DICK'S Sporting Goods Inc (DKS) 2014 Q1 法說會逐字稿

Good morning, and welcome to the Dick's Sporting Goods first quarter 2014 earnings conference call.

(Operator Instructions)

Please note, this event is being recorded.

I would now like to turn the conference over to Anne-Marie Megela, Vice President Treasury Services and Investor Relations.

Please go ahead.

Thank you.

Good morning, and thank you for joining us to discuss our first quarter 2014 financial results.

Please note that a rebroadcast of today's call will be archived on the investor relations portion of our website located at dicks.com for approximately 30 days.

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

In order for us to take advantage of the Safe Harbor rules, 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 includes, 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 the risk factors that could cause results to differ materially from those expressed in the forward-looking statements, please refer to our periodic reports filed with the SEC, including the Company's annual report on Form 10K for the year ended February 1, 2014.

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

We have 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 dicks.com.

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

Ed will review our business drivers, strategy, and outlook.

Joe Schmidt, our President and Chief Operating Officer, will review our omnichannel development program and specialty concepts.

After Joe's comments, Andre Hawaux, our Chief Financial Officer, will provide greater detail regarding our financial results, capital allocation and expectations.

I will now turn the call over to Ed Stack.

Thank you, Anne-Marie.

This morning we announced our first quarter results, including consolidated non-GAAP earnings per diluted share of $0.50, below our guidance of between $0.51 and $0.53.

There were two major issues that significantly affected our business in Q1, offsetting strong performance across many product categories.

One issue we believe to be temporary, the other maybe longer-lasting.

We are going to provide more granularity on how we built our plan and performed against it than we normally would as we believe it's important to help our investors understand these drivers.

Our hunting business missed its first quarter plan by approximately $15 million and comped down high teens to last year.

We had anticipated this category to be below last year, as did others in this space, but we underestimated the decline.

We all knew the significant increase in sales during the past couple of years was temporary and driven by concerns about legislative action that would broadly change our gun laws.

The hunting business is anticipated to continue this negative first quarter trend through the second quarter, improve slightly from this trend in the third quarter, and be relatively flat in the fourth quarter.

We continue to be enthusiastic about the outdoor business for both Dick's and Field & Stream longer term as we are confident the results here are just right-sizing the business from the panicked buying that began in 2012.

To illustrate this point, subcategories of the outdoor business such as paddle sports, hunting and fishing apparel, all grew double-digits.

The more concerning and unpredictable issue is the golf business.

We anticipated softness, but instead we saw significant decline with Golf Galaxy down 10.4% and the Dick's Sporting Goods golf business off by high single-digits.

Our overall golf business missed our first quarter 2014 sales plan by approximately $34 million.

We don't feel we've found the bottom yet in the golf sales number.

We now expect this trend could continue for the balance of the year and will impact our prior guidance which assumed a slight improvement in the golf business for the balance of the year.

As you know, the second quarter is the most important quarter for our golf business.

The issues in golf are threefold.

First, there is a glut of inventory in the market at both wholesale and retail as a result of the lackluster sales over the past 15 months.

The vendors have been more aggressive in pricing discontinued and cascaded product.

For example, we are selling drivers in our stores this spring for $99 that were $299 approximately 20 months ago.

The deep price reductions combined with the increase in inventory of cascaded products caused our AUR on men's drivers to drop 16% in Q1 while our units were only down 2%.

The second issue is the core golfer doesn't seem to understand or has not yet fully embraced the new technology our vendors have brought to market.

The technology in game improvement possibilities, especially in drivers, are fantastic.

But since it's not yet completely understood or embraced, the core golfer has not replaced his equipment and the more casual player has elected to buy closeout products at a lower price.

Third, we are continued -- we continue to be concerned about the structural issues of the decline in rounds played.

As an industry, all parties are looking at ways to reverse this trend.

The effect of both the golf and hunting issues is that our earnings were and will continue to be significantly impacted as these two businesses represent most of 30% of our annual sales.

Their miss to our sales plan impacted our earnings in Q1 by approximately $0.06.

If these trends continue, it could have an approximate $0.30 impact on our annual EPS.

Normally, we don't discuss how the business is performing during the quarter, but given the magnitude of our revised expectation, I believe it's important to share current trends in these categories.

Recognizing that we are only approximately 2.5 weeks into the quarter, golf comps are trending in the negative low teens while hunting is still in the negative high teens.

For Q2, these categories were approximately 30% of our sales.

It is because the hunt and golf businesses, along with some buildup of inventory partly due to our sales miss, that we are revising our full-year EPS guidance from $3.03 to $3.08 to $2.70 to $2.85 per share.

With all of the above said, the balance of our business is quite good.

Our women's athletic apparel initiative, which has providing great results with comps in the low teens range, our youth athletic apparel business has done even better than the women's business, although off a smaller base.

Team sports, along with footwear, have been strong as well.

If we take out golf and hunt, which we know we can't, our first-quarter comps would've been 6.6%.

Our e-commerce business is also doing well, growing to 7% of our overall business, up from 5.8% last year, and we've moved up to number 72 on the Internet retailer top 500 list, up from 94 last year.

We are excited about the progress on the key strategic elements of our business such as e-commerce, the performance of such categories as womens, youth, footwear, and the license business, however the balance of this year is expected to be difficult because of the trajectory of golf and the hunting businesses.

Be assured our associates, management team, and others will be working tirelessly to make this a successful year while continuing to make the right investments and decisions for the long-term growth of our business.

I'd like to now turn the call over to Joe.

Thank you.

Ed.

In the first quarter of 2014, we grew our omnichannel platform by expanding both our store network and our e-commerce business.

We opened eight new Dick's Sporting Goods stores, bringing our store count to 566 stores.

We also relocated one Dick's store to a new location.

New store productivity for our Dick's stores was 98.1% as our new stores performed in line with our existing stores.

On the e-commerce side, we took steps to drive further awareness of our online business by improving our search engine optimization capabilities.

We continue to enhance our mobile and tablet sites and are pleased with the increases in conversion we are seeing.

We also continued the pilot of our buy online, pick up in store capability.

We are in the process of reallocating space within our Dick's stores.

This involves a dedicated more square footage to higher growth and higher-margin categories such as youth apparel and women's apparel, while shifting floor space away from golf equipment and fitness equipment.

We have completed the transformation of the youth apparel in most of our stores to date and expect to complete the remaining stores as well as expand our women's apparel area in time for back-to-school.

All of our Dick's stores included ship-from-store fulfillment capabilities as we believe that stores are a critical piece of our omnichannel strategy.

As I stated earlier, we continue building our buy online, pick up in store capabilities.

We rolled out additional pilot stores during the quarter and are currently testing this capability on select product -- products in stores in three states.

As we learned from the pilot, we will roll out additional product categories and locations.

