantly when compared to twenty nineteen you for twenty two margin rate is two hundred and nine basis points higher driven by differentiated assortment combined with as sophisticated and discipline pricing strategy and a favorable product mix these odd the same key contributors to are structurally higher margins that we have been emphasizing on an ongoing basis as dna expenses what eight hundred and twenty three point seven million or twenty two point nine percent of net sales and leverage audio basis points compared to last year interest expense was eighteen million an increase of nine point two million on or non gaap basis compared to the same period last year this increase was primarily due to eleven point four million of interest expense related to the one point five billion in a note issued in january of fiscal twenty one driven by are structurally higher sales expanded merchandise mart you're not an operating efficiencies compared to record levels non gaap tbt was three hundred and fifty point five million on nine point seven four percent of net sales this compares to and non gaap bt of hundred and forty eight point six million or five points of one percent of net sales and twenty nineteen an increase of two hundred and one point nine million or four hundred a or basis points as a percentage of net sales
spk_3: in total be delivered non gaap earnings per diluted share of two dollars and ninety three sense that compares to a non gaap earnings per diluted share a three dollar than sixty four cents last year and represent the hundred and twenty two percent increase over twenty nineteen non gaap earnings but the chat a one dollar and thirty two cents as lawrence said the are very excited about the opportunity the head of us a tip the only in our core business that decks out as or as a result you plan to convert or seventeen existing field and stream stores
spk_2: the majority of which are part of decks field and stream almost or to decks also sport or large format deck stores and exit the field and stream brand be close to one of these stores during pool cue for and he planned to convert the remaining stores by twenty twenty four as a result in queue for be incurred pre tax charges totaling thirty point one million family utterly noncash impediments a field and stream store assets these charges along but certain either
spk_3: i'm related to a convertible seen out what included in our gaap earnings per diluted share of two dollars and sixty cents what's that about what additional details on this you can refer to a non gaap reconciliation table above press release that be issued this morning
spk_2: i'll look into a balance sheet the ended to bored with approximately one point nine billion of cash and cash equivalents that nobody wins and are one point six billion on secured credit facility order an inventory levels increase twenty three percent compared to you for up last year as a reminder you were chasing inventory last year amid industrywide supply chain disruptions therefore the more useful comparison is against when he nineteen compared to queue for up twenty nineteen or thirty eight percent increase in sales was well i heard about twenty nine as an increase in inventory
spk_3: i didn't venturi is healthy and opposition
spk_2: turning to i thought water complication net capital expenditures what eighty nine point eight million and be paid thirty nine point three million in quarterly evidence the also repurchase approximately six hundred and ten thousand shares of our stock or sixty six million at an average price of hundred and seven dollars and fifty three cents
spk_3: furthermore following the exchange approximately ninety five millions of the outstanding principle of our convertible seen and not became notice in february two the convertible know told us that the remaining fifty nine million will be redeemed and chairs or the told principal plus the accrued interest the expect these notes to be fully paid off by april eighteen now let me move to a twenty twenty three outlook which will be or fifty three be year coming up have two consecutive record years and twenty twenty and twenty twenty one or twenty twenty two to does provide a strong foundation upon which be was built in twenty twenty three and in the years ahead
spk_5: let's have you the details
spk_2: comparable store sales are expected to be in the range of lot to positive to percent the complex factor to be stronger in the first top you to improved inventory availability at the midpoint he became margin is expected to be approximately eleven point seven percent driven by increase in gross margins this includes than expected improvement and much and as margin
spk_6: and lowers the plight and cost
spk_2: q one gross margin is expected to meaningfully improve was as due for but be modestly down yet over here primarily due to lord merchandise margins partially offset by improving rate expenses yeah expect both gross margins and much and as margins the sequentially improve to the year as you an expensive are expected to deal average family due to investments to fund or growth strategy
spk_3: interest expense is expected to be approximately fifty five million which is down approximately forty million euro area year due to the inducement charges that and got to walk only twenty two as the repurchase a convertible debt and related interests savings in total we anticipate earnings per diluted share to be in the range of thousand dollar than ninety cents the thirteen dollars and eighty cents which includes approximately twenty cents coming from the fifty third week
spk_2: at the midpoint of this range u p s's up eleven percent was this twenty twenty two are five percent on a fifty to be comparable basis
