Dick's Sporting Goods Inc

Good morning, everyone, and welcome to the Q1 2023 Dick's Sporting Goods Earnings Conference call. My name is Ellen, and I will be coordinating your call today. During the presentation, if you would like to register a question, please press star, followed by one on your telephone keypad, and you will join the question queue. I will now hand you over to your host, Nate Galt, Senior Director of Investor Relations. Nate, please go ahead.

Good morning, everyone. Thank you for joining us to discuss our first quarter 2023 results. On today's call will be Lauren Hobart, our President and Chief Executive Officer, and Navdeep Gupta, our Chief Financial Officer. A playback of today's call will be archived on 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 Form 10-K and cautionary statements made during this call. 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 our non-GAAP financial measures referenced in today's call. And finally, for your future scheduling purposes, we are tentatively planning to publish our second quarter 2023 earnings results on August 22nd, 2023. With that, I will now turn the call over to Lauren.

Thank you, Nate, and good morning, everyone. We are very pleased with our first quarter results, which demonstrate the continued strength of our business, resulting from our focused strategies and the strong execution of our long-term transformation. While consumers face macroeconomic uncertainties, our athletes have continued to prioritize sport and rely on Dick's to meet their needs. In fact, compared to the same period last year, more athletes purchased from us, they purchased more frequently, and they spent more each trip. Our strategies are working and resonating with our athletes. We remain enthusiastic about our business and our long-term growth plan. As the largest U.S. sporting goods retailer, we have robust runway for growth, and are well positioned to continue gaining share in a fragmented $140 billion industry. We will build on our 2022 results, which set a new bar for us in both sales and profitability, and provide an excellent foundation for growth this year and in the years ahead. Today, we are reaffirming our guidance for 2023. We continue to expect our comparable store sales to be in the range of flat to positive 2%. We also continue to expect our earnings per diluted share to be in the range of $12.90 to $13.80, up 11% at the midpoint versus 2022. Now to our results. We achieved Q1 sales of $2.84 billion with total sales growth of 5.3% and comp growth of 3.4% as our compelling spring assortment allowed us to meet robust demand and deliver a fantastic athlete experience. We continued to gain market share and saw increases in both transactions and average tickets, with strong transaction growth driving most of our comp gain. Our gross margin represented a meaningful improvement from Q4 of 2022, and we delivered strong double-digit EBT margin of 11.6%. Our earnings per diluted share were $3.40. an increase of 19% over the prior year's quarter on a non-GAAP basis. As we continue our transformational journey, our focus is centered around four key priorities. Innovating within the athlete experience, curating a compelling and differentiated product assortment, providing a best-in-class teammate experience, and driving deep engagement with the Dix brand. Innovating within our omni-channel athlete experience is at the heart of our growth strategies, and we continue to enhance and refine our highly engaging in-store service model to consistently support and inspire our athletes. The very best expression of this is Dick's House of Sports. House of Sports is redefining sports retail and over the long term will be a significant part of our growth story and the primary driver of our square footage growth. House of Sport is fostering very strong engagement with both our athletes and our brand partners, all while delivering much higher sales and profit. This year, we're on track to open nine House of Sport locations ahead of the back to school season and are beginning construction on more than 10 additional locations that will open throughout 2024. By the end of 2027, we continue to estimate that we will have between 75 to 100 House of Sport locations nationwide. Furthermore, we're excited to provide a completely redesigned and reimagined experience for our athletes through our next generation Dick store translated into our more traditional 50,000 square foot format. This prototype is a great representation of key athlete insights that we've gained from House of Sport, including premium experiences, an elevated service model, and enhanced visual expressions. Our first location opened last week in South Bend, Indiana. We are really excited about this opportunity and look forward to continuing to develop and learn from this new store format. In combination with our stores, our digital experience remains an integral part of our success, and we continue to invest in technology to strengthen our athletes' omnichannel experience. Recent enhancements are being well received by our athletes, including easier access to scorecard rewards, access to upcoming launches through a native sneaker release calendar