We are also integrating our stores and technology in other ways.

In addition to our existing in-store kiosks, we are testing a program that equips our associates with tablets to offer customers an endless aisle experience.

This enables associates to check inventory across our network and order items for customers without leaving the sales floors.

Looking at our specialty concepts, we are very excited about our growth opportunity with Field & Stream.

We continue to learn more about Field & Stream in our two stores and identify additional opportunities to drive sales and margins.

There were approximately eight new stores expected to open in 2014, including one store scheduled to open in the second quarter.

At Golf Galaxy, we completed the relocation of our store in Paramus, New Jersey in the first quarter.

This relocated stores in our new format with a greater focus on golf services and experiential shopping.

Now, I will turn the call over to Andre to discuss our financial performance, capital allocation and outlook in more detail.

Thank you, Joe, and good morning to everyone.

Today I want to focus my comments on our first quarter financial performance, our balance sheet and capital allocation and our outlook for the second quarter and the full year.

In this first-quarter, our total sales increased 7.9% to approximately $1.4 billion.

Consolidated same-store sales increased 1.5% compared to our guidance for 3% to 4% same-store sales growth and compared to shifted comps of negative 3.8% in the first quarter last year.

Dick's Sporting Goods consolidated same-store sales increased 2.3% while Golf Galaxy decreased 10.4% in the first quarter.

The same-store sales increase in the Dick's Sporting Goods business was driven by a 0.2% decrease in traffic and by a 2.5% increase in sales per transaction.

E-commerce penetration was 7% of the total sales in the quarter compared to 5.8% of sales in the first quarter of last year.

Moving onto gross profit, first quarter consolidated gross profit was $440.9 million, or 30.64% of sales and was down 23 basis points from the first quarter of 2013.

Merchandise margin expanded 30 basis points.

This was offset by occupancy deleveraged and increased shipping expenses as our e-commerce penetration continued to increase.

Excluding a $14.4 million gain on an asset sale, SG&A expenses in the first quarter of 2014 was $337 million, or 23.42% of sales compared to 23.45% of sales in the first quarter of 2013.

This leverage of 3 basis points was primarily due to lower administrative expenses as a percentage of sales.

Our preopening expenses were $6.2 million, a $4.9 million increase from the first quarter of 2013.

As we discussed on our last earnings call, this was due to an increase in the number of new store openings relative to last year's first quarter.

For the first quarter, we generated non-GAAP earnings of $0.50 per diluted share, which excludes a $0.07 gain from the sale of a corporate aircraft.

This compares to non-GAAP earnings of $0.48 per share in the first quarter of last year.

Now, turning to the balance sheet, we ended the first quarter with $139 million of cash and cash equivalents.

Last year we ended the first quarter with $114 million of cash and cash equivalents.

We did not have any outstanding borrowings under our $500 million revolving credit facility.

Over the past 12 months, we have invested in omnichannel growth, repurchased shares and paid quarterly dividends.

Total inventory increased 12.8% at the end of the first quarter of this year compared to the end of last year's first quarter.

The increase in our inventory reflects investments in strategic growth categories including team sports, youth and women's apparel, new concepts, and excess inventory in golf and hunting.

Net capital expenditures were approximately $40 million, or $64 million on a gross basis.

This compares to the net capital expenditures of about $27 million, or $34 million on a gross business in the first quarter of last year.

During the first quarter of 2014, we repurchased $25 million of our common stock.

As we've said in the past, we will continue to repurchase shares to both offset dilution and opportunistically repurchase shares.

To date we have repurchased approximately $280 million under our $1 billion share authorization.

I'm now going to speak about guidance.

Many of the comments around guidance are going to be related to how we built our plan and the difference between our initial expectations of $3.03 to $3.08 to now $2.70 to $2.85.

We now anticipate consolidated earnings per diluted share of approximately $2.70 to $2.85 for the full year compared to our previous guidance of $3.03 to $3.08 per share.

We expect same-store sales to increase 1% to 3% for the year compared to our previous expectations of 3% to 4% increase.

The $0.23 change in the high end of EPS guidance is primarily driven by 1% lower comp and lower operating margins relative to original expectations.

We anticipate approximately 40 basis points lower gross profit margin from increased promotional activity and a 20 basis point increase in SG&A relative to sales due to lower total sales and increased spending.

The above factors lead to lower operating margins by approximately 60 basis points relative to our original expectations.

Turning now to the second quarter, Q2 is the largest quarter for golf and the anticipated hunting weakness is not expected to moderate until later in the year, as I'd mentioned.

Additionally, we plan to aggressively manage our higher than planned inventory levels so that as we enter the back half of the year, we are all well-positioned for the holiday season.

Taking these factors into consideration, we anticipate second quarter consolidated earnings per diluted share of approximately $0.62 to $0.67.

We expect same-store sales to increase approximately 1% to 3%.

Although we had not provided second quarter guidance, our internal plans call for EPS on the high end of approximately $0.78 on a 3% to 4% comp.

The $0.11 change in the high end of the second quarter EPS expectation is primarily driven by a 1% lower comp and lower operating margins relative to original expectations.

Gross margin is anticipated to be approximately 60 basis points lower due to the increased promotional activities stemming from the higher inventory levels that I just mentioned, as well as to address the challenges in the golf business.

We now anticipate SG&A relative to sales to be approximately 50 basis points higher due to the lower total sales number and increased spend.

The anticipated increase in expenses is expected to support traffic driving initiatives within the quarter.

Combined, this results in an approximately 110 basis point decline in operating margins relative to our original expectations.

In conclusion, we saw strength in key strategic areas and categories in Q1.

Our e-commerce business continued to show exceptional growth, and we are excited about the results we saw in categories including athletic apparel and team sports.

Our results were impacted by the challenges in golf and hunting that we've talked about in detail and because of the issues -- because of these issues, we've revised our full year outlook as discussed.

Despite these near-term challenges, we are working to drive the long-term growth of our business, and I'd like to thank all of our associates for their dedication and efforts.

This concludes our prepared remarks.

Thank you for your interest in Dick's Sporting Goods.

Operator, you may now open the line for questions.

(Operator Instructions)

Robbie Ohmes, Bank of America Merrill Lynch.

Thanks.

Good morning, guys.

Good morning, Robbie.

Thanks.

A couple of quick questions.

The first question just -- you called out women's and youth apparel.

Can you speak to what's going on in men's apparel and if it's -- if maybe even the golf apparel business, maybe work that in there?

The second question is, Andre, and the guidance you gave.

I think it also will cause a lot of analysts to take the back half down.

Is the -- can you help us think about how golf and other clearance -- how you're thinking about the back half in general?

I know it's early, but any sort of color in terms of the annual guidance you gave there.

And then just on the -- last question, just on the promotional activity, or managing -- I should call it managing the higher inventory levels, how much of it is just golf and hunting?