spk_3: i'm learning guidance is based on approximately eighty eight million average diluted shares outstanding and an effective tax rate up approximately twenty two percent which is driven by a favorable rate embark on the vesting of imply equity a was in the first quarter i'll conclude that a brief discussion around capital allocation priorities investing in our business to drive profitable organic growth remains a top priority the also remain committed to return a significant capital to our shareholders to laptop quarterly dividend and to opportunistic share repurchases
spk_2: in fact over the past two years we have returned nearly two point four billion to shareholders which included approximately one point six billion dollars of chevy but others and seven hundred and sixty six million dollars of dividend all while continuing to invest in the profitable growth of our business
spk_3: they're appropriate the will pursue acquisitions to amplify road and add new capabilities are the future all of this is underpinned by a commitment to a healthy balance sheet and maintaining our investment great credit ratings
spk_2: for twenty twenty three or capital allocation plan includes capital expenditure or five hundred and fifty million to six hundred million
spk_3: we will make significant investments to grow our business and drive athlete engagement and as lawrence said get excited to return to growing our square footage dick howser sport will be the primary driver of the squad for footage group in twenty twenty three the will open nine new decks out the sport locations eight of which are existing decks and field and stream common store conversion along with one relocation
spk_2: we will also begin construction on more than handed you decks house of sport locations that an open throughout twenty twenty four
spk_3: and twenty twenty three we will grow the footprint on gog galaxy business to got galaxy performance center and convert temporarily value chain stores to permanent location in addition we will convert over additional hundred stores bring imports others what they're taking this elevated athlete experience to over seventy five percent or decks locations in terms of returning happy to shareholders to that the announcer considerable increase the not evidence of hundred and five person to an annualised a out of or dollars for share a one dollar on a quarterly basis
spk_2: this dividend increase is based on our confidence in are structurally higher sales and earnings profile and reflects a connection and our strategies and future growth trajectory
spk_3: in addition or twenty twenty three plan includes or expectation of three hundred million dollars of chevy by just op's the delusion the effect of which is included in our dps guidance
spk_2: however you will consider using our excess cash flow to opportunistically repurchase shared beyond the three hundred million dollars
spk_3: the thought on turn it back over to learn to be some of the key initiatives that propel are profitable long term growth
spk_2: thanks of deep addicts we've been reinventing sports for seventy five years over the time we've grown significantly to become the largest army channel sports retailer in the us a one hundred and forty billion dollar industry and the number one premium golf and team or it's destination in the world we provide an unrivalled athletic apparel and footwear experience to our athletes and we are the most important us retail partner to many of the world leading sports brands since twenty seventeen we have transformed virtually every aspect of our business and of added we point six billion dollars in sales over the last three years we are well positioned to extend our leadership and a large fragmented industry and i've never been more excited about the future of decks within merchandising we built an industry leading assortment known for differentiated and entree product our ability to showcase an entire brand portfolio it highly valued by our strategic partners and our relationships with key browns remained stronger than ever we're also developing relationships with new and emerging browns and that the same time have created powerhouse vertical brands that collectively represent the second largest brand in our company in our stores we've invested in our t experience and training to heighten our team's ability to provide an enhanced level of service to our athletes all are continuing to make decks of fun and rewarding place to work we believe strongly that highly engaged teammates are critical to providing a great experience for athletes and our culture is one of our key competitive advantages and twenty twenty two we were name one a fortune best workplaces in retail and just last month we were named one of america's best large employers by forbes along with enhanced servants we leverage distinct in store elements howard by technology to provide an unparalleled athlete experience experience or in store elements such as he track batting cages fat man golf simulator and premium full service but where jack inspire confidence in our athletes and reinforce the power of our expertise the strategies and combination with our personalized marketing engine and brand building efforts are working we added seven million new athletes during the year and reached record highs and are active athlete database and you for our new athlete continue to skew younger and more female representing a great opportunity for future growth importantly our gold athletes are most valuable cohort it a record high of over seven million people equating to nearly thirty percent are active scorecard members we're seeing very strong retention with our gold athletes and they continue to drive meaningful sales growth representing well over forty percent of total fail we bought the launched new concepts such as public land and golf healthy performance center to better serve and if outdoor athletes and golfers and recently and now that we will be acquiring leading outdoor retailer moose jaw a rear affirmation of our commitment to growth in the multibillion dollar outdoor category however there's no greater example of our commitment to innovation within the athlete experience and decks how to sport it felt the for is redefining sports it's retail it's an