DICK'S Sporting Goods Inc (DKS) 2012 Q4 法說會逐字稿

Good morning.

And welcome to the Dick's Sporting Goods fourth-quarter earnings conference call.

All participants will be in listen-only mode.

(Operator Instructions)

After today's presentation there will be an opportunity to ask questions.

(Operator Instructions)

Please note, this event is being recorded.

I would now like to turn the conference over to Anne-Marie Megela, Director of Investor Relations.

Please go ahead.

Thank you.

Good morning.

Thank you for joining us to discuss our fourth-quarter 2012 financial results.

Please note that a rebroadcast of today's call will be archived on the Investor Relations portion of our website located a www.dickssportinggoods.com for approximately 30 days.

In addition, as outlined in our press release, the dial-in replay will be available for approximately 30 days.

In order for us to take advantage of the Safe Harbor rules, I would like to remind you that today's discussion includes some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Which include but are not limited to our views and expectations concerning our future results.

Such statements relate to future events and expectations, and involve known and unknown risks and uncertainties.

Our actual results or actions may differ materially from those projected in the forward-looking statements.

For a summary of risk factors that could cause results to differ materially from those expressed in the forward-looking statements, please refer to our periodic reports filed within the SEC, including the Company's annual report on Form 10-K for the year ended January 28, 2012.

We disclaim any obligation and do not intend to update these statements except as required by the securities laws.

We've also included some non-GAAP financial measures in our discussion today.

Our presentation of the most directly comparable financial measures, calculated in accordance with Generally Accepted Accounting Principles and related reconciliations, can be found on the Investor Relations portion of our website at dickssportinggoods.com.

Leading our call today will be Ed Stack, Chairman and Chief Executive Officer.

Ed will review our fourth-quarter and full-year financial and operating results, and discuss planned investments and guidance for 2013.

Joe Schmidt, our President and Chief Operating Officer, will then review our store development program, and discuss recent and expected system implementations, as well as provide insight into our new concept.

After Joe's comments, Tim Kullman, our Executive Vice President of Finance and Administration and Chief Financial Officer, will provide greater detail regarding our financial results, investments and expectations.

Ed will then provide some closing comments before opening the lines for Q&A.

I will now turn the it over to Ed Stack.

Thank you, Anne-Marie.

I'd like to thank all of you for joining us today.

In the fourth quarter we again generated record results, with earnings per diluted share increasing 17% to $1.03.

These earnings compared to our original guidance of $1.03 to $1.05.

The fourth quarter included a 14th week which contributed $0.03 of earnings to the quarter.

Sales increased 12% in the fourth quarter, driven by the growth of our store network, a 1.2% increase in consolidated same-store sales on a 13-to-13 week basis, and the inclusion of a 14th week.

The 1.2% increase in consolidated same-store sales compared to our comp expectation of 4%.

Same-store sales in the fourth quarter of 2012 for of Dick's Sporting Goods were down 2.2%, Golf Galaxy sales were up 1.3%, and eCommerce sales were up 54.2%.

Higher than anticipated sales in hunting were more than offset by significantly lower expected sales in outerwear and cold weather accessories, as we experienced warmer weather relative this year versus last year during peak selling periods.

As well as in fitness where we experienced a significant decline in the sales of ellipticals and treadmills.

To demonstrate the magnitude of this impact to these businesses, our consolidated comps would have been 5.4% for the quarter excluding cold weather-related categories and the fitness category.

In December, the warm weather again this year, we significantly reduced receipts of our partnership orders in winter outerwear and related accessories.

The catalyst driving this decision was our intent not to carry over winter inventory for another year following two warm winters.

Compared to last year, our winter inventory is down 17% on a per square foot basis, and our clearance inventory is down 14% per square foot versus last year.

This decision helped maintain our margin rates and allowed us to keep our inventory clean.

Although as we finally received cold weather, along with snow in January, it had a negative effect on our store sales performance for the back end of Q4 and into Q1.

Looking to fitness, the sales decline was a result of lower large equipment sales, as I mentioned -- treadmills and ellipticals.

We understand the issues that contributed to this sales decline, and are taking action to correct them.

For the full year 2012, and on a 53-week basis, we increased our non-GAAP earnings per diluted share by 25%, to 12% sales growth, operating margin expansion of 72 basis points.

We also opened up 38 new stores, which are demonstrating solid productivity.

And our growth brought our total number of stores to 518.

We also made several achievements that demonstrated our commitment to driving continuous improvement.

For example, we opened up a number of new specialty shops in our stores with Nike, Under Armour, adidas and the North Face.

We also bought two established brands during the year, Top-Flite and Field & Stream, which have great sales and margin growth potential.

Additionally, we invested in our True Runner retail concept, and have opened a new concept store for our Golf Galaxy brand.

We also made significant achievements with our omni-channel strategy.

We have demonstrated that we can meaningfully grow our eCommerce business at an aggressive pace, in a way that is both profitable and is increasing in profitability.

We generated nearly 50% growth in our eCommerce business, rolled out ship-from-store capabilities, significantly enhanced our mobile site, and launched a new mobile app which provides a mobile shopping platform and the ability for customers to look up and redeem their loyalty points.

Two extremely powerful and strategic assets that are making our progress with omni-channel possible.

The first is our talented team of associates.

We have invested heavily in talent over the past couple of years, building our knowledge base in many areas, including site merchandising, web site development, search engine optimization, and analytics.

We will continue to aggressively make these investments in the eCommerce area.

The second strategic asset is the distribution network that exists within our store base.

We have 518 stores across the country.

And today each and every store is set up and running with ship-from-store capabilities.

We're very pleased with the progress we made this year, but we recognize we have a lot more to do.

As a result, we will be making meaningful investments in our business for the continued long-term benefit of the Company and our shareholders.

In 2013, these substantial investments include growing our omni-channel platform through advanced mobile capabilities, the piloting of pick-up in store, and growing our eCommerce team.

We will also be remodeling existing stores, implementing new systems, and developing our new concepts.

In total, we expect these investments to have a $0.12 impact on earnings per diluted share in 2013, while building the capability for future sales and margin growth.

Our 2013 guidance takes these investments into consideration.

I would also like to point out that because fiscal 2012 included 53 weeks, any comparison to the 2012 retail calendar will reflect a shift.

This shift will not have a net effect on our total results for the full fiscal year but will impact our quarterly results.

Our reported comparable sales and earnings will be positively impacted in quarters one and two, but this will be offset in quarters three and four.

The first quarter of 2013, we anticipate consolidated earnings per diluted share of $0.47 to $0.49, compared with consolidated earnings per diluted share of $0.45 for the same period last year.

Our earnings expectations include a $0.02 impact from long-term growth investments I just mentioned, and a $0.05 benefit from the shifted calendar.

On a shifted basis, consolidated same-store sales are expected to be negative 2% to negative 1% on top of an 8.4% increase in the first quarter last year.

On an unshifted basis, consolidated same-store sales are expected to be flat to positive 1%.