Or is there other areas that you are going to be more promotional and outside of golf and hunting to manage inventory levels down?

Thanks.

Sure.

Robbie, the men's business has still been strong.

We talked about in previous calls the change that we are making in our women's business and our youth apparel business and reallocating floor space to those areas.

Actually taking space away from golf.

And we saw what would happen in golf.

We underestimated how significant a decline this would be, but we talked about this.

So, we've just called out what's happening in the women's business.

It's doing extremely well.

The youth business is actually doing better than the women's business, and as I said, from a smaller base.

Our men's business, we are still quite pleased with.

On the promotional activity, we've got some buildup of inventory based on the miss of sales.

Some of that is the golf business.

Some of it is just other businesses that -- our clearance inventory is actually below what it's historically been.

A little bit higher than it was last year, but lower than what the approximate five-year trend has been.

We're going to take this opportunity to clean up that inventory also.

Robbie, your question relative to what our expectations were for Q3 and Q4, we've taken them down certainly a lot more modestly than what's happening in Q2.

As we said, the golf business, it's biggest impact for us is in Q1 and Q2, and obviously Q2 is the biggest one.

We do see ourselves, though, taking as a result of the golf and the hunt business, we are taking our comps down.

Most of the flow through in Q3 and Q4 is largely comp-driven with a little bit of extra margin pressure as we clear through.

But the lion's share of it sits in Q2 and a little bit of it in Q3 and Q4.

But after Q1 and Q2, we've gotten through a pretty significant piece of our miss with a little bit more into Q3 and Q4.

Got it.

Thanks very much.

Christopher Horvers, JPMorgan.

Thanks.

Good morning.

I wanted to follow up on that back half question.

As we think about the change in the back half, this is basically saying that the lag in hunting and golf or the pressure in hunting and golf is going to last longer than it previously did?

And as we think about the mix of hunting and golf, how do they proceed throughout the year?

Is 4Q pick back up from a mix perspective in those two categories relative to 3Q?

When you take a combination of the two, it's not a lot different.

It just becomes more based to hunt and less to golf, where in the second quarter, it's more golf and less hunt.

Okay.

So, net-net, they both tick -- so net-net, it that 30% lower in the back half?

For both categories?

Combined, yes.

And is 4Q lower than 3Q or higher?

I'm trying to get that for you right now.

What you mean is the -- is Q4 or Q3 higher as a percent of the totals?

Yes.

They're going to be -- they'll be relatively the same.

It won't be meaningfully different.

Okay.

Q3 is -- it's a smaller quarter, but Q3 might actually be a little higher than Q4, but it's a small quarter.

Yes.

Q4 -- just on the golf business, Q4 is obviously -- is our small quarter.

At that point in time, it represents about 10% of our business.

Just to put it in perspective, just because we do want to provide you all a little bit more granularity.

In Q2, though, it's about almost 25% of our business and overall, that's the kind of dimensions you have with golf.

I got you.

So then -- that's very helpful.

Then just to clarify, the overall 30% is smaller in the backlog for both categories or similar?

Is it 30% --

In total, Chris, it's a mix out difference.

It's slightly smaller, but you have more -- to Ed's point, you have more hunt and less golf.

You get almost to 30%, but it's a little bit less than that in the fourth quarter.

I got you.

So, then as you think about planning the business, you expect -- it sounds like the golf pressures you expect to be more persistent versus -- hunting has lasted a little longer here.

You do think that flattens out by 4Q?

We feel that it does.

The golf business, we think this is going to be longer lasting.

And as I said, we really don't know where the bottom is in golf.

A couple of the golf manufacturers have come out and talked about what is going on in their golf business.

It hasn't been good.

Adidas announced that TaylorMade's business was off 34% in the first quarter.

That's a big difference.

And TaylorMade is to the golf business what a couple of the real big athletic guys are to the athletic business.

And if TaylorMade is off 34%, the industry has a real issue.

So, just to reiterate what Ed said in his prepared comments, we have taken the golf business and we have modeled it like the performance we've had in Q1.

We have not made the alternations.

What we have altered is the hunt business which, as Ed mentioned, is Q2 will be about the same as Q1.

It gets slightly better in Q3 and flattens in Q4.

That's the way we've built our models for the balance of the year.

And then on the golf, Ed, does it change your -- you are already moving some space out of golf.

As I think about that section of the store, it's probably 10%, 15% of the square footage in the store.

My quick math.

But does it change your view?

Or do you start to accelerate this space reallocation, and what are your latest thoughts on that?

Well, I think we continue to see how this plays out.

There could be some additional reduction of golf space as we go forward.

Because -- part of is because of the golf business being the way that it is, we don't know where the bottom is.

But we've also seen other areas of our business that have big upside such as the women's business, that youth business, and we're trying to invest more heavily in that.

So, yes, we are looking at that allocation of space inside the Dick's stores and what we are going to do with it.

And then the last one, do you think on the golf, the clubs themselves, do you think it's just we've reached a resistance point on AUR in the drivers and the irons space?

No.

I don't think so, because the prices really haven't gone up very much from the last couple of years.

TaylorMade's top end driver is $399, it's been $399 for the last couple of years.

There's just such a glut of inventory out there that the AURs have come down.

Selling last year's product or two years ago product, some of that is still in the -- what we're trying to clean out from a couple of different vendors, and the AURs have gone down.

Some of the new technology that the brands have brought out is really, I believe terrific technology.

But it's very different than the way people viewed golf clubs in the past, especially on the driver side.

And people just haven't quite understand or quite have accepted what they should do with these drivers from a technology standpoint, and it's slowed the replacement process.

And the -- as I said, the casual golfer has just decided to go to lower-priced product for right now.

Thank you very much.

Sure.

Thanks, Chris.

Matt Fassler, Goldman Sachs.

Thanks a lot, and good morning.

My first question -- thanks -- my first question relates to golf and hunting.

As we think about sales -- long run sales, I know you are going to have some space reallocation.

Should we think about 2014 in your view as being essentially a new base for both of those businesses?

Where the business would be flat to up in the ordinary course off of 2014 levels?

Clearly, you gave us a lot of granularity for this year, but if we think about 2015 and beyond.

Well, Matt, I think that if you read between the lines --and we are not trying to make it so that you have to read between the lines, we are trying to be pretty granular here for you.

The hunt business we think is temporary.

We think it gets relatively flat at the end of the year.

I would say that 2014 is a good base year for that hunt business going forward.

But as I said in my remarks, we don't know where the bottom is in golf.

We may be at the bottom.

We are not sure.

You got to bottom out before you can start -- with sales increasing again, and we are not sure where the bottom is in the golf business right now.

Understood.

My second question -- you talked, Andre, a couple of times about some increased spending, I think in the second quarter in particular, to drive traffic.