experiential destination that lived inspired by ed as he challenges us to create the concept that it built across the street from a dick sporting goods store would put that store out of business it's this way of thinking that us to continue to innovate and create market leading disruption how could sport is an experience that fosters deep community involvement goes well beyond traditional retail and had become a destination where athlete can feel their passion since launching help the sport and twenty twenty one our initial relocation have exceeded our expectations driving strong engagement with our brand partners while delivering much higher total sales and profits as well as much higher sales and profit on a per square foot basis out for it will be a significant part of our future growth story over the next two years we plan to open around twenty this all locations including downtown but then and are to hometown of pittsburgh and binghamton new york and over the next five years we could have as many as seventy five to one hundred houses or across the country we are also continuing to pulled he learns into our or dicks fleet and fat later this year where they need to open the next generation fifty thousand square foot extort in south bend indiana which will reflect the house britain will help us sport learning or athlete
spk_1: for those who haven't yet had the chance to visit a house sport in person which we highly recommend we've added a short video to our investor relations website to help bring the experience to life
spk_2: a cropper ecosystem we will continue to improve our omni channel experience for decades we've focused on making meaningful investments and technology with the long game and mind our athletes desire touch point have a fall significantly over the years and we think about how to best need their needs to a personalized experience enable by technology and arguably the best dataset in sports we continue to see growth and are omni channel athletes who spend more with us and shot more frequently than single channel athletes works cited by the results these investments are generating and believe our capabilities are distinctive in our industry and provide a long term competitive advantage as we and our leadership position and news or a game changer played a pivotal role game changer in the premier scoring and it's it's mobile app for youth sports and is a leader in the multibillion dollar sports technology market as a recurring revenue software the service bit company aims and your has delivered by the arcade guard revenue keg or of thirty five percent while also being profitable a function of it's business model which deliver some of the best unit economic thing consumer technology with game changer we are connecting you athlete to their teammates oce it and family scorekeeping and live streaming all on one either these mobile app over the past two years or game changer team trent wanted user experience to incorporate video streaming highlights and eight new sports all delivered to athletes and their families on their phones and tablets anywhere they are every year nearly six million games are covered on game changer an athlete and their families engage with the platform for over two hundred and eighty million hours to put this in perspective more games are covered in a single spring month on game changer and i've been played in the entire history of major league baseball we were honored to see game changer name to fast company list of the world's most innovative companies for twenty twenty three and also be named other finalists for the sports business journal tech awards that will be held later today looking ahead we will continue innovating within youth or technology and strengthening this important connection with athlete lastly we have big plans for are branded twenty twenty three over the years our brand marketing has inspired athlete to participate in sports and our sports matter program have made it possible for more youth athletes to bury and the unique and life altering benefits but you sports it's provide we believe it's time to blend be inspiration and aspiration that always been a part of our brand marketing efforts with the raw power and emotion of our sports matter initiative to make that happen we're really pleased to share and we will be relaunching our brand during the upcoming and feasible a tournament with a camp it with a campaign focused on the power of sports to change live we are so proud of the great work or team has done and if you're watching the tournament men or women i promise you will not it in addition we're combining that with a commitment from our foundation of more than five million dollars to fund seventy five youth sports organizations each with a seventy five thousand dollar grant to keep kids playing in closing we want to reiterate that are strong que for and twenty twenty two performance is the direct result of our strategies our agility and meeting the all the needs of our athletes and are relentless drive to innovate all supported by outstanding execution from our team since nineteen forty eight didn't have believed in a power sports change lives and we are committed to bringing this belief to live through our athlete experience or an engagement differentiated products and most importantly are people either the pillars of the new foundation of growth for our business and we believe that no one is better position to lead in the marketplace before concluding ebay to thank all of our teammates across our stores distribution centers and customer support center for their outstanding efforts and continued commitment to our business this concludes are prepared remarks thank you for your interest and dick's sporting goods operator you may now open the line for question
spk_0: thinking we will now begin the question and answer session please with stable questions by pressing start by one on your telephone keypads we'd like to remind or participants to please limit yourself to one question and one follow up will post momentarily to compile q and a roster a ask question say comes from the line of simeon goodman with morgan stanley simeon please go ahead