For the full year, we anticipate consolidated 2013 same-store sales will increase 2% to 3% on a 52-to-52 week basis, on top of a 4.3% increase in 2012.

We are anticipating consolidated earnings per diluted share between $2.84 and $2.86.

This compares to non-GAAP earnings per diluted share of $2.53 in 2012, including the 53rd week, and excluding the impairment charge from JJB.

Our guidance includes a $0.12 impact from our growth investments.

So even with the substantial investments we are making in the business in 2013, we expect to generate double-digit earnings growth and deliver operating margin expansion.

In summary, we had a strong year with steady progress in growing all aspects of our business.

We made several important investments in the future, including adding locations, acquiring established brands, developing and testing retail concepts, launching eCommerce technologies, and creating new marketing strategies.

All of these investments have strengthened our foundation and positioned us for continued growth.

We're optimistic about the outlook for the coming year, and excited about our prospects for the future.

We're also proud of the people who continue to prove that focus and drive are key to staying on top of our game.

I want to thank our entire team of associates for their hard work and commitment.

I'll now turn the call over to Joe.

Thanks, Ed.

In 2012 we continued to grow our store base, augment supply chain efficiencies and support omni-channel initiatives.

We opened 38 new Dick's Sporting Goods stores, and relocated five Dick's Sporting Goods stores to preferred locations.

Our new Dick's Sporting Goods continue to perform well, with new store productivity of 93.5% in the fourth quarter of 2012, compared to 94.2% in the fourth quarter of 2011.

The detailed calculation of new store productivity can be found in the table section of the press release we issued this morning.

Looking to 2013, we expect to add more stores while increasing investments in our existing store base.

On the real estate front, our plan is to open approximately 40 new Dick's Sporting Goods stores and relocate one Dick's store to a preferred location.

In addition, we will increase capital expenditures to further upgrade some of our existing stores, to improve the shopping experience for our customers.

Keep in mind that we did not conduct any full store remodels in 2012, as we were finalizing our new store prototype.

In 2013, our plan is to complete approximately four full remodels, as well as approximately 75 partial remodels.

Our 2013 remodel plan is one step in a multi-year program, which is expected to span across a significant portion of our store base.

The partial remodels focus on strategic growth categories and, when completed, will feature Nike and Under Armour shops.

These vendor shops continue to perform well, as they generate higher sales and margin, while increasing product exclusivity.

At the end of 2012, we had 171 Nike Field House shops, 97 Under Armour All-American shops, 10 Under Armour Blue Chip shops, and 91 North Face shops.

In 2013, we plan to accelerate the pace of these new vendor shops by adding approximately 100 Nike Field House shops, 70 Under Armour All-American shops, as well as 65 new brand shops with adidas.

We are working closely with the North Face to add new shops in conjunction with store remodels.

As well as elevate their branding in our seasonally expanded shops.

We continue to see strong financial results and positive customer feedback in stores with shared service footwear decks.

As of 2012 year end, they are featured in 174 Dick's locations.

In 2013, shared service footwear decks are planned for all new and fully remodeled stores.

Given the anticipated investment in our new stores, relocated stores, remodels and vendor shops, we plan to nearly double our CapEx spend on stores in 2013 over 2012.

Our strategy for new store growth is expanding to smaller markets.

Based on a research in smaller markets, and considering the success of our smaller market format stores, we believe this strategy opens up a range of new expansion possibilities for us.

In the past, we have stated that we believe there was an opportunity for at least 900 Dick's Sporting Goods stores in the US.

This new growth strategy allows us ultimate goal to grow to over 1,100 stores.

In addition to our excitement surrounding our growth opportunities, we are beginning to see benefits of recent investments in our supply chain, such as freight savings generated by the opening of the new distribution center in Goodyear, Arizona this past January.

These savings are expected to more than offset the related DC costs.

We are also pleased with the implementation of systemic solutions, such as merchandise assortment planning, which helps optimize inventory across categories by store size and by region, in size scaling and pack optimization, which generates apparel size combination based on store level sales data.

Additionally, we are seeing positive results from testing and implementing other systems, including price management and optimization, which maintains item pricing across channels.

And space planning, which enables consistent and efficient execution in our stores by taking into account the subtle differences in fixtures and square footages across the chain.

In 2013, we will continue to invest in these systems, while we deploy additional mobile technology in our stores, implement merchandise demand forecasting capabilities, and better align our store associates with customers by utilizing our new workforce management system.

Moving to Golf Galaxy.

We repositioned one store in the fourth quarter of 2012.

This store is significantly larger than our current format.

And includes a greater focus on golf services and more experiential shopping, with an increased presence of our key vendor brand shops.

The initial reads on this store have been very encouraging.

We are planning to open one new store and relocate another store in 2013, both of which will be in the larger format.

In 2012, we developed and tested a new concept running store, True Runner.

These stores allow us to further connect with the enthusiast runners, giving us valuable insight that we can apply across our businesses.

Our plans are to open two additional locations in 2013.

Finally, we plan to introduce an outdoor concept store in 2013.

Our Field & Stream stores will be destinations for hunting, fishing, and camping enthusiasts.

And will offer premium assortments with superior service levels.

Our plans are to open two stores this year, the first of which is scheduled to open in Pittsburgh in the third quarter.

The planned investments in new stores, existing stores, and supply chain, combined with a continuing evolution of eCommerce outlined by Ed, is evidenced by a powerful omni-channel platform that is taking hold.

One that continues to drive sales, improve profitability, and most importantly, provide more choices and shopping options to our customers.

I will now turn the call over to Tim to review our financial performance, investments and outlook in greater detail.

Thanks, Joe.

Sales for the quarter of 2012, which was a 14-week quarter, increased by 12% to $1.8 billion, compared with 13-week quarter a year ago.

On a 13-week to 13-week comparative basis, same-store sales at Dick's Sporting Goods stores decreased 2.2%, Golf Galaxy increased 1.3%, and our eCommerce business increased 54.2%.

The decrease in same-store sales in the Dick's Sporting Goods stores was driven by a 3.2% increase in sales per transaction, and by a 5.4% decrease in traffic.

I would also like to remind everyone of the change in our disclosure policy for same-store sales in 2013.

Beginning with the first quarter of 2013, we will report same-store sales for our Dick's Sporting Goods stores' eCommerce business together with the business for our stores.

We will continue to provide the size of the eCommerce business as a percentage of total sales.

To provide an example, had we reported fourth-quarter results with this new methodology, the comps would have been as follows.

A 1.2% increase in consolidated same-store sales, with same-store sales for Dick's Sporting Goods up 1.2% and Golf Galaxy up 1.3%.

ECommerce penetration would be reported as 8.6% of total sales.

We are making this reporting change because, as we built out our omni-channel platform, it is becoming apparent that the traditional sales channels are overlapping with the digital space, and that providing comp sales on a combined basis will be more meaningful.

Now looking to gross profit.

In the fourth quarter of 2012, consolidated gross profit was $588.7 million, or 32.61% of sales.