But some of the SG&A ratio movement seems to be incremental dollars into the business.

Often times when sales are under pressure, companies might cut back.

You've done that often times as well.

If you could just give us some clarity as to where those incremental SG&A dollars are going?

Yes.

The incremental SG&A dollars, we've got a couple of issues that are impacting the negative leverage in SG&A.

One is obviously, as Ed mentioned, just in Q1 alone we took our sales -- our sales plan in those two categories were down $50 million.

We are getting some reduced sales pressure on SG&A.

The investments we're making are very surgical.

They are around, in Q2 specifically, around marketing activities to promote and move the inventory, we've talked about the excess that's been built up.

We're going to try to create some events in our stores to be able to move and flush that inventory out into Q2.

So, that's where a bit of that spending is going to happen, so a combination of marketing activity to do that.

Got it.

And then finally, you talked about first-quarter deleverage from occupancy and shipping.

Can you quantify how much -- how big the drag was from the mix shift to online?

I just want to figure out how persistent of a drag to gross margin that will be when you think about free shipping or other distribution costs.

Yes.

Again, I mentioned where we were.

We had a favorable KPI margins in Q1 as our business performed well on the KPI margin side.

Our shipping expense decline was -- I'm going to give you some approximate numbers and it's going to get you close.

From a deleverage standpoint versus a year ago, about 20 basis points, and that would be where the shipping number was.

Occupancy number was a little bit higher, again, as we missed -- we built out a lot of new stores in the first quarter year over year, so you had a little bit of that in terms of from a timing standpoint.

Those are the rough numbers.

Thank you, guys.

Thanks, Matt.

Brian Nagel, Oppenheimer.

Hi.

Good morning.

Good morning.

I to just wanted to delve a little bit further into the golf business, and maybe it was a bigger picture question to start.

But you have been around the golf business for a long time, Dick's has obviously been a big seller of golf equipment for a long time.

As you look at what is happening right now, I appreciate all of the color you've given so far, but is this -- do you think this is a cyclical bump in the golf business, or is there something structurally shifting that may be unprecedented given the history of the category?

I think it's a combination.

I think there's been a structural modification been happening with the less rounds played over the last couple of years.

I think there is something that's structural in this, although I think that's the smaller piece of this issue right now.

I think the issue right now is AUR dropping the way that they are with this glut of inventory makes a big difference.

And drivers, which is a very key category in this business and what people, other than golf balls, probably replace the most, that core golfer, that AUR was down 16%.

Units were only down 2%, but the AURs were down 16%.

I think this is more cyclical than it is structural, although there is a structural component to this.

But I don't know how -- I don't know where the bottom is yet on the cyclical issue, which is not like us.

We usually have a pretty good sense of this, but right now we think that this -- we're not sure where the cyclical bottom is to the golf business.

Got it.

And then with respect to the stores, and I think I would just go back, you've discussed some reallocation of space within your stores.

Maybe away from the golf category to other categories.

But could this lead you to go one step further and actually rethink the size of the store?

Dick's is still opening a large number of stores annually that, if golf, and then this would apply to hunting as well, if the golf and hunting trends are going to be weaker for a while or permanently weaker, would you start to consider maybe smaller stores?

Well, so we said the golf business could be weaker.

We think that the hunting businesses was just temporary and is right-sized.

So, to answer your question, because the hunting business I think will stabilize, and even if we take a little bit of square feet out of the golf business, our average store has, from a sales standpoint, maybe 4,500 square feet of golf.

You could take -- even if you took 1,000 square feet out of that, we've got categories that we would expand such as the women's business, the youth business, the footwear business, the team sports business.

I don't think this results in any meaningful reduction in our store size.

Got it.

And then just one follow-up.

In terms of golf and how it relates to the rest of the business, is golf typically a business in and of itself in Dick's stores, or does it serve as more of a traffic driver leading to sales of other products?

Well, as you would imagine, the more traffic you bring into the store, the more business you do.

But I would say that the golf business is primarily a Dick's business unto its own.

But the traffic in there does have some impact on the other business we do.

But first and foremost, it's a business unto its own.

Got it.

Okay.

Well, thank you.

Sure.

Camilo Lyon, Canaccord Genuity.

Thanks.

Good morning, everyone.

Ed, I wanted to get your thoughts on -- what this shortfall in golf and the hunts to how you view your 2017 targets and your achievability of the $10 billion in sales and the 10.5% EBIT margin targets that you laid out?

Right.

I think we still feel that we can do that.

We can meet those targets.

As I said, the hunt business is going to be -- we think will stabilize.

The golf business is going to be a bit more of a challenge.

But we have got opportunities in other areas as I've said, such as the women's business, the youth business, that can make up a, we think a meaningful part of these sales and at a higher gross margin.

So, what we might be missing in sales, the women's business and some of these other categories are at a higher margin rate than the golf business.

And if you remember, when we talked about our sales, the 2017 plan, we had very little growth from a Golf Galaxy standpoint there.

Okay.

That was my follow-up question.

What was embedded in the expectations for golf in those longer-term targets?

Was it more of a flat business or was it more of a business that was in a low single-digit decline to that four or five year period?

Well, it was used to be relatively flat, so we feel that we've got some things that we need to make up if golf continues to decline.

We will have some things that we would have to make up there, but we think we've got the categories, as I've said, the women's business, the youth business, the footwear business and that team sports business that we can make that up and at higher margin rates than what we get out of golf.

Got it.

And then just as it pertains to the hunt category, it sounds like the biggest detractor to comp there was the guns and ammo business comparing off of the strong growth years.

Were there any other categories within hunt that also contributed to that decline?

And if not, then it sounds like, by the way that you're talking about the guidance for the rest of the year, that we're -- once you get to the back half, that the tougher comparisons on the guns and ammo business really start to anniversary.

Is that the right way of thinking about the specific part of hunt category?

Yes.

To the answer to the second part of your question, yes.

We think that moderates in the comps that we are up against the back half of the year are significantly different than the first half of the year.

And the gun and ammunition business was really the main driver to this sales decline in the hunt and ammo business.

There were some other categories that did -- were down a little bit, but we really think that that's a traffic piece -- a traffic category.

Okay.

And then just finally, just a larger picture question on golf.

In that the volatile performance that it's had over the last 1, 1.5 years.

Does this make you reconsider your commitment to the category, or do feel that you need to be exposed to this category?

Well, we think we need to be exposed to the category just because it's part of the sports industry.

Do we need to be as exposed as we are today?

That's what we're rethinking.

But after -- we are not quite ready to make that decision yet.

We need some more information.

We need to see where the sales fall out and we need to see where the bottom is.

But we'll manage the business the best we can and then we will make a decision as to how exposed we want to be in the golf business.

I would expect that we will be less exposed to the golf business a couple years from now than we are today.