spk_1: are you going on in my first question it on may twenty three march margin guidance and be up to tell us with source that mic the lottery or and for markups much promo and then it with twenty two level of march margin is that a baseline that your underwriting ann arbor we walk that
spk_2: i me and yes i'm our article twenty two level of arts margin is indeed a new baseline we are planning to grow armored margin are going forward alternate some deep to answer the breakdown of of where we think that will come from next year
spk_3: the money the men are actually i did later they're not guidance we expect the profitability of the business to improve next year driven by both growth and almost a nice margin and gross margin on and as we talked about it be i'm very optimistic about continuing to grow or top line and profitability on the long term basis as well
spk_7: okay i guess the follow up switch to fail
spk_1: no one of the fact there are a lot of factors have driven the better still perform and i think some of the narrow distribution but you don't go up reflection of how will you done that because getting he product id ah has helped what's your line of sight that the structure whole that he needs to be played with me for any chronic and that the marketplace doesn't he bought it to be more widespread
spk_2: thanks man at the yeah you're absolutely right that our product mix and are assortment is a key driver of our growth and it's been a driver of our growth and our transformation it will be going forward
spk_1: we believe there has been there has been a structural change in our business over the last five years first always been a shift in consumer behavior where they are prioritizing athletic endeavors or it's health and actually light help health and eat healthy excuse me an active lifestyle
spk_2: and they're prioritizing did in order to meet those needs but it as you mentioned we've also completely revamped our athlete experience so we've got up army channel capabilities that people are leaning into we've got a great service model that we continue to focus on and we brought in experiences such as he tracks and track man into our into our overall experience with that people can really feel confident in the goods that they're buying and then lastly our ability to showcase a brand from head to toe and to really put a brand forward and the best life possible has become a big advantage so are our distribution are access to product the fact that we now have products all the way from opening price point up to what the enthusiast will would desire to
spk_1: meet their needs on the field or is is absolutely part of our ongoing strategy we're very confident and in that growth
spk_0: our next question comes from adrian newey with barclays adrian please go ahead
spk_8: great thank you for and a few they thank you very much and on nathan to have to a great year lauren i wanted so good sort of on the maybe longer term horizon other new concept in the store growth on it sounds like your net now back into the acceleration of square footage and the store that are being open are much larger in size a thing i can you talk about kind of the failed productivity of they thought heard of either contribution how we could think about that are impacting the for the consolidated for wall and the my follow got the there's also on that i'm in that kind of top line and by from then on what the longer term credit easy to market look like maybe on a three year five your horizon if you well thank you very much
spk_2: thanks adrian you're absolutely correct that we are leaning into news to our growth and specifically you to the experience we've had with houses or the fact that these three experiences that we built as really concept stores have become scale ball highly profitable more sell more pro op ed both on a total bases as well as a square footage basis we are we are leaning into that growth and so we will have nine that are being built this year up from remodel and one me location as well as ten in the pipeline word or twenty twenty four at that are were already gone start construction this year we're very very bullish on houses
spk_1: sport and what this can do for our athlete experience in our business
spk_3: now been a on course the not i think that maybe it's too late to answer that football like be upset twenty twenty two the new baseline foundation upon which will grow on sales than earnings over the long term as adults alarm noted on you know as we look to the future be still believe that it's tremendous amount of share gain opportunity he bought us beyond the largest sporting goods on company and right now our share in one hundred and forty billion dollar industry is just a bus to as with look to the future that is be a very optimistic about the the opportunity that we have to continue to provide differentiator an assortment and others to outlive and continue the game share i'm i'm not willing
spk_2: to get to they are are a long term rubric but here's the way to think about it that we believe he can continue to drive positive comes to continue to grow our square footage and continue to expand their profitability into the future and be a very optimistic as you can be based on the guidance that we have provided that are twenty twenty three
spk_0: on next question comes from robbie i'm the bank of america
spk_9: robbie please go ahead
spk_1: a morning guys yeah i think to question system i just want to i think this is of obvious but i be cadence the cops in twenty twenty three could you give a little more color you nor they sort of strongest in the first quarter and then feed through the year and in a busy year to two i figured you implying that we should we should be