And was 79 basis points higher than the fourth quarter of 2011.

This increase was driven by merchandise margin expansion of 46 basis points, and occupancy leverage of 48 basis points, partially offset by freight and distribution deleverage, which was driven by the increase in eCommerce sales.

SG&A expense in the fourth quarter of 2012 was $375.8 million, or 20.82% of sales, compared to SG&A expenses of $326.6 million or 20.26% of sales in last year's fourth quarter.

This deleverage of 56 basis points was due to increased administrative expenses, primarily related to payroll for IT and eCommerce, as we continue to strengthen our omni-channel platform.

On the balance sheet, we ended the fourth quarter of 2012 with $345 million in cash and cash equivalents, and with no outstanding borrowing under our $500 million revolving credit facility.

Last year we ended the fourth quarter with $734 million in cash and cash equivalents, and with no outstanding borrowing under the facility.

Over the course of the past 12 months, we've utilized capital to fund the $200 million share repurchase program, pay quarterly dividends, purchase our store support center, invest in JJB, acquire intellectual property rights to the Top-Flite and Field & Stream brands, build our new distribution center, and fund a $246 million special dividend.

Inventory per square foot increased by 0.7% at the end of the fourth quarter this year, compared to the end of the fourth quarter of last year.

At year end, clearance inventory was down 14% per square foot.

Net capital expenditures were $51 million in the fourth quarter of 2012, or $62 million on a gross basis.

Compared with net capital expenditures of $36 million, or $54 million on a gross basis in the fourth quarter of last year.

For the full year, net capital expenditures were $187 million, or $219 million on a gross basis.

Compared with net capital expenditures of $154 million, or $202 million on a gross basis last year.

Recall that 2012 includes CapEx related to our distribution center.

Now, looking to guidance.

Keep in mind that, because fiscal 2012 includes 53 weeks, any comparison to the 2012 retail calendar will reflect a shift.

This shift will not have a net effect on our total results for the fiscal year, but will impact our quarterly results.

Our reported comparable sales and earnings will be positively impacted in quarters one and two, but this will be offset in quarters three and four.

Also keep in mind that our earnings guidance takes into consideration the impact of the substantial investments planned in 2013 in our omni-channel platform, stores, information systems, and new concepts, which are expected to have $0.12 impact on earnings per diluted share for the full year.

The impact of these growth investments in 2013 by quarter is expected to be $0.02 to $0.03 in the first quarter, and $0.03 for quarters two, three and four.

For the first quarter of 2013, we anticipate consolidated earnings per diluted share of $0.47 to $0.49, compared with consolidated earnings per diluted share of $0.45 for the same period last year.

Our earnings expectations includes a $0.02 to $0.03 impact from the growth investment, and a $0.05 benefit from the shifted calendar.

Gross margin is expected to increase year-over-year, driven by higher merchandise margins, partially offset by occupancy deleverage, and an increase in freight and distribution costs as a percentage of sales.

The occupancy deleverage is a result of an increase in new store costs.

SG&A as a percentage of sales is expected to increase in the first quarter, due to increased administrative expenses, primarily as a result of payroll expenses related to IT and eCommerce, as we continue to build out our omni-channel offering.

On a shifted basis, consolidated same-store sales in the first quarter of 2013 are expected to be negative 2 to negative 1, on top of an 8.4% increase in the first quarter of last year.

On an unshifted basis, consolidated same-store sales are expected to be flat to 1% in the first quarter.

For the full year, we are anticipating consolidated earnings per diluted share between $2.84 and $2.86.

As we mentioned earlier, this guidance includes a $0.12 impact from the meaningful growth investments being made in 2013.

For the full year, gross margin is expected to remain relatively flat in 2013, driven by merchandise margin expansion, primarily offset by an increase in occupancy costs.

Occupancy is expected to deleverage in 2013, due to the increase in new store costs and store remodels.

SG&A as a percent of sales is expected to leverage compared to 2012, even with the significant investments in eCommerce, IT, and new concepts, as we continue to build our omni-channel infrastructure and develop additional growth drivers.

Diluted shares outstanding are expected to be approximately 126 million for our full year, compared to the 126 million outstanding shares in 2012.

We anticipate consolidated 2013 same-store sales will increase 2% to 3% on top of a 4.3% increase in 2012.

For the full year, net capital expenditures are expected to be approximately $258 million, or $299 million on a gross basis.

Net capital expenditures for 2012 were $186 million or $219 million on a gross basis.

The anticipated increase in capital expenditures from 2012 to 2013 is primarily the result of the planned growth investments in the business in 2013.

As we consider our capital allocation strategy for 2013, there are four main components.

First, is investing in the growth in our business.

Second is the quarterly dividend plan.

Third is the stock repurchase plan which was announced this morning.

And fourth is the consideration of opportunistic acquisition that's fit within our strategic plan.

As discussed, we will make substantial investments in the growth of our business by investing in our omni-channel strategy, opening new stores, remodeling existing stores, implementing system enhancements, and opening new store concepts, which includes the repositioning of two Golf Galaxy stores, the addition of two new True Runner stores, and the opening of our first two Field & Stream stores.

The second component, the quarterly dividend plan, was initiated as a declaration of an annual dividend in 2011 and subsequent quarterly dividends.

On February 19 of this year, we announced that our Board declared a quarterly dividend of $0.125 per share, payable in cash on March 29 to stockholders of record as of the close of business on March 8. The third component, the share repurchase authorization, is a five-year, $1 billion program.

At a minimum, it is intended to be used to keep the share count flat, which is contemplated in our guidance.

The last capital allocation component is the consideration of opportunistic acquisitions.

We will evaluate those that are strategically important to our business.

I will now turn the call back to Ed.

Thank you, Tim.

We see significant opportunity ahead.

And over the next five years we plan to make meaningful investments that will position us to capture it.

Today we provided you with insight into our expectations for this year, including our planned growth investments.

To discuss our long-term strategic growth opportunities and investment plans we are hosting our first ever Analyst Day this September.

During this event we'll explain how we're leveraging the focus and drive of our team to grow our Company and continue to lead our industry.

Our commentary will include an overview of our merchandising strategy, a discussion of the Omni channel opportunities we plan to pursue through eCommerce, our stores and marketing.

We'll also review our plans for technology advancements and review our longer-term capital investments.

During the day we'll offer guided tours of a nearby Dick's Sporting Goods store and our first Field & Stream store.

It promises to be a great event and we look forward to seeing you there.

This concludes our prepared remarks.

We'd now be happy to answer any questions you may have.

(Operator Instructions)

Brian Nagel of Oppenheimer.

I just wanted to ask a question about your fitness equipment.

You clearly called that out as one of your weaker spots here in the quarter, and was the reason for the drag in total sales.

My question is, having followed Dick's for a while now, fitness equipment has had its issues.

So did something else happen?

Was there a reason for incremental weakness here in Q4?

And then, going forward, what levers can you pull there to improve the performance of that category?

