DICK'S Sporting Goods Inc (DKS) 2015 Q2 法說會逐字稿

Good morning, and welcome to the DICK'S Sporting Goods second-quarter 2015 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 of Treasury Services and Investor Relations.

Please go ahead.

Thank you.

Good morning, and thank you for joining us to discuss our second-quarter 2015 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, 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 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 10-K for the year ended January 31, 2015.

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

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 second-quarter results, key business drivers, and outlook.

After Ed's comments, Andre Hawaux will provide greater detail regarding our results, and guidance for the third-quarter and full-year 2015.

I will now turn the call over to Ed Stack.

Thank you, Anne-Marie.

As we announced this morning, we generated second-quarter earnings per diluted share of $0.77, a 15% increase over last year, and above the high end of our guidance of $0.73 to $0.76.

We drove this profitable growth primarily through new stores, an increase in consolidated same-store sales, continued momentum in eCommerce, and a meaningful margin rate expansion.

Second-quarter consolidated same-store sales of 1.2% was within our guided range of flat to 2%; it was on top of a 3.2% comp in the second quarter of 2014, which included substantial World Cup sales.

DICK'S omni-channel comp sales increased 1.5% in the quarter, with growth across all of our three primary categories: hardlines, apparel, and footwear.

Our focus on eCommerce continues to pay off, with eCommerce penetration growing to 7.3% of sales in the second quarter of this year, compared to 6.3% in the second quarter of 2014, reflecting growth of 24.4%.

Our golf business is beginning to show some encouraging trends.

Our margins have improved significantly over last year, and the apparel side of our Business has comped positively throughout the second quarter.

Additionally, looking back at our golf business from the beginning of the year, we have experienced sequential improvement in our comp sales.

We have increased our inventory levels to begin the third quarter, supporting the accelerated sale in our outdoor category, and to better capture the back-to-school business this year.

At the end of Q3, we anticipate sales and inventory growth to more closely approximate each other.

Now let me provide a few updates on our growth drivers.

We remain focused on driving store productivity through meaningful marketing and merchandising strategies.

On the marketing front, we evolved our brand campaign this year asking a simple question: Who will you be?

We find the authenticity is really resonating with our customers.

We have also formed a new partnership with Team USA, and are now the official sporting-goods retailer of the United States Olympic Committee.

Through this partnership we will provide equipment and jobs with flexible hours to our Olympic hopefuls.

Additionally, through our DICK'S Sporting Goods foundation, we are expanding our Sports Matter program, and deepening our commitment to youth athletics.

On the merchandising front, we remain particularly excited about our women's business, including our exclusive private brand offering, CALIA by Carrie Underwood.

This brand has performed better than expected, and we continue to believe it will become our number three women's athletic apparel brand by the end of 2016.

Turning to eCommerce, we're progressing toward our goal of moving our DICK'S Sporting Goods eCommerce site onto our own platform by January 2017.

As you will recall, last quarter we completed a key step by successfully relaunching GolfGalaxy.com, including ship-from-store capabilities.

And we remain on track to launch a Field & Stream transactional site later this year.

The new Field & Stream site will not only allow us to capture incremental sales, but it will be able to operate and learn from having two sites on a single platform, which significantly leverages our costs.

Finally, we remain excited to grow our outdoor business.

During the quarter we opened our first combo store in Mobile, Alabama, featuring a DICK'S Sporting Goods and Field & Stream store under the same roof.

We believe this new combined-store concept will generate higher sales and store productivity, as compared to our traditional stand-alone stores.

The hunt, fish and camp product will all be in Field & Stream, leaving more room in the DICK'S stores for higher-margin, faster-turning categories.

From a customer standpoint, they benefit from an expanded assortment, and the ability to move between the stores once inside.

We plan to have four of these combo stores in place by the end of 2015.

Taking into consideration our year-to-date results and our expectations for the balance of the year, we are raising our full-year earnings guidance, and now expect to deliver earnings per diluted share in the range of $3.13 to $3.21, and maintaining our 2015 full-year consolidated comp growth range of 1% to 3%.