spk_10: you're doing negative same store sales for the back half of your i just want to a confirmed that and then the other question says some somewhat related just the average transaction size was i think you i sit down in the fourth quarter think to two point three percent you that doesn't you guys don't have negative average transaction size often is it can you give us colorado is it
spk_1: you know week large ticket or you know like a price increases in and then also related to that the traffic was you obviously offset that was that stored more store traffic were you know more online transactions any any color on these are things around same store sales would be great
spk_2: thanks i'll be i'll start off the cadence of comps and pit bull twenty three you're correct that we will expect we do expect comes to be stronger in the first half and the second half the as you think back to last year at this time que wanting you we had significant him into a challenge at that the whole reason why the
spk_1: i'm into a came in late of the year went on a minute with difficult to put together a really fantastic athlete experience at this point our spring product is in i would actually encourage you to go to a death's store and and to take a look we have a fantastic assortment and so do to go to the comes from last year and that conference we have in our business we do expect comps can be very
spk_11: strong in the first half
spk_2: as you look towards the back half the year which just being cautious were up against the six percent calm and we wonder it reflected the cops will moderate alternate i will turn it over to and abductor to break down from your further president but i do want to start by saying your question about transaction five i think you have to start with the fact that transactions were up that i'm point six percent so while there was a flight to cop decline in average ticket and we don't break out whether that you have a you are u p t we did find that there were more aptly to with more athletes in our database they shopped more frequently and in total they spent more so delivering a five point three percent comp with that level of the transaction sides were really really pleased with that the money robbie i think the loot lauren code that and with really well maybe another way to think about us as if you look at all the same time action and ticket voices point was is twenty nine gain it's all much balance performance so that maybe the another way to think about that and then you know as you loved the guidance overall we remaining very optimistic and
spk_3: confident about the guidance that we have provided here for twenty twenty three
spk_0: on next question comes from picnic same with goldman sachs take please go ahead
spk_12: ah good morning thanks for taking your question we wondered if we could go back to our merchandise margin than the gross margin died in terms of what is driving me improvement that you expect regarding than twenty three is that the cover of up in assets for the earth it
spk_8: venturi ah issues than promotions and twenty two that you expect things to be a little bit better at there's something changing with the vendor relationship or the march markets be a little bit better and really bad drill down there will be really helpful
spk_2: the morning take this is not be on so we give to our color commentary it on be gross margin expectation was that be we expect that be much margin and gross margins will improve into twenty twenty three two drivers much margin as well as the lower rate expense that we will start to see the benefit into twenty twenty three as well in terms of a little bit more cadence around goes on too much margin about the as you can imagine been in the in the inventory positions and to one vote for us as well as beams or are in the industry was pretty lean and was pretty constraints well as we are will i thing that we expect some level of normalization of the pricing in the first half and that's what we gave in our kind of a cadence for the much margin expansion and as the think about the back half the also expect afraid expenses discharges five the benefit of the inventory starts to turn because we capitalized on expenses so that's the other factor that we're contemplating
spk_13: in not guidance
spk_1: kate i just wanna pick up one of the art of your question you you asked whether were lapping severe inventories you or promotion i wanna be very clear that we while we managed to a lot of inventory disruptions last year it was no return to an overall promotional environment we clear to him into a to our value chain stores are going going
spk_2: on a chain and we were able to keep the deck store really to out looking great for holiday with an assortment of full priced merchandise than that really was was to drop the entire yourself promotions i just want to a pickup truck that story that comes up all the time promotion or not a key factor in our your last year there was priced item discounts especially on
spk_1: lumps but it was an elite hostile environment for us
spk_0: i'm next question comes from chris how this with jp morgan chris please go ahead
spk_14: banks and good morning
spk_1: i have a couple toppling related questions as well so you know first as you think about
spk_15: how you're planning the business
spk_14: the are you reference to a nineteen up until this point we're getting to a period is is twenty nineteen even a good reference point so are you looking at things and a for your basis and then more broadly is the expectation that your business sort of reverse to like a normal seasonal seasonal cadence ah
spk_15: over the year and then related to that just has as you think about that back half and that hard compare do you know to what extent do you think that promotions elevated the com trend in the back half of the or as as as in terms of like you know some some felt that you're just gonna happen naturally get back