Okay.

Thanks very much.

Best of luck.

Thank you.

Dan Wewer, Raymond James.

Thanks.

Ed, I wanted to follow-up on the 2017 financial goals.

As I recall, last September we were talking about improving EBIT rate 150 basis points over five years.

In light of today's guidance, it looks like we'll have to make up about maybe 220 basis points of operating margin over four years.

And given you're a bit more skeptical on the cyclical outlook for golf, would it not make more sense to be thinking about a 9.5% or 10% operating margin goal for 2017?

Well, I think Dan, I don't think we have enough information for that yet.

We still feel that we've got some upside, as I said, in some of these other categories such as the women's business, footwear business, youth business, which carries significantly higher margin rates than the golf business by hundreds of basis points difference.

I think it's too early for us yet to look at that.

But as we get through the next couple of quarters, we'll update you if we think that that's appropriate.

All right.

And then regarding golf, as I recall, it was a couple years after you purchased Golf Galaxy, I think there was about $190 million or $200 million impairment charge.

But given what's happening with that division, Andre, do you expect another impairment charge related to Golf Galaxy this year?

No.

We do not.

And we run those numbers, Dan, every quarter to ensure, along with our independent owners, that there is no impairment forthcoming, and there is none.

We've looked at the cash flows and things like that, so we don't see that happening at all.

And just the last item, a housekeeping.

Andre, you called out the gain on the aircraft during the quarter.

In last year's 10-K, you talked about an impairment charge of $7.9 million on a Gulfstream 450.

Just confused as to why would there be a write-down and then booking a gain for those different aircraft, or just not sure?

They are -- you are correct, Dan.

They are different aircraft, so they were two different transactions.

Okay.

Great.

Thank you.

Seth Sigman, Credit Suisse.

Okay.

Thanks.

A couple questions here.

First following up on the outdoor business.

Obviously, the comparisons have been pretty difficult, but any other changes there relative to your initial expectations?

And specifically, some other retailers have called out being a little bit more promotional this quarter.

Just wondering if that's something that you guys saw also and maybe responded a bit to?

Nothing of any significance.

Okay.

Just in general, as you look out over the next few quarters, what gives you comfort that that business can start to normalize?

Is it just comparisons?

Anything else you are seeing at this point?

I think it's comparisons in we're taking a look at what happened before this run-up of this because panic buying because of concerns on legislation.

We are getting back to more historical levels, and we think that we'll be fine.

Okay.

And then just one other question, I guess you're really one of the only retailers that can actually call out weather this quarter.

Explicitly and the 6.6% comp, excluding hunting and golf seems like a pretty good trend, but maybe weather held that back a bit, so any more color there would be helpful.

¶ And then given that you did give some color on Q2, how does that trend look so far this quarter?

Thanks.

We are not going to comment on Q2 anymore them we already have, but we didn't call out weather.

We -- based on the fact that we've got some real issues in -- this industry has some very big issues in the golf business, per se, and what was going on in the hunt business, we didn't want it to look like we were hiding behind the weather.

And the fact that we did do a very good job in the other categories of business mitigated what that weather was.

If the weather had been better, would those other categories have been a little bit better?

Probably would have been but we are not -- in this case here, we're not sitting hiding behind weather.

We are just step up and let you know that our golf business is difficult right now and the reasons of what's going on in hunting.

This is really a golf/hunt story.

Just on that golf point, you've been very clear on some of the product issues you are facing.

Is there a way to parse out maybe how online versus Dick's stores versus Golf Galaxy is performing?

I'm just wondering that beyond the product issues, is there also an e-commerce underlying theme here to be thinking about?

No.

I don't think the golf business is impacted because of online any more than any other categories are, so this is not an online issue.

Okay.

Thanks.

Sure.

Kate McShane, Citi Research.

Thanks.

Good morning.

Ed, you did seem more cautious on golf when you gave your guidance back in March, but this is obviously a lot worse than when we last heard from you.

What do you think was the tipping point?

Did you see a significant deterioration then in April that you hadn't been seeing in March?

And what really was the biggest driver of the inventory build that deteriorated from the last time we heard from you?

I think -- one of the -- the biggest issue is that the glut of inventory and what happened from a promotional standpoint in golf.

Like I said, the AURs in golf, because of some cascaded product and product from a couple of years ago, took those AURs down significantly.

When we first looked at this, we really thought that the technology that the customer -- that our brands brought forth such as the SLDR driver from TaylorMade, the Big Bertha Alpha, some of these things would really drive a lot more replacement purchases than they did.

And I think the customer just doesn't yet quite understand -- doesn't quite feel comfortable with this technology, which it really is great technology, but it's very different than how you would fit a driver or how you would look at a golf club from a couple of years ago.

So, we just thought that the replacement business would be better.

And with regards to that, has there been another example in recent history where technology or new technology and innovation has not been understood by the customer?

And when that does happen, how much control do you have in taking the messaging of what the technology can do for the customer and how much are the vendors trying to take care control of that messaging?

Well, I think the vendors are trying to take control of that messaging, especially with TaylorMade with their whole Loft Up campaign.

But there's a difference between new technology and technology that's almost the opposite of what people originally thought.

TaylorMade and a few people have moved to the center of gravity on these drivers, higher and forward which means you have to hit a higher lofted driver, which is very different.

People always thought if I have a 9 degree lofted driver, I hit it that further than a 10.5 degree lofted driver.

Now, with this new technology, they're saying if you have a 12 degree driver -- lofted driver, you'd hit that further than you -- you may hit that further than your 10.5, so you have to have more loft.

It's just a very different view of golf clubs in that core golfer hasn't quite accepted that yet.

I think when they do it could get better, but we are not planning anything like that right now.

As I said, we just don't feel we've seen the got bottom in golf.

Okay.

Thanks.

And my final question is just with regards to the Golf Galaxy stores.

Do you have a notable amount of leases coming up for renewal over the next year or two with Golf Galaxy, specifically which could allow you to maybe shut some doors or reduce the square footage?

Yes, Kate.

This is Joe.

We do have a fair amount of leases coming due in the next couple of years.

And as we do with our Dick's stores, we look at each one of those leases carefully to determine whether or not we have a potential, relocation potential, a potential closure or a potential remodel.

So, we'll take a quick close look at these leases as they come due over the next couple of years.

Okay.

Thank you.

Sure.

Scot Ciccarelli, RBC Capital Markets.

Hi guys.

Golf and hunting I believe are both bigger ticket categories.

Golf in particular it is very discretionary.

Are there any other high ticket, very discretionary products you can point to that are selling well to tell us just this is really a golf technology issue or is it a highly discretionary item type issue?

Well, there's a number of things that are relatively high ticket items.

Our boat category has been very good.

Our baseball business around bats and all that has been very good.

High ticket basketball hoops has been good.

