Dick's Sporting Goods Inc

answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. And if you would like to withdraw your question, again, press the star followed by the number one. Thank you. Nate Gilt, Senior Director of Investor Relations, you may begin your conference.

Good morning, everyone, and thank you for joining us to discuss our second quarter 2023 results. On today's call will be Lauren Hobart, our President and Chief Executive Officer, and Navdeep Gupta, our Chief Financial Officer. The 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 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 third quarter 2023 earnings results on November 21, 2023. With that, I'll now turn the call over to Lauren.

Thank you, Nate, and good morning, everyone. We are pleased with our strong sales performance for the second quarter. Total sales increased 3.6% to $3.22 billion, and our comp sales increased 1.8%, driven by robust transaction growth. We continue to gain market share, demonstrating that athletes throughout the country are increasingly relying on Dick's to meet their needs. Within the quarter, sales accelerated significantly in July when the back-to-school season kicked off and when we opened our newest House of Sport location. For the full year, we remain confident in delivering comparable store sales in the range of flat to positive 2%, unchanged from our prior outlook. With this context, I want to take a moment to address our second quarter profitability and our revised 2023 EPS outlook. While we delivered double-digit EBT margin of 10.1%, our second quarter profitability was short of our expectations. This was primarily due to lower gross margin, which, while still significantly above pre-COVID levels, was lower than originally anticipated. Two key factors impacted our second quarter gross margin relative to our original expectations. The first was the impact of higher inventory shrink. Organized retail crime and theft in general is an increasingly serious issue impacting many retailers. Based on the results from our most recent physical inventory cycle, the impact of theft on our shrink was meaningful to both our Q2 results and our go-forward expectations for the balance of year. We are doing everything we can to address the problem and keep our stores, teammates, and athletes safe. And second, beyond shrink, we also took decisive action on excess product, particularly in the outdoor category, to allow us to bring in new receipts and ensure our inventory remains vibrant and well-positioned. Keeping our inventory fresh is one of our key operating philosophies, and we're pleased that our inventory was down 5% at the end of the quarter. Our revised 2023 non-GAAP EPS guidance of $11.50 to $12.30 takes into account our Q2 results as well as our latest views on gross margin for the back half of the year, including higher levels of shrink. It's important to note we remain very confident that we still expect gross margin to increase for the full year compared to 2022, which includes a significant increase in the back half. To say our future is bright would be an understatement. The enthusiasm we have for our business and the confidence we have in our long-term growth opportunities have never been stronger. We're making transformative investments so that we're well-positioned to continue gaining share and extending our leadership in a fragmented $140 billion industry. Following our tremendous success over the last several years, we are laser focused on capitalizing on our most significant growth opportunities. We're doing extensive work to determine how best to optimize our business going forward to capture that growth. This includes better aligning our talent, organizational design, and spending in support of our most critical strategies, while also streamlining our overall structure and cost. Now, Deep will share more details about our plans and the associated charges we anticipate related to this business. Innovating within the omni-channel athlete experience is at the heart of our growth strategies, and our newest Dix concepts have proven to be tremendously successful and are a key part of our future. First, Dix House of Sport is yielding powerful results. During Q2, we're excited to have opened seven new locations, and earlier this month we opened two additional locations. I've had the opportunity to visit many of these stores in recent months and I left each visit proud of our team and inspired by the athlete experience they're providing. These stores are doing incredibly well and during July delivered strong double digit comp growth compared to their prior combo store locations with the same square footage. With 12 total House of Sports stores now open and plans to open another 10 locations throughout 2024, we continue to expect that by 2027, we will have between 75 to 100 across the country. In addition to House of Sports, we're excited to continue rolling out our next generation Dick store, which completely revolutionizes our most typical 50,000 square foot format. This store is inspired by our House of Sport concept with a similar elevated assortment and service model, premium experiences, and enhanced visual expressions. Building on the success of our first opening, we've now opened two additional locations, and overall sales have been exceptionally strong. This concept is driving great results, and we're excited to open another eight locations by the end of 2023. The one-two punch of House of Sport and our new 50,000 square foot prototype is the future of our Dix stores. We're also extremely enthusiastic about our long-term opportunity in golf, both at Dix and Golf Galaxy. We're excited to open seven new Golf Galaxy performance centers this year. Beyond this year, we'll continue growing our Golf Galaxy footprint with approximately 10 new locations planned for 2024. 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. This past quarter, we were excited to extend our omnichannel fulfillment model and now offer our integrated white-label same-day delivery service on the Dix app and on Dix.com. We also continue to innovate and invest in our rapidly growing and profitable game-changer business, and we're very proud to have recently announced a multi-year partnership between Game Changer and Major League Baseball. In conjunction with the reinvention of our omni-channel experience, we continue to drive deep brand engagement. This past quarter, we launched the second iteration of our Sports Change Lives campaign. In partnership with Nike and Jordan, we're spotlighting 10 iconic athletes, including Mike Trout, Alice Morgan, and Carmelo Anthony, who share their personal stories of how sports changed their lives. In addition to the athlete stories, we captured exclusive behind-the-scenes content that is available to our DIX and Nike connected members on the DIX app. We've seen extremely positive athlete sentiment, and to date, this work has achieved nearly 1.5 billion impressions in our media. The marketing campaign has run in the summer's most relevant sports moments, including the NBA Finals, NHL Stanley Cup playoffs, and the Women's World Cup. I want to thank all of our teammates across the company for their outstanding efforts and continued commitment to Dick's Sporting Goods. We have an incredible team here across every area of our business, and they are the most important drivers of our success. Before concluding, I want to share some final thoughts on Dick's growth potential. The enthusiasm we have for our business and the confidence we have in our long-term growth opportunities has never been stronger. We're driving positive comp sales and gaining significant share. Despite moderating our 2023 EBT expectations, we will still deliver double-digit EBT margin this year, which is approximately double our 2019 rate. And based on the powerful results of our new DICS concept, House of Sport, and our next generation 50,000 square foot prototype, the long-term growth opportunity we have ahead of us is nothing short of extraordinary. As Ed said, and I quote, we haven't seen growth opportunities like these since we went public in the early 2000s. With that, I will turn the call over to Navdeep to share our financial results in more detail.