Dick’s Sporting Goods saw sales increase during the fourth quarter and 2016 overall, thanks in large part to acquisitions and an ongoing realignment of its brick-and-mortar presence and inventory, but profits still dropped.
The retailer acquired the Sports Authority and Golfsmith International Holdings Inc. last year by way of bankruptcy auctions. During the fourth quarter, three Dick’s Sporting Goods were opened in former Sports Authority locations while as many were closed and the company closed 13 of its Golf Galaxy locations and two True Runner stores.
With the acquisition of 30 Golfsmith locations, Dick’s said 10 of the closed Golf Galaxy stores were simply too close to a Golfsmith store “that is better positioned to serve the company’s customers.” However, the Golfsmith stores will be reopened under the Golf Galaxy brand.
Dick’s did not explain the remaining closures, but the company has taken pains to change up its inventory structure. During the fourth quarter, the company incurred charges of $46 million in order to write down inventory “that does not fit within its new merchandising strategy,” along with another $47 million in charges related to store closings and conversion of Sports Authority locations.
With those costs, Dick’s reported net income of $90.2 million for the fourth quarter, down from $129 million at the end of 2015, on sales of $2.5 billion, a 10.9 percent increase. Consolidated same store sales also increased by 2.5 percent.
For the year, Dick’s reported consolidated net income of $287.4 million, down from $330.4 million in 2015. Net sales grew by 9 percent, to $7.9 billion.
“We realized meaningful market share gains and saw growth across each of our three primary categories of hardlines, apparel and footwear,” said Edward W. Stack, Dick’s chairman and chief executive officer.
He added that the company worked over the year to “enhance” the in-store shopping experience and that during the year it relaunched its e-commerce site on an internal web platform.
Dick’s e-commerce penetration for 2016 grew to 11.9 percent of net sales, up from 10.3 percent.
Stack went on to say that Dick’s will continue to be “aggressive” in evolving its business over 2017, including implementing a new merchandising strategy “aimed at rationalizing our vendor base and optimizing our assortment to deliver a more refined offering to our customers.”
“We are in the process of reviewing our entire vendor base, which will be segmented into strategic partners and transactional vendors, with tertiary vendors being eliminated,” Stack said. “This strategy, combined with our efforts to enhance our digital capabilities, will enable us to stay ahead of consumer trends and differentiate us from the competition.”
Dick’s expects sales to increase again during 2017, by between 2 and 3 percent and plans to open 43 new Dick’s locations, along with nine Golf Galaxy stores.