Of course, we would not be able to execute our growth plan without the hard work and commitment of our associates.

I would like to thank all of them for their dedication and contribution to our progress.

Before concluding, I'd like to take a moment to welcome Teri List-Stoll to DICK'S Sporting Goods as Executive Vice President and Chief Financial Officer.

Teri joins the Company after an impressive 30-year career in finance.

She served as EVP and Chief Financial Officer for Kraft Foods.

Prior to joining Kraft, Teri was Senior Vice President and Treasurer at P&G, where she led the global treasury, acquisition and divestiture, investor relations and external business development organizations.

We're very happy to have Teri on our team.

Andre Hawaux, who most recently served in a temporary dual role as Executive Vice President, Chief Operating Officer and Chief Financial Officer, will now continue as our Executive Vice President and Chief Operating Officer.

Andre has done a great job as our CFO, and I know he will continue to contribute meaningfully in his new role.

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

Thank you, Ed.

And thanks for the kind words.

This morning I will cover three topics: our second-quarter results, our balance sheet, and our performance expectations for the remainder of 2015.

To begin with our second-quarter financial results, total sales increased 7.9% to approximately $1.8 billion.

Consolidated same-store sales increased 1.2% compared to our guidance of flat to 2%, and compare to comps of 3.2% in the second quarter of last year.

DICK'S Sporting Goods' omni-channel same-store sales increased 1.5%, driven by a 2.5% increase in sales per transaction and a 1% decrease in traffic.

This decrease in traffic is primarily attributable to the anniversary of last year's World Cup event, and golf promotions.

In the second quarter of 2015 we continued to grow our omni-channel platform.

We opened seven new DICK'S stores, and generated 96.5% new store productivity.

We opened one new Field & Stream store, and closed three Golf Galaxy stores, as these leases expired and these stores were not meeting our internal hurdle rates.

Additionally, we grew our eCommerce business to 7.3% of sales compared to 6.3% in the second quarter of 2014.

Gross profit for the second quarter was $554 million or 30.37% of sales, and was up 47 basis points year over year on a non-GAAP basis.

This improvement in gross profit margin was primarily driven by less promotional activity as compared to the second quarter of last year, and partially offset by occupancy deleverage.

SG&A expenses in the second quarter were $396 million or 21.72% of sales; and on a non-GAAP basis, deleveraged 10 basis points from the second quarter of last year.

This was primarily due to expenses related to building out our brand, which were described by Ed earlier, and planned investments in eCommerce.

Now looking to our balance sheet, we ended the second quarter of 2015 with approximately $123 million of cash and cash equivalents, and no borrowings under our revolving credit facility.

Also, as disclosed this morning, we've amended and extended our revolving credit facility prior to its expiration in December of 2016, thereby benefiting from the attractive interest rate environment.

We have increased our limit from $500 million to $1 billion to support the continued growth of our Business.

Total inventory increased 13.9% for the end of the second quarter of 2015 compared to the end of the second quarter of 2014.

As Ed previously mentioned, this planned increase was due primarily to earlier receipts of back-to-school merchandise, and support for our outdoor business.

For the third quarter, we anticipate inventory growth to approximate sales growth.

Second-quarter net capital expenditures were $55 million, or $89 million on a gross basis.

Now turning to our outlook for the remainder of FY15, we're raising our full-year earnings guidance, and now expect full-year earnings per diluted share in the range of $3.13 to $3.21.

We expect same-store sales to increase in the range of 1% to 3%, consistent with our prior guidance.

Gross margin is expected to increase, primarily driven by merchandise margin expansion, and partially offset by occupancy deleverage.

SG&A is expected to deleverage as we invest in key marketing strategies, as well as expenses related to bringing eCommerce onto our own platform.

Year over year, pre-opening expenses are expected to remain relatively flat as a percentage of sales.

As a result of these dynamics, we expect operating margins on a non-GAAP basis to increase slightly year over year.