Thanks.

Brian, fitness was a -- we got thrown a curve ball here with fitness.

The LIVESTRONG brand is a little bit more than 50% of our treadmill and elliptical business.

And, unfortunately, when the news came out about Lance and the issues that he had, and that being confirmed, people had a very negative reaction to the LIVESTRONG brand, unfortunately.

Even though with Lance, he's no longer with the Foundation -- the Foundation does great work -- the customers had a very negative reaction to the LIVESTRONG brand.

And the business with the LIVESTRONG treadmills and ellipticals which, as I said, were over 50% of our business, just stopped.

As long as it takes to get product in, we couldn't get new products in, in order to offset that.

And we still have some of that inventory here which we will get through.

But there will be some costs associated getting through it, which are all baked into our guidance going forward.

But that's the biggest issue around the Fitness business.

Just to be clear on that, then, in your stores now you've started to significantly de-emphasize the LIVESTRONG brand in those categories?

Yes.

We're marking that product down and attempting to clear that off the floor and make arrangements for other products to come in.

Got it.

Thank you.

Michael Baker of Deutsche Bank.

Lots to ask here.

I'll ask, pace of business, can you discuss what November and December looked like relative to January?

And then even early February, what's in your guidance?

I think you can figure out, by the way you're talking about shift and non-shift, that the end of January or early February was probably pretty bad for a week in there, but then got better.

Can you confirm that?

We've never talked about what's going on in a particular quarter.

We've indicated that with the cold weather not coming again in December, we made a decision to cancel partnership orders that we have in that product.

And we didn't want to have two years of inventory backed up, as we did last year.

Last year, we were able to get through this, and last year it was fine.

But to have two years of this, we made the decision to cancel those partnership orders.

It didn't look like winter was going to come again.

And then when we did get some of the colder weather, we didn't have enough inventory to really support those sales.

And as we said in the prepared remarks, that had an impact on Q4 sales and it had an impact going into Q1.

But if we had the decision to do over again, at the time that we made the decision, we would probably make the same decision because we wanted to have this inventory clean, and we didn't want to have two years of cold weather merchandise back up on us.

Let me ask it another way.

Just the terminology -- shifted and non-shifted -- is a little confusing.

When you talk about your shifted comps, what weeks are you looking at this year versus last year?

Is that looking at the weeks ending May 4, 2013, which I think is when your quarter's going to end, versus April 28 last year?

How exactly -- if you could give us those dates we can probably figure it out from there.

I don't have those dates right off the top of my head, but the quarter ends a week later this year every quarter.

Because there was 53 weeks.

Unfortunately in the retail calendar every number of six years there's a 53rd week, so that pushes everything out a quarter.

I think we understand that.

It's just the shift, when you say shifted or non-shifted, so non-shifted means you're going back to the same weeks that you had in your fourth quarter last year?

Is that the non-shifted part?

The non-shifted or unshifted is our reported.

The shifted is being more comparable to the prior year weeks.

Correct.

Okay.

Thanks.

Matthew Fassler of Goldman Sachs.

I've got one question on investments, and then just a quick follow-up on store growth.

On the investments, you invest money every year.

What makes this $0.12 incremental?

And then as to P&L geography, it was a little surprising that it sounds like the expenses will lever anyway, even with this.

So what's happening to the so-called core expenses above and beyond these $0.12?

A couple of these are pretty big investments, Matt, that haven't been in the normal course of business.

So one is around eCommerce.

We know that the -- what we're looking to do from an eCommerce standpoint, and the traction we have here, we're going to continue to make additional investments in our eCommerce business around infrastructure of people to make sure we've got the right people in place here.

We're in the process of building out a new platform that we haven't done in the past.

And we think that in order to be truly relevant going forward, we need to be very relevant from an eCommerce standpoint, omni-channel standpoint.

This is different than what we've done in the past.

As we continue to take a look at what our growth opportunities are going to be going forward, we want to have the ability to have growth outside of Dick's Sporting Goods when the growth of Dick's Sporting Goods starts to slow down as we hit that end of the runway of the number of stores that we would have.

We think that the outdoor category is extremely important and a great growth opportunity for us.

We're making meaningful investments in that channel.

There's also a difference in the competitive dynamics out there in the outdoor category, with what Cabela's has done with the next generation stores in their 80,000 to 100,000 square foot stores, and their 40,000 to 50,000 square foot stores.

And the real estate strategy that they're going to employ.

So, we really feel that it's important for us to have a competitive answer to that concept.

Understood.

We're also going to be doing some meaningful remodeling of our stores, that we haven't done in the past, where we're going to be taking the Nike shops, the Under Armour shops, the North Face shops and adidas shops and making meaningful investments in roughly 75 additional stores that are above and beyond what has been our normal run rate.

With the investments that we've made in these shops, we've seen meaningful increase in sales and margin rate because those products have a higher-margin rate.

We think this is really a terrific investment to have.

And we've got several hundred stores that don't have these shops in here and we decided to really distance ourselves from our competitors.

It's important to do this.

So I know this is somewhat painful, is the only word I can think of, it is somewhat painful from an investment standpoint to swallow.

But we're really taking a look and making these investments for the long-term benefit of the Company, and not just trying to manage the business quarter to quarter.

And I know that that's difficult.

A lot of people really articulate that that's the way a business should be run until you run it that way, and then there's some pain associated with it.

But we feel that these are absolutely the right things to do for the Company going forward.

If I could slip in the second part of my question.

From an ROI perspective, clearly you're doing well on eCommerce, and that business is growing.

Your store growth continues a pace, as well.

And presumably, if you look at your traffic trends and where the growth is coming from, more of the business is going to be done online as a proportion of the overall on an ongoing basis.

Talk to us about how you think about ROI on the box itself, and how essential it is that you have that unit growth to ultimately capture that revenue.

We think that the ROIs that we look at or the IRR that we look at from a real estate standpoint has not changed.

We still expect to have that same IRR with our new stores going forward.

We're excited about a couple of these concepts that we've tested in these smaller markets that have done extremely well.

So, we still think we've got meaningful growth opportunity in the Dick's Sporting Goods stores, and that isn't going to change.

We'll open up next year north of 40 stores again.

And that IRR is reflective of some of the earnings from online?

Or is it purely for sales that come through the retail channel?

That's strictly coming through the retail channel.

But we do know that -- we have seen, as we've opened up stores, the eCommerce business that we get from that geography increases pretty substantially as we open up stores in those markets.

Thank you.

Camilo Lyon of Canaccord Genuity.

Joe, I was hoping you could shed a little bit more light on the definition of the smaller markets that you reference, and how that's enabling you to extend your long-term square footage growth runway.

Sure.

Over the last couple of years we have experimented opening some of these smaller market stores with stores that are reduced in square footage.

And those stores range anywhere from 35,000 to 45,000 square feet.

And we've had very good success in some of these smaller markets.

And based on that success, we've done some additional studies that tell us we have the opportunity to grow an additional 200 stores across the country.