The GPS monitoring products, Fitbit, the Nike FuelBand, all of those categories, that technology has been very good.

I really don't think this is an -- this is not a big ticket issue.

This is a technology issue with golf.

This is a glut of inventory issue with golf, and in guns it's not an AUR issue either because the biggest part of the -- there's a big part of the fault is in ammunition which is not expensive at all.

It's just nobody's -- nobody feels they have to stockpile ammunition because there's really no concern about any meaningful change in gun legislation.

Got it.

That's helpful.

And then any kind of color you guys could provide, year-over-year profitability trends in the e-commerce biz would be great.

Thanks.

Our e-commerce business has continued to grow, as we have indicated, and it continues to become more profitable.

And how does that profitability compare to the store level that 's something that you've compared it to in the past?

This is Andre.

Currently, as we've talked about, because of the GSI fees and things like that were slightly below where our stores are.

But currently, as we've talked about in our roadmap, we would see ourselves getting to shrinking that difference and then actually exceeding it.

Ultimately e-commerce would be more profitable as we bring that in-house.

And that continues to be what we do.

Our teams continue to look at how we assort that product and how we move it through using our stores, and our shipment store continues to grow very nicely.

Our probability in the channel, our growth is very good and our profitability continues to improve quarter in, quarter out.

Got it.

All right.

Thanks, guys.

Sean McGowan, Needham & Company.

Thank you, these are basically a couple of clarifying questions.

When you were talking earlier about hunting and golf being 30%, I assume that you mean all of hunting, right?

Not just the gun portion?

Correct.

Okay.

And on the question of weather, I appreciate your not wanting to hide behind that.

That's commendable, but would you say that weather did have an impact on golf?

Is that one of the things going on with rounds played?

I think that's a portion of it, but I don't think that's the biggest issue.

The biggest issue is around some of the new products not doing as well as we had thought.

And an AUR decline of 16% in drivers is not a weather issue.

Clearly, okay.

And then finally, Andre, your comments in going through the model in detail was very appreciated, but when you compare what your expectations are -- you would say a 50 basis point reduction or whatever was that -- were all of those comments were against your previous expectations, or were some of those also against last year?

They were all -- as I prefaced it, they were all against our expectations because I think people -- I would want -- you would want to know what we had modeled and what the differences is in that model.

So, what the model that got us to the $3.03 to $3.08 and now it's getting us to the $2.70 to $2.85., So, it is versus our internal expectation.

Just wanted to be clear that that covered all of those comments.

Thank you.

Yes.

Sam Poser, Sterne Agee.

Good morning.

Thank you for taking my question.

I just was wondering, what percent of the excess inventory is golf?

When you look -- inventory is up 13%, sales are up 8%.

Your sales per square foot are up quite a bit as well.

What percent is that as we look at that?

We're not going to get to that granular a level there, Sam.

Okay.

And then -- you say you feel comfortable with the hunt.

What has given you the confidence that the hunting business will stabilize towards the end of the year above the fact of the comparisons ease?

Because you were up against easier comparisons, fairly easy comparisons with golf as well, and that's not getting any better.

Well, Sam, I'm not sure what the comparison of golf has to do with that comparison of hunt.

I'm not sure how you draw that conclusion.

I'm just wondering what makes you comfortable it is going to get better?

I understand.

But you tied golf to hunt from a comfort level.

I think they're two entirely different concerns.

We feel that -- and we all know, and I know you're a student of this industry, so we all know that the comps previously had been driven by the panic buying around what would happen with gun legislation after the election and then more recently and tragically, what happened at Sandy Hook.

So, there was a lot of panic buying, which you know.

The golf business, we have indicated we don't know where the bottom is.

We think that there's a real issue there.

As we take a look at the hunt business, other categories in the hunt business are doing reasonably well or quite well.

And this is really a big issue around gun ammunition which people were panic buying.

People were buying guns and ammo in a panic session way, they weren't buying hunting apparel and boots in a panicked way.

As we come through this whole time period, as we get into the fourth quarter of last year, which is where the panic buying basically stopped, we don't think that there's going to be any meaningful deterioration and we think it will get to relatively flat.

Maybe up a little and maybe down a little, but relatively flat.

Thank you.

And then lastly, could you -- you commented that in the first quarter -- can you give us -- you commented in the first quarter that 30% of the business was hunt and golf.

Is that correct?

Correct.

And that seems fairly steady, but it's just moves around more.

Correct.

The composition of it changes between hunt and golf.

And in the first quarter, the golf business in the Dick's stores proper, could you break -- if you take away Golf Galaxy because I'm just trying to figure out the comp of that -- of the makeup of that -- of the two three comp.

Is that where you said that it was down high singles in the Dick's stores?

Correct.

We said -- that's right.

We said it was high single-digit down in the Dick's stores.

Okay.

Thank you for the clarification.

Sure.

Michael Lasser, UBS Investment Bank

Good morning.

Thanks a lot for taking my question.

Ed, I think if we look back over the last couple of years, the comprehensive have been volatile.

We have seen different categories exhibit strength, different categories exhibit weakness.

Would you say that this is just endemic to running a big-box sporting goods retail business?

That you're always going to have categories doing well and some that are not doing as well?

And therefore, it's incumbent upon a company to maybe be nimble and manage the portfolio of what's coming in and out?

And do feel like your competency in doing -- and the Company's competency is doing that is where it needs to be?

I think yes.

It's our job to manage that portfolio of business in four years.

There's been some categories that have done well and some others that have struggled from a cyclical standpoint.

And this year -- this first quarter, we hit the perfect storm with (technical difficulty) anything with 30% of the business be affected like this.

In the gun and ammunition business, we anticipated that there would be headwinds.

It wasn't -- it was more than we had anticipated, which I think you've seen that from some other retailers.

And we thought that the golf business would have some headwinds, we didn't anticipate they would be this significant.

And you can see that from the comments that Callaway made going forward and the fact that Adidas indicated that the TaylorMade business was down 34%.

So, yes.

It's incumbent upon us to manage that portfolio, and this is one of those perfect storms we are the portfolio, the gun and ammunition business both hit us at the same time.

And you couldn't make that up with these other categories even though the other categories are doing extremely well with comps over 6% in those other categories.

And we typically see this movement around, but it's the depth of this movement that probably has this showing the numbers through Q1.

Because typically, you have a category up one or two and the others -- and that all balances itself out.

That is the nature of the business.

But the depth in which we saw the golf business and the hunt business all coming together in one quarter was pretty big.

And we are in the process of managing this portfolio, which is why you've heard us talk in recent quarters that we are scaling back the space in golf and adding space to the women's apparel business and the youth apparel business, which all of that's working out very well, but the golf business caught us by surprise.

As a number of other people did.

Yes.

No doubt.

And that all makes sense.