Net capital expenditures for the full year are expected to be approximately $245 million, or about $365 million on a gross basis.

In 2015, we expect to open 44 new DICK'S stores, relocate seven DICK'S stores, and relocate one Golf Galaxy store.

We also remain focused on growing our Field & Stream concept, and expect to open nine new Field & Stream stores this year.

For the third quarter of 2015, we anticipate earnings per diluted share in the range of $0.45 to $0.48.

The growth in earnings will be driven by an expected consolidated same-store sales increase in the range of 1% to 3%, expansion in gross margin, and a lower tax rate, partly offset by SG&A expense deleverage.

During the quarter, we expect to open 27 new DICK'S stores, relocate five DICK'S stores, and open seven new Field & Stream stores.

In summary, we are pleased with our performance in the second quarter, confident we have the plans in place to deliver our 2015 guidance, and continue to successfully grow our Business to drive long-term shareholder value.

This will conclude our prepared comments.

We appreciate your interest in DICK'S Sporting Goods.

Operator, please open the line for questions.

(Operator Instructions)

Kate McShane, Citi Research.

Thank you, good morning.

My first question was on team sports.

I just wondered if you could walk us through how you view this category, in light of some of the participation declines we've seen in football and soccer, especially as we embark into the new fall season?

And how do you mitigate some of those risks going forward?

Kate, we've seen some loss of participation in football; we haven't seen that in soccer.

Some of the participation in football has been a bit more difficult at the younger levels, as opposed to getting up into the high school level.

So, there's a little bit there; it's just more dramatic at the younger levels.

But it feels that those kids who played football have moved to soccer or to fall baseball.

If you take out the soccer business from the World Cup, we're very pleased with our soccer business and our baseball business.

Okay, that's helpful.

Thank you.

And can I just ask a question on an update on your strategy to put more opening price points in the store?

Where are we in terms of that strategy?

And are there still areas within the store that can benefit from this?

We are pretty pleased with where we are from an opening price point standpoint.

We will be adding a couple of brands into the fall and into the fourth quarter and more into the spring, brands that will be a bit more opening price point, such as Skechers.

We plan to have a meaningful increase in our Skechers business going forward.

But we're pretty pleased with where we are with the opening price points.

Thank you very much.

Seth Sigman, Credit Suisse.

Thanks.

Just wonder if you can elaborate on some of the category trends in the second quarter?

It looked like the Business performed pretty much in line with your expectations overall, despite some mixed commentary out there in the industry.

So, I was just wondering if you could talk to some of the categories that performed well, some categories that maybe are still underperforming, any color there?

Seth, as you know, we won't get to quite probably the granularity that you would like, but we continue to be happy with the athletic apparel business that we talked about, both on the men's side and the women's side.

The license business was not what it was last year, although we were pleased with the performance because of the meaningful World Cup business that we did in 2014.

And we've been very pleased with the outdoor category, and the golf business is getting better.

Okay.

And then just shifting gears, if you look at the promotional plans for the balance of the year -- the topic of promotional activity has come up a bit in recent quarters.

Q2 seemed to be lower, and pretty much in line with your plans, based on your commentary, and you were lapping some events last year.

I think, Andre, you talked about merchandise margins improving in the back half of this year, which we saw this quarter.

Just wondering if you could talk about the promotional plans and what you're seeing on the competitive landscape?

We don't think it's any more promotional than it was last year.

We think that our inventory's in better shape than it was last year from a quality standpoint.

We don't need to be as promotional on the golf business, as that business has gotten better and the inventory has been cleaned up.

So, we are pretty confident with what our promotional cadence will need to be, and it's baked into our guidance.

Okay.

Thank you.

Michael Lasser, UBS.

Good morning.

Thanks a lot for taking my question.

On the -- just structural gross margin in the industry, you have a portion of the merchandise margin that you lost last year in this quarter back this quarter, but not all of it.

Based on your comments, you said the promotional activity was about equal to what it was last year.