And those smaller markets, how would you define that?

You mean what are some of those markets?

Yes, So population size.

100,000 people?

200,000 people?

Whatever measure it is that you use.

Less than 200,000.

Okay.

How should we look or think about the mix of those smaller stores or the smaller market opportunities versus your normal bigger box opportunities?

I think you can think about 15% to 20% of our stores on an annual basis will be below 45,000 square feet.

Got it.

And then just shifting to the shop-in-shops that you mentioned.

I think to date most, if not all, of the Under Armour shop-in-shops are in stores that have a Nike Field House concept in them.

With respect to the adidas shops you'll be opening, are those adidas shops, will they also be in stores that have both Under Armour and Nike shops in them?

Or is adidas going to be housed in a non-competitive store?

No, you can think about the shops that we will add for adidas will be in those stores that currently have Nike and Under Armour shops today.

Got it.

Thanks a lot and good luck.

Chris Horvers of JPMorgan.

I just wanted to parse out some of the impact.

So the 400 basis point hit from fitness and weather, would you say that was roughly evenly split or was the cold weather categories more?

And, also, did you see any impact from Sandy in the quarter?

It was relatively even between the two categories.

We're not going to break out Sandy's impact.

Some of the stores around there that were hardest hit, yes.

But in a meaningful aspect, no meaningful issue around Hurricane Sandy.

Okay.

And then on the fitness equipment, do you think that you'll get through that inventory here in the first quarter?

And can you talk about perhaps the seasonality of that business, fourth quarter versus the first half?

Let's put it -- the fourth quarter and the first quarter are the two key fitness quarters.

So we're in that -- and it's really the first part of the first quarter.

So we're coming out of the back half of this.

The team has done a nice job starting to reduce that inventory.

We still have some work to go, but it's all planned in the guidance.

And there shouldn't be an earnings impact from markdowns.

And then in terms of the investments that you're making in the step-up, the $0.12, was just curious, how much of that is really on the system side, the eCommerce side, versus the store remodel program?

Let me give you a rough breakdown, Chris.

As Ed mentioned, eCommerce is really leading the pack.

That's about $0.04 of that investment.

The new concepts as we build those out will be about $0.03.

The IT impact and systems that Joe has mentioned is about $0.03.

And then the additional depreciation for these remodels, as well as the 75 store partial remodels, will be about $0.02.

And that depreciation -- just an accounting question -- does that go through cost of goods or does that go through SG&A?

The $0.02 that I just spoke of goes through cost of goods.

Okay.

And then finally, just a follow-up on Michael's question.

What you'll report for the first quarter for the period that started February 3, that is zero to plus 1%, that's your guide for that?

Yes.

Okay.

Understood.

Thanks very much.

Sean Naughton of Piper Jaffray.

Just on the hunting category, this has obviously been a relatively interesting year from a demand perspective over the last several months.

Just curious if you could talk about any supply constraints in this particular department, as well as potentially any changes you're making in terms of the product assortment in that particular area of the store?

The inventory has certainly been a struggle as it relates to ammunition.

On the hard lines aspect of it, we haven't seen as much.

You may or may not know, we don't sell handguns and haven't sold handguns for 20 years.

So we're not experiencing any issues around handguns.

But the ammunition has been very difficult to keep in stock.

We actually have people who call the store every morning to find out if we got ammunition, they come in and buy it.

We don't expect the ammunition supply to be fixed any time soon.

So there's no changes in the types of long guns that you're carrying in the store then at this point in time.

We focus on the hunter.

We suspended the sale of MSRs after the issue, the tragedy at Sandy Hook.

And have not put those back in the store.

But we don't expect any other modifications to what we sell.

We focus our products primarily on the sportsman and the hunter.

Okay.

And then just a follow-up on the systems implementations you're working on.

It seems to be, this has been going on for a number of years now.

But maybe you could just give us an idea of where we are in the assortment planning and price optimization process.

And when we should start seeing some of the benefits from those systems come into play.

Where we stand today is those systems were implemented in 2012.

But, keep in mind, as you implement those systems there's six to nine months worth of beginning to understand how they work and getting them up to full capacity.

So late 2013 is where we expect to see some results from those systems implementations.

Okay.

So really on the full year, maybe 2014 we'll start to see the full benefit from that.

That's correct.

Okay.

Great.

Thank you.

Best of luck in Q1.

Rick Nelson of Stephens.

I'd like to ask you about the gun and ammo sales, how that affected your comp in the period, and how you're planning that business for the remainder of 2013.

It had a positive impact.

We don't call out specifically category by category, but it was certainly a positive impact.

We think it's going to be relatively neutral, maybe down a little bit as we go into '13, just because of the lack of inventory from an ammunition standpoint.

The size of the Field & Stream stores, what are you talking about here?

I'm sorry, could you repeat that?

The size of the Field & Stream stores?

The first two Field & Stream stores will be 50,000 square feet.

And we think the research that we've done, we think we can get everything we need to do in roughly 50,000 square feet.

Thanks.

Good luck.

Robbie Ohmes of Bank of America-Merrill Lynch.

Ed, I was hoping you could comment on one of the places where you did have good momentum, which you called out, apparel and footwear.

Could you talk a little more about what was working in those categories in the fourth quarter.

And maybe help us understand how you're thinking about maintaining that momentum in 2013, and some examples of things that could keep it going.

Thanks.

Sure.

The Athletic Apparel business was really very good.

Fleece product was very good.

The Women's Athletic piece was really very good.

And the Footwear business, as we indicated, was good for us.

And we're seeing, as some other people are, a resurgence of the Basketball business.

So the basketball silhouette has been very good and we will be taking a much more aggressive stance in basketball going forward into 2013.

Great.

Thanks very much.

Paul Swinand of Morningstar Investment Research.

The first question is maybe a tough one, but retailers have been dealing with weather problems for as long as they've been around.

But is there any new technology that you think will help this type of problem?

My visits to the stores definitely showed stuff sold out in January just when the weather turns.

Not to give you guys too much of a soft ball, but is there anything that's going to be different next year?

I don't think there's going to be anything different.

We look at planalytics to try to get some sense of what's going to happen.

We can predict based on the weather.

Starting in November of the fourth quarter and through probably middle of April, based on the temperature, we can pretty much predict on a day-by-day basis what our business is going to do.

The issue is, we can't influence the temperature.

This next week we're going to be on average -- I was just talking to our team today -- on average, next week temperature is going to be 15 degrees colder than it was last year, which is one of the things that helped drive that 8% gain we had last year.

As we take a look at this from an outerwear standpoint, we think the Outerwear business is still really very good and an important business for us.

And I've said this 100 times.

When it's been cold and we've had a lot of snow, I've indicated to the Street -- hey, we're not as smart as we look, the weather was helpful to our Business.

And when the weather isn't helpful to our Business we're not as dumb as we look.

But what we can do to change how to predict the weather and how sales are going to be based on the weather, I don't see anything different next year than this year.