spk_2: yeah thanks script and we have been talking twenty nine teams all of the up and down to the past few years but we will not be doing that going for words at twenty two is the new base from which were going to grow we're going to grow top line and bottom line and yes it is our hope that this year finally there's some normalized season okay entries because with him into a challenges for last year and and the impact that had on consumer shopping behaviors was some of the am issues people were having with inflation all of that will we hope he will normalize this year's that that weekend he did plan from this going forward up important point i'm related to what i was to think kate are promotion did not elevate or comp trend in in the second half in fact most of the him into a liquidation that we had happened in our value chain and in our warehouse stores which don't affect our comp are cop was driven by a by a transaction that one point six percent increase in transaction
spk_16: got it
spk_0: our next question comes from mike baker would be a davidson might please go ahead
spk_17: okay are today that to monday and born modeling questions but i did one after you buy your toy story sales growth or silva vs cops we can we can probably estimate the act week but if moose jaw which think of a couple hundred million dollars off both close and march is that in the guidance or without the or that be above beyond
spk_2: am i got nothing like most just not included in our gotten into the as a transaction is not nadia closed on so we will include that commentary and not next orders on outlook charlotte it's not likely to be material
spk_17: okay five ah okay and that off a second our model in question talk talk of hot interest income was a big driver to earnings in the fourth quarter what isn't he told us what interest expense should be and toy three can you tell us what interest income is expected within your e b t guidance
spk_3: that's a great question mike i think that long depend on what do we do with the extra cash as we have also been included in our gardens that we will continue to remain opportunistic been i share buybacks so ah depending on what we do with the share buyback that will have an impact on the interest income but you right believe that the different address on and mom and that we have the unable to get a good yield on or excess cash on the balance sheet
spk_0: our next question comes from michael less with you bs michael please go ahead
spk_18: the morning people are pretty good my question you mention that the thirty
spk_1: the two thousand and twenty two percent or thirty four point pick people up a gross margin mistook that again you mention that the twenty twenty two gross margin of thirty four point six percent is the new level from which you start to to to move higher promote route from here yet of thirty four point picked griffin gross margin last year had a significant amount of him into a liquidation with in man
spk_18: to it plus you have the benefit of lower transportation cause to a why wouldn't you get more of that back and to what degree are you just assuming that transportation cause we're going to drive the group margin in twenty twenty three in a not kill widening your group morgan going to be even better
spk_19: moving pouring getting a promotion are going to increase metal provide a little bit of an awkward
spk_3: of might have that let's make sure we understand your question correctly the cars on maybe i'll begin with the money part of your question you indicated that the transportation costs for the benefit and twenty twenty two actually that is not the case because we recognize the freight expensive the load the tons of the inventory the by the time we started to see the early been of
spk_2: but of the braid expenses by the time and roll through the actually those start to see the benefit in the second of twenty twenty three arm and in terms of odd the guy and the that's kind of the first part of your question what we said what would the sales and the profitability and been not indicating to the gross margins in talking about the overall profitability of the company is the new baseline of be a very confident in the on in the guidance that we gate and we will improve both the much margin and gross profit into twenty twenty three over will be punished when it when you do
spk_19: here's the better way to to to be adequate the wasn't clear apologize for that why wouldn't he be back to thirty percent group martin you had twenty one when they would let him into a clear and and she would have a favorable transportation costs on top of that in getting into thalia one a and my second question how did the one that had the full complement of of a foot in brooklyn are going
spk_20: completely new well who with the did not have of elevated new one with the important cordon that going with was quoted me on the to you in the column move coworker who would
spk_2: yeah i'm on think the postcard an option to learn for the second one on the don't have all the time like you said that is nothing structurally that is holding us back from achieving that level of profitability that we delivered and twenty twenty one so all the time i called your comment as as as is a probably yeah
spk_1: and maybe long you been take the second one sure yet and if you think about our priority categories of were athletic apparel team sports and but were in our premium full service but where decks we are making a larger investment in those have you heard not prepared remarks because it does allow us to have a full assortment which
spk_0: the does really to that athlete and then able to drive strong comp are beyond that we're not going to break down how was how are we didn't you for by bird various categories but generally speaking are assortment of was really strong and drop the comp
spk_21: the next question comes from brian may go with oppenheimer brian please go ahead
spk_1: a good morning good great quarter of a new regulations so i my first question is just i'm a bit of a follow up a and ah you look there's obviously a lot of talk with the in your your broader space about you between clearance and a don't normalize and promotions or by what you're saying is that promotions did not drive the business the second half of the year