So, are we just seeing that the merchandise margin rate in the broader sporting-goods sector are just on decline, and that's going to have a longer-term impact on your Business?

No, and you've got to be careful on how you take a look at this from a mix standpoint also.

Some of the things that are lower margins that have done very well are the performance tracking products.

Those are higher ticket items, lower margin rates, so that's impacted the penetration of that product.

And when I said the promotional activity was about what we expected it to be, I meant for the third and fourth quarter.

We don't see anything really having to drive that promotional activity more than what we think it is.

And where we picked up some lack of promotional activity this year versus last year in this quarter was really around the golf business.

We weren't nearly as promotional in golf this year as we were last year.

Were you promotional in other areas to drive the Business?

No, no more than what we had been in the past.

We picked up margin rate versus last year, and we really weren't more promotional in other areas.

We've got some other categories of merchandise that we are bringing in and testing that we think will be helpful.

We've got a number of Jordan shops that are going to be going into the store that are really a test right now.

That's higher-margin product.

We've got a partnership with Polo on the Polo Sport brand that we will have in 75 stores or so that will be higher-margin rates, and should be accretive to our earnings.

Although it's only 75 stores right now, it's a test, and we expect that to be significantly more going into 2016 and 2017.

We continue to work the mix, and try to drive that apparel business and footwear business in those higher-margin categories.

And how deep is the Jordan test going to be?

We're starting out with 10 stores this fall, and if it goes well -- and we expect it will -- then there will be a meaningful increase going into 2016 and 2017.

Okay.

Thank you so much.

Matt Nemer, Wells Fargo Securities.

Good morning, and thanks for taking my questions.

Could you tell me if the future Field & Stream locations are more likely to be side-by-sides, or are you still planning to open standalones after you get through this 2016 class of stores?

We haven't made a final decision yet, but the research that we have done in the first store that we have opened -- and, as we said, we plan to have four of these combo stores opened by the end of this year -- we think the vast majority of these will be in the combo format.

The research -- the customers love the idea.

The customers in Mobile, Alabama, where we have it opened up, have responded very positively.

So, I would expect the vast majority of them will be in the combo format.

And you will leave the standalones -- there is no plan to do anything different with those?

The ones that you have will stay standalones?

For right now, yes

Okay, great.

And then, secondly, the higher credit facility, is that primarily general corporate use or is there an ability to use that to potentially increase the buyback or do some acquisitions?

Matt, it's for general corporate use, but it wouldn't preclude us from buying back shares with it and doing M&A activity with it.

It is for general corporate purposes.

Okay.

Thanks so much.

Simeon Gutman, Morgan Stanley.

Thanks, good morning.

A quick question on back-to-school: DICK'S has always done a nice job around it, and it's clearly embedded in the forecast.

Without giving too much read into Q3, which you choose not to, can you give us just a sense of anything with fall sports trending in markets where it's relevant or back-to-school has begun yet?

You are right, we don't talk about the quarter that we are in.

But I can tell you, embedded in our guidance, we are pretty -- optimistic about back-to-school.

A couple of the things that we are enthusiastic about is the fashion trend in athletic apparel for back-to-school, in particular for men and women on the bottoms category.

We're excited about the footwear business going to back-to-school, and the team sport business around the cleat business.

So, all in all, we remain optimistic about back-to-school.

We are in better inventory shape than we were last year to begin the back-to-school season, and we're pretty confident.

Okay.

And then a bigger picture: Nike, Under Armour, I think around 30% or so of brands -- I don't know if you say it explicitly or they do -- but it looks like the growth on that business has been decelerating over time.

And it could be due to a bunch of things.

Certainly you're trying to diversify your revenue stream.

You mentioned CALIA.

Some of it just could be the law of large numbers.

But I'm curious what the right way to think about that is.

Is the sell-through of that merchandise slowing, or is it that just law of large numbers and purposeful, given some of the focus on other categories or other brands?

We're continuing to grow both of those brands in our Business, in our stores, with the investments we've made in shops on both the Nike side and the Under Armour side.