And I don't see anything different five years from now than this year.

Does the customer exhibit any learning behavior like buying earlier instead of waiting?

Have you ever seen that in your experience?

No, I don't.

Well, I shouldn't say that.

There's some of the fashion items, colors, some hot products that might sell out earlier in the season that people want.

But for the most part, most of the time people buy very close to need.

When a snowstorm is coming or cold weather is coming, or when it's here is when they buy it.

Got it.

And then a quick question on the ellipticals and treadmills versus the apparel and the LIVESTRONG brand.

It seems like you've got a lot of apparel still.

Is that still doing pretty well?

The apparel didn't do as well either.

We had a hit from the apparel standpoint also.

Okay.

Great.

Thank you very much.

Peter Benedict of Robert W. Baird.

A couple questions.

First, if we think about the eCommerce business, obviously the penetration up big this year.

And it was as high as 8.6% in the fourth quarter.

When you think about next year's fourth quarter, are there any merchandising strategy adjustments you have to make, recognizing that?

ECommerce being around 4% of sales Q1, 2 and 3, but then more than doubling in the fourth quarter.

Can you talk about maybe how that changes your thinking going forward about the fourth quarter?

A couple of the things that helped our fourth quarter was earlier in the year we didn't have as much set up from ship-from-store.

So having ship-from-store being as fully robust as it was in the fourth quarter was certainly helpful.

With that being said, we think that next fourth quarter will be the highest penetration of eCommerce business versus the other quarters.

We take a look at where those products sold, where we think that the trend is going to be, and make sure that we have those products in place.

Some of the things that we'll do to try to do a better job in next year's fourth quarter is, on the marketing front, we won't be as outerwear-focused.

We were really enthusiastic about the Outerwear business.

We probably over-invested from a marketing standpoint in outerwear, both online and in the stores.

And we will modify that to be more balanced next year than we were this year.

Okay.

Thank you.

And then if we look at the square footage growth of the Business, last couple years running around 7% or so.

You talked about the new smaller market opportunity.

As we think about making our way towards the 1,100 store target, should we think about a square footage growth backdrop that's somewhat around that 7%?

Do you still think you can get that closer to 9%, 10% or should we think 7% is the number?

Or less?

I think you can think about 7% to 8% in 2013.

But we think we can move that up to 9%, maybe 10% in the coming years.

So we do think there will be an opportunity to increase that slightly over the next couple of years once we get through '13.

Great.

That's helpful.

And then just lastly, a clarification.

The $0.12 investment expense that's coming this year, clearly it's a step-up.

But we're not to think of this as being a one-time.

It's new level of expenses, and they'll probably persist as we go forward.

Is that the right way to think about it?

You should consider this part of the infrastructure.

Great.

Thanks, Tim.

Dan Wewer of Raymond James.

Ed, I know that golf category becomes significantly more important in the next two quarters.

Given the late start to spring, I think you alluded to it's going to be 15 degrees colder next week.

I was unaware of that.

But is that one of the reasons why you're guiding conservatively on 1Q?

That you would expect golf to get off to a slower start?

Yes, I think everything in the spring is going to get off to a little bit slower start this year.

What I looked at from a forecast standpoint, 15 degrees colder next week, that has an impact.

Now, what I will tell you, though, is I think between the first quarter and second quarter it will even out.

We talked about last year that in the first quarter we moved business from the second quarter to the first quarter.

I think this year it's going to be more normalized.

And when we take a look at the two quarters combined, we anticipate that it's going to be fine.

But it's just going to be difference between the first and second quarter.

Somebody asked me one time, about a year ago, what Wall Street doesn't understand about our Business.

And I smiled and tongue in cheek said, what Wall Street doesn't understand about our Business is that our customers don't understand the concept of quarters.

They don't understand when they begin and end.

But season-wise as we go into the first and second quarter combined, I think it's going to be fine.

We're really pretty enthusiastic.

We think the golf -- there's some great new technology out there from a golf standpoint.

TaylorMade Rocketballz Stage 2, the R1 from TaylorMade.

The new Nike Covert driver is doing very well.

The Callaway products are doing very well.

This is a great product cycle from a golf standpoint right now.

You talked about moving to the large store format for Golf Galaxy.

But I think there's only one relocation and one opening this year.

But what makes your large store format different than a PGA Tour Superstore, or different than the new Golfsmith format?

It's still smaller than PGA Superstore.

As you take a look at what we're going to do there, there will be fittings similar to what you get at PGA Superstores.

What will really be a big differentiating factor with us is going to be the apparel aspect we have in the store.

And when you take a look at -- we're not going to talk about it right here -- when you take a look at some of the services, and the way we're going to provide some of the services, it's going to seem much more like what happens on tour than what happens when somebody goes into the back room and takes care of your club.

We're going to provide much more of a tour experience in our store than you'll find anyplace else.

Great.

Thanks.

Kate McShane of Citi.

Most of my questions have been answered.

But with regards to the commercial real estate opportunity, I wondered if you could update us on if you're seeing any improvement in the buildout or availability.

And what costs are just based on your mentioning of the deleveraging on occupancy in 2013.

Sure, Kate.

We're not seeing a significant change in new construction of shopping centers.

What we are seeing is that REITs are buying more properties from department stores.

They're repurposing small shop space, vacant department stores, movie theaters, junior anchors.

Obviously, Sears, with what's going on with Sears, we are seeing some opportunity there to repurpose some of those properties.

And then with what's gone on with Best Buy, Barnes & Noble, Office Depot, Office Max, potential store closures there, as you would expect we are looking at all of those opportunities as we become aware of those.

New growth has been pretty consistent over the last couple of years.

We've been about 50% new construction versus repurposing existing boxes.

And I think you can expect to see 2013 pretty similar in that regard.

As far as prices, we are seeing prices escalate a little bit in some of the major mets.

So as you think about Chicago, New York, LA and some of the major mets across the country, we are starting to see some increases there.

But elsewhere around the country I think you'd see pretty consistent pricing over the last couple years, and expect it to be pretty similar moving forward.

That's very helpful.

Thank you.

My second question is just a follow-up with regards to real estate.

How is Dick's viewing the metro market opportunity for this 1,100 door strategy?

Kate, we think there's an opportunity there.

We'll test it.

We have tested some close to urban settings.

But this year I think we're going to add a couple of stores in the urban area of Chicago.

So, we think there's an opportunity there to expand some store growth, as well.

Thank you.

Sam Poser of Sterne Agee.

Can you talk about week 53 specifically?

And if you were impacted by the delay of the tax refunds and how that's all working into the story right now?

The refund, Sam, I have no idea.

We haven't tracked that.

Some people have talked that that's been an impact.

And maybe, it is somewhat of an impact because people aren't getting their checks back early enough.

But we can't quantify that so we can't really make a comment.

Can I ask you this -- some larger boxes, not competitors, commented on January, when they gave their January same-store sales, basically it showed a significant falloff in the week five of January, even though it wasn't in their comp.

Their comps were okay.