and in-app reservation capabilities, as well as in-store mode in the Dix app, which offers product scanning, access to scorecard offers, and free shipping. Furthermore, our expansive database of our 150 million athletes is a tremendous asset that enables stronger, more personalized relationships with our athletes. We're also expanding our leadership position in the sports technology market through Game Changer, the premier video streaming, scoring, and statistics mobile platform for youth sports. During Q1, Game Changer saw continued robust revenue growth and massive engagement increases. Nearly 2 million games were covered by the platform, up 25% over the same period last year, with over a quarter of these games streamed live a year-over-year increase of over 100%. We'll continue innovating and investing in our game-changer business as we strengthen our relationships with our athletes on and off the field. We're also advancing new strategic concepts to connect with our athletes. Our value chain stores are enabling a great experience for our value-conscious athletes, while also serving as a critical component of our inventory optimization strategy. They allow us to move clearance product out of the DIC stores, opening up space for more full price selling. At the same time, they allow us to provide full size and color runs clearance product for our athletes. We've been really pleased with the athlete feedback as well as the margin recapture rates from these stores. Next, within merchandising, we're curating a compelling and differentiated product assortment. As discussed on prior calls, Footwear is a key pillar of our merchandising strategy. During the quarter, we converted nearly 20 additional stores to include premium full-service footwear, and by the end of the year, we'll take this experience to more than 75% of the Dick's chain. Our premium footwear decks have enabled us to expand our access to a wider assortment of differentiated product from key brand partners, as well as new and emerging brands. We're confident that our ability to provide an elevated footwear experience will continue to foster strong engagement with our athletes as well as drive sales growth and robust margins. We remain committed to developing and investing in our vertical brands, which strongly resonate with our athletes. Our brands offer something for every athlete, including our DSG brand, which continues to play a pivotal role in our opening price point assortment. We've also recently expanded our vertical brands into new product categories, including Versed and Calia golf apparel, as well as Calia fitness accessories. The athlete response has been fantastic, and we're confident in our ability to continue growing our vertical brand portfolio. Our third key priority is providing a best-in-class teammate experience. We strongly believe that highly engaged teammates are critical to a great athlete experience. Our culture is a key advantage, and we continue to be recognized by national media organizations and industry experts as a great place to work. At the same time, we're making investments in foundational elements of our in-store experience to enable greater efficiency and productivity, including a new point of sale system with a more seamless checkout process. We also recently implemented a new HR management system across our organization, which will unlock further efficiencies in our workforce management. We're confident these investments will amplify our team's ability to provide an enhanced level of service to our athletes while supporting our strong culture. Lastly, we're driving deep brand engagement. As we celebrate our company's 75th anniversary this year, we recently launched our Sports Change Lives campaign. Our objective with this work is to unequivocally communicate who we are and what we stand for. Dix believes in the positive impact that sports participation has on physical and mental health, academic achievement, and more broadly, the ability of sport to bring together and inspire communities and the next generation of athletes. The feedback has been very positive, and it's clear our message is resonating. We're excited to build on this energy as we launch the second iteration of this campaign early next month, focused on telling stories of how sports changed the lives of several well-known athletes. In addition, as part of our 75 for 75 Sports Matter grant program, our foundation will fund 75 under-resourced youth sports organizations, each with a $75,000 grant to keep kids playing. In closing, our strong Q1 performance is the direct result of our transformational journey, and we will continue to focus on athlete experience, differentiated product, teammate experience, and brand engagement as the pillars of growth for our business. While the macroeconomic environment remains uncertain, we remain confident in our business and the strategies that will deliver sales and earnings growth this year and into the future. Before concluding, I'd like to thank all of our teammates across our company for their outstanding efforts and continued commitment to our business. I'll now turn the call over to Navdeep to review our financial results and outlook in more detail.