I think some of the confusion probably rests with what you're now expecting for the rest of the year, because it does seem -- your updated guidance does seem to imply that you're not expecting golf to get much better and maybe some counteractive measures to not necessarily have that much of an impact.

Well, it's going to -- golf is going to be a very difficult business to overcome through the balance of this year.

We indicated what we missed the sales plan by in the first quarter.

We gave you that kind of granularity, and you can run your models and see what that number is for the balance of the year.

That's a difficult to overcome in a short period of time.

Okay.

My last question is -- does this experience color your view on mergers and acquisitions at all?

I think if you look back, would you have taken the same approach with Golf Galaxy?

And moving forward, does this experience change the way you look at M&A?

I think that the -- going back to Golf Galaxy, that was a very long time ago.

And would it color our thought process?

No.

We've laid out why we did what we did, the benefits that we got from it.

I think we still feel the same way.

We are going through a difficult time in the golf business right now, and we'll assess over a reasonable time period what that means.

Where is the bottom?

What does this business mean going forward?

But right now, we're happy that we are in the golf business.

We are just -- we're happy long term we are in the golf business.

We are just not happy today that it's having the impact on is that it is.

Okay.

Thank you very much.

Sure.

Michael Baker, Deutsche Bank.

Hi.

Thanks, guys.

Just a bigger picture question.

Why do you think the golf business has weakened so much?

I understand there's a glut of product in the market.

And then it sounds like you are attributing that glut of product to people not understanding the technology, so is it really just that simple?

Golf has weakened because people do not understand the technology and there's a glut of product out there, or is it economic?

You do not want to blame weather, I understand that.

But it seems to be that there has got to be something bigger going on here than just people not understanding new technology.

Well, if you listen to my comments, I didn't say that it was just the people not understanding the new technology.

I said they didn't embrace the new technology, which didn't -- people didn't replace new clubs as they normally would.

But I also indicated that there is a glut of inventory which is real and is significant and took AURs down 18% -- 16% while units are only down 2%.

If you take your AURs down 16% in any significant business and the units go down 2%, that's a difficult business.

Sure.

I understand So I guess --

It's really that simple.

There is a glut of inventory.

So, is that glut of inventory is being caused by something beyond just the not embracing the technology?

I guess that's my question, if that's what you're saying.

My question is, why that glut of inventory?

Is that an economic thing, do you think?

The golf business has been difficult for the last 15 months, which is what we've indicated.

And there's been a glut of inventory, both at retail and on the wholesale side, that's caused this inventory.

To clear the inventory, there's been significant markdowns taken.

Price reductions from the vendors for us to buy new product and the AURs are down 16%.

Okay.

Not to beat it, but why do you think the industry has been weak for 15 months?

Is it something beyond the technology, I guess?

That's the crux of my question.

I talked about the technology for this quarter.

Right.

They launched this -- the last 15 months the business has been difficult and there's been too much inventory manufactured.

There's a glut of inventory in the system.

We had two years of pretty good business.

When TaylorMade launched the white driver and came out with RocketBallz, all of that did very well.

Last year everybody was -- a number of people were surprised that RocketBallz 2 and some of the new technology that came out wasn't as embraced as they thought it would be, so they had too much inventory.

We all thought that this new technology would be more readily accepted, and it wasn't.

So, inventory and has backed up.

It simple.

It's not that -- it's really -- I don't try -- we always try to break things down to its lowest common denominator.

It's that simple.

There's too much inventory in the market.

And the replacement cycle hasn't happened this year because people are somewhat confused about this technology.

Okay.

That actually does help.

So, it's just overbuilding after some success with that white driver a couple years ago.

So, it seems like a big impact.

Okay.

Thank you.

Sure.

Paul Swinand, Morningstar.

Good morning.

And we were just shifting gears away from the golf a little bit.

Just thinking longer term about your e-commerce business.

I'm trying to think, do you have some kind of advantage being national versus the regionals?

In other words, when you've mentioned proposed promotional pressures, if a regional player is advertising something and your advertising -- it comes down to a price game, or do have some kind of advantage in the products you get or the reach that you guys the way that you buy the online advertising?

Is there something that's structurally different there?

Well, I think being national in scope and the number of stores we have certainly helps us, as we've indicated.

When we open the store, we see a meaningful increase in our e-commerce sales in that trade zone or in that market.

I think we do have the -- we do have an advantage that way.

We also have an advantage over the regional guy with what we do from a marketing on a national basis.

A lot of people know who we are, even if we don't have a store in their particular market at the present time.

So, yes.

I think we have a very significant advantage over the regional player.

Would you say, when we are looking at your store base and you're saying people are discovering the brand, even outside the stores, but what percentage of the white space is underpenetrated in e-com?

Is it about half?

Halfway there?

Or how would you characterize that?

I'm not sure I understand question.

In other words, your store base has not penetrated the full country yet.

Correct.

You're getting discovered from your national advertising.

How much further along is your e-com penetration in the national?

Well, I think it's probably a bit less than what the store growth could be.

If we think we could grow our store base by 20% in those markets, I think our e-commerce growth could be 15%, because we are doing some business in those markets already.

If you understand that.

Yes.

I'm not saying those are the right numbers, I'm just saying, take that directionally.

Got it.

Okay, great.

Thank you very much, and best of luck.

Mark Miller, William Blair.

Hi.

Good morning.

A little bit of a longer-term question here and I'll try to avoid including golf in this.

Is there a point, Ed, where you would consider slowing the pace of store expansion?

Customers are shopping online with Dick's.

The return on capital has been tracking lower now, and it just seems like this would help you bring more focus to your existing operations.

Well, I think we've -- we think we are opening the appropriate amount of stores.

We still have a lot of space where we don't have stores.

So, where our growth will probably slow a little bit is -- where our stores will probably slow a little bit will be in competitive markets.

But if you take a look at our new store productivity, that new store productivity is still continue to be very good.

Until -- so we don't think we've hit that saturation point yet, and again, we've got a number of markets where we have no stores or are very underpenetrated.

I don't think we're there yet.

And a separate question on the cadence of hunting in 2014.

If we look at the industry, firearm sales began to slow during the second quarter of 2013 based on the NICS or FBI background checks.

It does seem that the comparisons ought to be easier in the July quarter.

I guess I'm asking why would the hunting comps be down as much in 2Q as 1Q?

Well, it's just taking a look at what happened in that industry, and the gun business may have slowed a little bit.

I'd have to go back and take a look at how much it really changed with us, but ammunition was still a very, very hot commodity back in Q2, which has been a big part of this driver.

Okay.

Thanks.

Rick Nelson, Stephens.

Good morning.

You mentioned that 4,500 square feet is allocated to the golf business.

I'm curious how that compares to the prior year and if the environment remains challenging, what sort of square footage you think that department deserves?