spk_2: you're actually optimistic it's rebooking the fruits seven tweet tweet the federal employee of all guilty well be drive group sale the further proof sale that it gets so the course have it is is greeks then just not affected by promotion outside of your company which are seen we got a glance rather recharges abusive marriage you to that yeah thanks brian so and jake is a cafe not affected by any losses outside of our company but aren't sort minutes so narrowly distribute distributed now and dip and differentiated that we don't spend a lot of time looking at an outside promotional environment we have
spk_1: extensive database of one hundred and fifty million people we we can manage on a personal basis what what i think we want to offer and we are very much more focused on strategic investments and priced item were necessary to to move our business not very helpful and grapple that and then a second question i have also just looking at dick's route to what else is helping out there so your dog or number retailers to talk lately about pressure within their consumer whether the equation or some other top economic factors you pull your sales and poop you're so i guess the question i have yours are you seen any signs of a more pressured consumer behind your strong results and as we look at the twenty three with the basic macro assumption other pretty the cottage rebadged back
spk_2: yeah thanks so if we are seeing our consumer doing very very well and i would point to a few data points on that though i'm so over each one of our income demographics we have seen growth and we saw growth in his past quarter we are growth and our gold athlete
spk_1: but every single income demographic and what we're finding is that people are prioritizing health and wellness an active lifestyle team sports than and those are either even more popular than they were afford the pandemic i think people really have decided with whatever
spk_2: they have in their wallet their prioritizing you category they're they're they're coming to life more as the festivities rather than discretionary not the utterance you to answer that us on or macros
spk_3: don't come to the market or dungeons and we will continue to be on more mindful about what is happening in them in the macro economic landscape but the your point you know as you look at the guidance that we have provided you know black come to plus to be a very optimistic and confident about the and that we have provided just based on the differentiated assortment the cape
spk_0: abilities that we have as well as the number of athletes that we have acquired over the last of us here we have we are confident in the garden that we have provided
spk_1: the next question comes from worn chang with africa isi one please go ahead
spk_10: a good morning picture take my question i asked about the partnership with nike so you're you're over a year now into the loyalty program or plugin and the presumably getting a much deeper level of customer data and site and they were war and they thought lot about investing in the breast best strategic pa
spk_2: nurse other examples you can give on just how they've been using that data or any updates on how they're engaging with you as a partner yes wind thank you our relationship with nike is at an all time high and that's everything from insights that we are sharing product information that we're sharing were looking very long term at the state of the consumer and each category and work at a very strategic level we've been very pleased with how the connected membership has gone we have over million members now who have opted to link or with their nike and their decks loyalty account and because of that were able to get much better insight into our athletes how their shopping where their shopping and how we can continue to innovate and that partnership we're very excited about summer things coming down the pike up with that connected membership and terms of ah channel experiences
spk_22: we're going to offer that we haven't gotten into yet but overall the nike partnership is as a tremendous i'm just a wonderful partnership for us
spk_3: great and my of the clarification on some the comments you made earlier about the house and sport roll up our rollout is that actually going to be ah a margin a creative for merger neutral ours is that to that take time to to scale before that happens
spk_2: he also warned us couple of common room before we get into that specific so we're very confident about the houses more try to do the thrift store that be of open a handful of stores but that advanced both on the top line on the bottom line that we're seeing a really really great and that's what gives us that the confidence that we have and don't have
spk_23: or the impact of these things that will be recognized over time as you can imagine over the next two years we intend to open about twenty and like lawrence i did not prepare commons over the next five years the could be seventy five to hundreds of the benefit will be seen overtime but be a very optimistic about the strategy in the difference the asian as well as the ability to provide us to engage
spk_0: with the athlete in a very differentiated way
spk_7: on next question comes from poland that transmit city pool please go ahead
spk_1: hey these guys i'm sure the region give an update on not going going gone and the need to end the year where