Did you see a similar kind of thing?

Did week five live up to your expectations even though you made the guidance, the EPS addition, did it do what you expected it to do?

Or was it disappointing?

We had always indicated that we thought the 53rd week was going to be approximately $0.03 in earnings impact, and that's exactly what it came in at.

Okay.

And then just to confirm, you're saying that quarters one and two will be helped by the calendar shift.

So, the revenue, the responding revenue -- but you're saying that your -- but your reported or your comp sales on a fiscal basis are going to be down, but your comp stores on a calendar basis will be flat to up.

Doesn't that say that there's a negative impact in the first quarter, and that should be the other way around in Q2 and 4, I would think.

Sam, let's back up.

On a fiscal year basis, there is no change.

Understood.

But as we get -- on a reported basis, we have to report as the weeks fall out.

From a reported basis we get a $0.05 benefit in the first quarter, as we indicated.

We get a little bit less than that in the second quarter.

And then it completely turns around in Qs 3 and 4. So, if you look at how we guided our comp, for example, our reported or unshifted comp is flat to 1%.

Whereas the shifted comp is negative 2% to negative 1%.

So, you understand that with a positive comp we get better earnings.

With a negative comp we have lesser earnings.

The shift is really taking a look at -- if I can explain this -- this does get confusing.

And a number of retailers are going through this right now.

But Q1, we replace the first week of Q1 with the last week of Q1.

So last year, the first week of Q1 would have been the first fiscal week of February.

This year it's the second week of February.

Which gets offset with a week in April, which was really the first week of May.

And we do a lot more business in the first week of May than we do in the first week of February.

If that makes it any clearer, Sam.

I hope it does.

It does.

A lot of other companies do more business that first week of February than the first week of May.

So the shift is different because of that.

Yes, we don't.

We do a lot more business the first week of May than we do the first week of February.

And most of that, I would assume, comes from your active outside equipment stuff -- your camping and all the stuff that people do outside, versus a lot of the athletic footwear guys and so on that sell a lot more basketball and that kind of stuff earlier, as a percent of your total business.

Is that the right way to think about it?

A lot of stuff that we do outside.

So, you've got people who are buying running shoes.

You've got people who are buying apparel to run.

Our Golf business, Baseball business, Hunting business, Camping business, all of that.

When people start to get outdoors in the spring, we do a lot more business.

And then in Q3, you basically lose a big week of back-to-school and you gain a smaller week at the end of October.

That's exactly correct.

Okay.

So, I understand the difference.

Thank you so much for clarifying that.

Matt Nemer of Wells Fargo Securities.

I just want to sneak in two questions.

First is the competitive response to Cabela's next generation small market store that you mentioned.

Have you seen an impact in your stores where there's geographic overlap to these concepts?

And then, secondly, I know it's early, but can you comment on the volume that you're pushing through ship-from-store?

And then any impact that you've seen in terms of shipping speed to the customer and margins.

Thanks.

With Cabela's stores, any time a competitor opens up there's always some impact.

I have to give the guys, Cabela's, credit.

They've done a really nice job with these stores.

So, yes, we do see an impact.

And we'll take a look at what we're going to do from a competitive standpoint.

We think testing these stores is the appropriate course of action.

We're really very excited about it, and it's in an expertise area that we have.

As far as ship-from-store capabilities or volume, we're not going to comment at that granular a level.

We've laid out to you what our total eCommerce penetration was.

Ship-from-store is certainly a meaningful part of that.

One of the things that we look at is that we have 500 distribution centers around the country, very close to the customer.

So, we can get product to people very quickly and relatively inexpensively from a shipping standpoint by having the ability to ship from store.

And is the goal of that program primarily to increase shipping speed?

Or is it more around rebalancing inventory and reducing markdowns?

The primary objective is not to rebalance inventory, although as we get more sophisticated, I think that we'll be able to do that.

But the primary objective is to provide the customer with the best service possible and get them their product as quickly as we can.

Great.

Thanks so much.

John Zolidis of Buckingham Research Group.

A big picture question.

We've got the True Runner concept you're opening.

You're doing another concept with the Field & Stream.

We're looking at the smaller markets now.

When we take all that together from a strategic standpoint, should that tell us anything about how you feel about the core concept?

It would suggest that maybe you're somewhat less enthusiastic about the core concept.

Thank you.

Good question.

But the answer is, not even close.

We are extremely enthusiastic about the core business.

And one of the ways, one of the dots you connect to say how enthusiastic we are about this, is that we're renovating 75 stores, and putting in 75 of these Nike concept shops, Under Armour, adidas, North Face.

No, the stores are doing extremely well.

Still the vast majority of our earnings are coming from those stores and we're very enthusiastic about it going forward.

What we want to do is, we think from a competitive standpoint, it gives us another part of the competitive arsenal for us with the Field & Stream concept, with the Golf Galaxy concept, and with the True Runner concept.

And we are looking for an area to grow the Business once that tail slows with the Dick's stores.

We're going to hit that particular number of stores, that growth curve is going to be more difficult for us.

And at that point, the Street will be asking us -- why don't you have anything in your back pocket to grow.

We've looked at a lot of other retailers who have not really positioned themselves for that day.

We want to position our self for that day.

And one just follow-up.

How do you ensure that management doesn't get distracted by these smaller new concepts with the ongoing challenges that you would face in the course of ordinary business in the core business?

The best way to do that is to hire great talent to run them, which is what we anticipate.

Which is why part of the $0.12 is for talent infrastructure.

But the best way to make sure that our present management isn't distracted, and that the new management has the best chance of success, is to hire great talent.

Thanks very much and good luck.

Michael Lasser of UBS.

Ed, you've dealt with product cycles, weather in the past.

As you become a bigger organization, is it more difficult to manage through those types of issues than when you were a smaller company?

Thanks a lot.

Is it more difficult?

I think it's more complex.

I don't think it's necessarily more difficult.

When we were a smaller organization we didn't have the talent we have today.

We didn't have systemic solutions we have today.

But I don't think it's more difficult.

I just think it's more complex.

And I think we have the resources at our disposal to work through those complex issues.

So it doesn't lead to greater volatility in sales, because you can manage through it?

I think we can manage through it.

At the end of the day, so we guided to $1.03 to $1.05.

We wish we had been at $1.05 instead of $1.03, but we still got within our guidance.

And when we take a look at the original guidance we provided for 2012, the high end of that guidance was $2.41.

We beat the original guidance by a pretty wide margin.

I wish we had had a better fourth quarter.

Some of the things were beyond our control.

Some of them weren't beyond our control.

We could have held a little tougher on reducing the incoming cold weather accessories.

That was a decision I made.

I didn't want to have that inventory backed up again.

Should I have made a different decision?

You could say that.

But we continue to manage through these with still pretty good earnings, although not what we had anticipated, which is disappointing to us.

Thank you very much.

David Golberg, Morgan Stanley.

This is Shaun on for Dave.