Well, we are not ready to make that decision yet.

But we took roughly 1000 square feet out of the golf business.

Okay.

Last year.

And if I could also ask you about the footwear business, how that performed in 1Q and your expectation as we look forward.

We won't get that granular with the footwear business, but we were pleased with the footwear business, and we expect to be pleased with that going forward.

Thanks.

Good luck.

Matt Nemer, Wells Fargo Securities.

Thanks so much.

I've got two questions.

First, in the hunting category, the background checks do flatten out this summer.

Some of your public peers have stated that they expect firearms to turn positive in late summer, and you can see that in the Street expectations.

So, I'm just wondering, is there something different about you that would have you down in Q3?

Or do you think the market has changed in the last few months and we are tracking below where you would've originally expected?

Well, I think there's -- again, we need to be careful not to -- this is a whole blended business, and we need to remember that there is a gun and an ammunition piece to this.

And we are just taking a look at what we think the trend is right now and what we think it's going to be, and we are going to be careful not to get over our skis.

Okay.

Fair enough.

And then secondly, if we look at stores that have reallocated space away from golf and fitness, can you just remind us how many stores have gone through that change and then how the performance might differ in those stores versus the rest of the change?

Rest of the chain?

Virtually all of the stores have gone through that change.

And we are seeing similar results in all the stores that the youth business, the women's business has had some nice gains.

We're really pleased with what is going on there, as we said, women's and the teens.

Thank you.

Sure.

David McGee, SunTrust.

Yes.

Hi.

Good morning, everybody.

Good morning.

First question on the hunt category, beyond this year, how concerned are you about all the new square footage that is being put out there by specialists in the space, including your own chain?

How concerned are you about the impact on the core stores?

We know that that will impact the core stores.

But we've been dealing with that for years.

We don't think that that's anything really different than what's going on right now.

We think that that's going to continue to be impact that and as we take a look at that, we've got some stores, we haven't talked a lot about it, but we've got some stores that we've taken space out of the hunt/fish category and replaced it with the teams sports and some other categories.

And secondly, what would be the downside to taking the store size going forward to 40,000 square feet, give or take?

Well, we think that part of that issue is we still think there's a number of categories inside our store now that are squeezed from a square footage standpoint.

The women's business could still take more square footage.

The youth business could still take more square footage, the team sports business could take more square footage.

We may continue to modify the allocation of space, but we don't think to go down significantly in store size right now is the appropriate thing to do.

If we do that, some of these other areas that are having such great sales gains at much higher margins than the Company as a whole will impact that growth rate.

Thank you, and just lastly, would you comment on the baseball business this spring, particularly the markets maybe in the South that had -- that turned warm?

Yes.

We've been pretty pleased with our baseball business.

The whole team sports business was very good as a whole, and baseball was a big driver of that.

Great.

Thank you.

Sure.

Jim Chartier, Monness, Crespi & Hardt.

Can you just tell us what percentage hunting accounts for in terms of your overall lodge business?

And then how did the lodge business overall perform relative to your expectations?

Well, the overall lodge business didn't perform to our expectations, as we said, because we had such a big miss in the hunt -- I mean the gun and ammunition business.

But we're not going to get that granular to provide that level of detail.

We've laid out of that we missed the sales by $15 million in that category, and for us, that's pretty granular.

So, hunt, camp and fish were also below expectations?

I'm not going to get to that level of granularity, but there was -- I will tell you that the fish customer is more a hunt customer than a camp customers is a hunt customer, and that lack of traffic impacted that business a bit.

Okay.

And then is hunting about 50% of your overall outdoor business?

Is that about right?

As we indicated, we're not going to give you that level of granularity.

Okay.

Thanks, and best of luck

Sure.

Thank you.

Peter Benedict, Robert W. Baird.

Hello, guys.

Thanks.

Just one for Andre.

Can you update us with your thoughts on capital allocation strategy?

I'm thinking specifically to the excess free cash flow for dividends and buybacks.

How do you think about that going forward?

As we've talked about in the past, Peter, we are committed to use of our cash in the following order is really to drive the growth of our business, the build of our stores and our new concepts, et cetera.

And then obviously opportunistically taking a look at a minimal handling the dilution issue and then opportunistically going into the market for shares.

We do have a June board meeting that's coming up where we will be discussing with our board our entire capital allocation strategy, including our capital investment model, as well as share buybacks and also our dividend program.

That will be forthcoming with them in the month of June when we have our next board meeting.

Okay.

Good.

Fair enough.

Thank you.

Jay Sole, Morgan Stanley.

Hi.

Good morning.

Thanks for taking my call.

Sure.

I just want to ask about market share trends.

Do you believe that you gained share versus your brick and mortar competition in the quarter, and in the same question, for your online pure play competition?

In our pure play competition, I think we did extremely well.

As we said, we moved up the Internet 500 list by a pretty wide margin last year, so we are really pleased with what's going on with that.

Do we think that we gained market share versus our competitors?

Actually, we do.

Our channel checks and what we see other retailers doing, we think that we did.

We had a comp gain.

We are not happy with what happened in the golf business and the hunt business but we actually had a comp gain.

So, we think overall, we do think that we gained market share.

Okay, interesting.

And then let me ask you about the same youth sports competition.

Obviously, golf participation is down.

What do you see happening in the youth sports business -- or sorry, in the youth sports participation, and how might that impact your team sports business going forward?

We still think that business has continued to be strong.

Kids are still playing sports.

Sports is really part of our culture, and we don't see a meaningful impact there.

Okay.

Terrific.

Thanks so much.

Lee Giordano, CRT Capital.

Thanks.

Good morning, everybody.

Can you give us a quick update on what's happening in the fitness category?

Are you seeing any improvements there?

And then secondly, on the marketing strategy currently, how you're thinking about the back half of the year as far as TV versus online versus print, et cetera, and maybe what your overall marketing spend expectations might be versus historical levels?

Thanks.

Hey, Lee.

I will take the first one on fitness.

I think the team has done a really, really nice job with the space allocation.

The last two quarters, both in Q4 and Q1, we actually comped positive in fitness.

We feel that we've got that spacing correct, we think we have the assortment correct.

And so we feel very good about the work that we've done there, and it's part of our space allocation strategy.

I'll let Ed talk about the marketing

From a marketing standpoint, TV, online and print, we continue to look to ways to reduce our print advertising and increase what we're doing from an online standpoint and TV.

The overall dollars as a percent to sales will be relatively even this year versus last year.

Thank you.

Sure.

Ladies and gentlemen, this will conclude our question and answer session.

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

I'd like to thank everyone for joining us today on our quarterly earnings call, and we look forward to talking to you about the second quarter.

Thank you.

Ladies and gentlemen, the conference has now concluded.

We thank you for attending today's presentation.

You may now disconnect your lines.