spk_2: how many are pop ups vs permanent and down and age share and to deport that added to sales and enough twenty two and what's the plan for have twenty three the tall and terms of be going going gone on stores are like as we call them on them and they were fifteen of them are that we had a the end of the year we had more their house blast door that kind of the be forty three on temporary location as we call them up really early and to the arctic bought the strategy not only that allowing us to engage with an athlete and a different profile up an oddly benedict sporting goods outweigh the that's one benefit in addition as we have talked about the ah the benefit that that provides in terms of being able to liquidate out inventory and actually get a better recovery rate on that inventory is also a so wrong as it for us all i would just add one thing i think that the way we look at the going on and on chain is that it a flexible act that so we we can expand and we done that with are temporary pop up locations weekend
spk_1: take a look down at if that we don't need them are they're not working so i the time something becomes the going going gone up concept it's been proven tested up at the warehouse strategy is very flexible
spk_10: got it and then she said many to global breakdown of callbacks investments for for twenty three just how much about school level both new and existing stores
spk_24: versus i corporate thanks
spk_2: yeah on
spk_3: although the vast majority of the expand on a capital investment will be going into stores as we call it outright be are planning to open nine new houses a locations as well as to the only a copy capital investment into the twenty twenty four as a sport openings in addition as we indicated will be all be upgrading under the bar stores to print
spk_0: impulse or this what their deck there is definitely an investment on the backside in terms of the game changer technology and investment that we're making personalization as well as the the other capability from data analytics all of that it also included in the guidance but the vast majority of their investment will continue to be store facing the next question comes from john can and with cohen
spk_25: john please go ahead you line is a pin excellent your take my question and can grab them a great year so you how should we think about the new store productivity contribution from square footage grow up at looks like that the gap between thompson and overall report itself was cause it two hundred basis points this quarter which would suggest am
spk_3: and he knew store predicated come on online line has been quite productive just history is actually model one new store productivity and overall square footage growth based on the number of stores you're talking to and also the bigger size of some of them
spk_2: yeah john are two different onto the to that plus upon to look at you for the a different that you're seeing between the on com sales and an arm and the tory sales growth one like you said is driven by that some of the new store openings in addition the temporary their house locations that we have a i was blessed or that we call them they are not include
spk_3: ordered in the aren't numbers that the sales that happened during on the fort gordon in those temporary locations are included in that are coming back to your macro question we do see a significant improvement in our sales productivity then we can work a stored on from the basic fifty gets stored in the house a sport location or even a you know a comparable store to a houses sport location considering that a majority of the of the store that we have read remodeled right now or relocations the those will be in our comp acts no expectation they won't be as part of the new source on and then be open decks out a sport as a brand new location yet they will def and
spk_0: early start to benefit on use or productivity metrics
spk_1: a final question today comes from jay feldman as kelsey advisory great job please go ahead yeah thanks gosh the question one asked about
spk_26: any merchandising changes you might be considering for twenty twenty three like are are there any
spk_1: you know categories are certain trends are products that you might be leaning into are emphasizing a little bit more based on what you're seeing from the consumer
spk_26: i joe yes we are still very focused on our for priority categories footwear team sports athletic apparel and golf were always looking for new trend the new category but generally speaking that's that eighty percent of us have our business and that's where we're focused on on driving growth
spk_27: okay so not much newness coming i guess from both what about on the while i did all that and the actually described as i anything
spk_2: oh sure yeah
spk_26: i do i just want to i didn't say that was it know any new at there's a ton of as coming i just want to share with you that are our product or parody categories of for working towards the peril and golf r where we're focused but there's certainly a ton of units across the desert okay a got it okay sorry for misunderstanding that a man with regard to private label year maybe could you share just kind of the latest penetration and and what you saw in the fourth quarter i feel like you guys usually have shared a little more color they are around you know how to consumers opting for some year
spk_1: your brands
spk_2: yeah thanks gel or vertical brand it up tremendously well last year and in order we are really pleased with how the deity brand is doing opening price point brand i function i fashion as well as quickly and verse which are filling white space in our portfolio and even
spk_1: the and brand doing incredibly well so it's we look to the end of the year are are a robert of a brand penetration for this past year was fourteen percent we had it recently laid out a goal up two billion dollars a few years ago for vertical grantham and we finished about one point seven very excited about a detailed and margin opportunity go for it as you know
spk_0: vertical brands of sixty eight hundred basis points of higher margin than and our average
spk_2: unfortunately the is all the time we have today the questions on alchemical back to learn how about president and ceo is any concluding remarks
spk_0: thank you all for your time today it for your interest and dick's sporting goods reporting on the next oh thank you

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