Just on the new store roll-outs, particularly in the South with four Oklahoma openings and one in Louisiana this quarter, what are you seeing in those markets?

And how would you describe the competitive dynamics, maybe relative to your existing markets?

We don't give specific information by market, but you can expect that we're pleased with how the business has gone in Oklahoma.

And in the South in particular, we're very pleased with how business is going.

Which you can see in our new store productivity numbers.

Got you.

Just one more follow-up on the incremental SG&A spend.

Given that those investments are going to be ongoing in nature, do you think there's going to any impact on your operating margin goal long term, or how long it might take to get there?

No, I don't think so.

Although these expenses are ongoing, what we're doing is we're building the infrastructure ahead of the sales.

And we'll talk more about this at the Analyst Day.

But we're building the infrastructure for the new concept.

We're building the infrastructure for the eCommerce business, which we now have a lot of that done through GSI.

But we're building this infrastructure ahead of what the sales are.

Thank you.

Joe Feldman of Telsey Advisory.

I'll try to be brief, as well.

But eCommerce -- just wanted to drill down a little bit.

Can you talk about the profitability that you're seeing in eCommerce these days relative to the stores?

I know there's a lot of investment going on, so not to say that -- and I know what the game plan has been with eCommerce.

But just wanted to better understand that because it is growing pretty rapidly, and it's now 8% or 9% of sales.

Just wanted to go down that path with you.

We think the eCommerce business is going to continue to be an important part of our Business.

We think that there's a lot of opportunities out there from an eCommerce standpoint.

And we want to go capture that.

We expect to do the same thing from an eCommerce standpoint as we have with the Dick's Sporting Goods stores.

Thanks.

And then just one more question.

The remodels that you guys are doing this year, how much of it -- what's different than what you've done before?

Is it mainly just that you're adding the vendor shops?

I was wondering if you could talk about the split between your cost in the vendor shop versus the vendors themselves.

And what kind of lift you would expect.

Because with a 2% to 3% comp lift, it seems a pretty conservative number, given that you're adding some of these new in-store shops with the remodels.

These in-store shops haven't been added yet.

We're doing this during the year, and the cost split between us and the vendors.

We haven't talked with them about, articulating what that is.

So we're not going to articulate that.

But we think that this is going to have an important impact on our business going forward.

But these shops won't be fully done until roughly halfway through the year.

Got it.

And is that the bulk of what's going on in the remodel, just the in-store shop and the shared footwear model?

Or are there other things.

Understand that it's not just as simple as adding the shop.

We're basically taking the center part of the store, both sides of the center part of the store, and rebuilding it.

So, yes, the simple answer is putting the shops in, but there's a lot more to it than just dropping a shop in there.

We've got to build the infrastructure, the walls to house these shops.

We've got a different traffic pattern that will go into the store, different lighting, different graphics.

There's a lot that goes into this, really from the front of the store all the way back to footwear.

It's really not as simple as it sounds.

Got it.

That's exactly what I was trying to get.

Okay, thank you so much, guys.

Good luck this quarter.

David Magee of SunTrust.

Just two quick questions.

First, on the renovations, are they going to be ticking on the comp pool during the construction period?

They are not.

Okay.

Secondly, with regard to the eCommerce business, have you said what your ultimate penetration goal would be there?

Is there a point at which it becomes a little bit alarming to you, given that it's growing so fast?

We haven't provided guidance as to what we think it would be long term.

But we think it will be meaningfully better than it is today.

But we're not going to go out on a limb and give you that guidance.

Is a big part of this coming from areas that don't have stores right now?

It's mixed.

But as I said earlier, as we open up stores in new markets, our eCommerce penetration goes up pretty dramatically.

Great, thank you.

Sam Poser of Sterne Agee.

Just a quick follow-up.

You talked about the new smaller market stores.

Can you tell us what two markets the current test stores are in so we can get some idea of the kind of actual market it is?

Coney Island, New York is one of them.

And we did a couple here outside Pittsburgh.

We did one in Washington, Pennsylvania a few years back.

We just opened one in Holly Springs down in North Carolina, which would be a good example of that, as well.

Okay, thanks very much.

Chris Svezia of Susquehanna Financial Group.

Tim, for you.

Just curious, on the gross margin outlook, in the fourth quarter you leveraged some occupancy.

I'm assuming that's some shoring up of -- I'm just curious, you said for the year you wouldn't do it.

But in the fourth quarter you did, on a pretty low comp.

So just maybe talk about that for a sec.

I think you also have to look at the high comp that we had on the eCommerce side.

That helped a great deal on the leverage on the occupancy.

Okay.

And you don't anticipate that as much in 2013, given the store remodels and store growth?

That is correct.

Okay.

And then, just lastly, as you guys think about competitive environment, particular in outdoor and fish, as Sports Authority continues to de-emphasize those categories, what are you seeing in those markets?

Are you picking up that market share opportunity as they continue to de-emphasize those categories?

I think they talk about de-emphasizing those categories, but I don't think they had much market share in the first place.

So I don't think it's a big impact.

Okay.

All right.

Thank you very much and all the best.

Matthew Fassler of Goldman Sachs.

Just two modeling questions that hopefully will be of broad interest.

First of all, can you talk about, or can you size the sales shift by quarter associated with the movement in the weeks?

Can we?

-- Yes.

We can do that.

But we've never gone that granular before.

We've laid out what the shifted basis is and an unshifted basis, which we think gives you a sense of where business is at.

I'm asking you, for Q1 we can figure it out, but then there's a piece for Q2.

I'm not sure if that's bigger or smaller than the Q1 shift.

And then if the payback in the second half is split evenly or disproportionately whether it's one quarter or the other.

Even that would be helpful for getting the quarters figured out.

What we can do, Matt, much like we did in the press release where we laid out now the consolidated comps when we include eCommerce, we could give you an idea of what the difference is in the comp guidance on a quarterly basis as we get through the next quarter.

As they go.

Okay, that's fine.

And then, secondly, just coming back to the notion of the gross margin guide versus the SG&A guide, you cited the store remodel effort as laying on occupancy costs.

And if that's $0.02, that's an up 7 basis points to your gross margin.

And your merch margin rate has run up 40 bps or better, with some continuity.

So I'm not sure if giving back the leverage associated with the extra week in the fourth quarter of last year, is the decisive factor.

Or if you're modeling a much lower merch margin improvement than you've had to date.

Just trying to figure out why occupancy was a 2 or 3 comp, which should be okay, is that much of a weight for you.

There's two components that we outlined, Matt.

It was the impact of the remodels.

But we also have the carryover impact of the 2012 stores coming online.

Yes.

Okay.

Thank you very much.

That will conclude our question-and-answer session.

I would like to turn the conference back over to Mr. Edward Stack for his closing remarks.

I'd like to thank everyone for joining us today on the call to discuss our fourth-quarter earnings.

And we look forward to talking to everybody about first quarter.

Thank you.

Ladies and gentlemen, the conference has now concluded.

Thank you for attending today's presentation.

You may now disconnect.