We continue to make investments in both of those brands around the youth apparel business and with some shops.

And with what we're doing with Nike, we're really excited about it, and they are, too.

Around these Jordan shops, we think there is still growth available in both of those brands.

Okay.

Just to sneak in one last one, just to clarify -- back half of the year gross margin guidance Q3, Q4, I don't know if you gave it explicitly, I may have missed something, but what have you said on gross margin for the back half of the year?

Merch margin expansion and slight occupancy deleverage, but net-net we should see gross profit expansion.

Great.

Thank you.

Stephen Tanal, Goldman Sachs.

Good morning, and thanks for the question, guys.

Just wanted to follow up on the color around promotions.

We felt like we saw at least a lot more emails with offers.

Maybe not more offers in terms of -- or bigger type of more impactful type promotions, but I'm wondering if you can tie that out with the somewhat moderation in online growth, which happened despite an easier compare.

Do you think those are related or is something else going on?

We're very pleased with our online growth.

We went from 6.3% of sales up to 7.3% of sales.

We are really quite pleased with it.

Stephen, this is Andre.

I think we also -- let's not forget that not only did the brick-and-mortar business last year benefit from World Cup, but as did our online business.

So, we were lapping a pretty significant Q2 number last year in online, as well.

To Ed's point, we feel very confident in the way our eCommerce business continues to perform.

And this was an issue where we had a very big quarter we were lapping due to World Cup.

Okay, fair enough.

On gross margin, you guys used to give a little bit more color.

It sounds like there's probably less of a headwind from shipping and freight, which had been an issue.

Could you help us parse it out a little bit in terms of what merch margin was versus fixed costs, as well?

What I'll do for you, Stephen, is I will just stay at the highest level.

So, I would say that our merch margin expansion was about 58 basis points, and then we had some things moving up and down on a couple of the line items between merch margin and gross profit.

The biggest factor that brought that number from 58 down to the 47 would be the occupancy deleverage.

That's about as much granularity as we are going to provide.

Okay, that's very helpful, thanks.

And, just lastly, on the buyback -- it doesn't seem like anything else is in the guide, nothing done in 2Q -- care to comment on that at all?

I think we will be consistent with what we said in the first quarter, or at least what I said in the first quarter, which was -- we've got $150 million, you should bake that into your models.

And if we do more between now and the back half of the year, we will give that to you.

That's where we stood in Q1; that's where we stand in Q2.

Got it.

Thanks a lot.

Dan Wewer, Raymond James.

Thanks.

Ed, in the last two or three quarters, when you break out the big growth online, it implies that your bricks-and-mortar same-store sales have been flat or slightly negative.

That was even before the tough comparisons with the World Cup.

And I'm guessing that's probably the reason why the occupancy cost delevered.

But going forward, are there any initiatives to drive faster bricks-and-mortar growth, or is the future really predicated on the success of online?

No, the online business will continue to be an important growth driver, as will the stores.

Although we're not going to guide exactly what that number is, but, yes, we have a number of initiatives in place to drive comp stores at the store level.

We believe the Skechers addition will be helpful.

What we're doing with the Polo stores, the Polo shops, in 75 stores this fall, we think will be helpful.

We think that, as we continue to go forward with these combo stores, and being able to move the hunt-fish-camp business out of the DICK'S stores into the Field & Stream side, giving us space to be able to invest a bit more heavily in the apparel business, the footwear business, will help those stores also.

So, yes, we've got a number of initiatives to drive that store productivity.

Also I had a question about gross margin rate in your online business.

And the reason I'm asking is when you're waiting to check out in a retail store, you have all of the impulse items with the big margin rates that I'm assuming you are selling a fair amount of that product.

But when your customer is shopping online, they really are a hunter; they're probably not attaching those higher-margin impulse items.

I don't know if I'm right or wrong, but how would the margin rates compare on those two channels?

We haven't provided that level of granularity, but we are extremely pleased with the profit margin and the profitability of where we are from an eCommerce standpoint.

And it has grown -- the profitability of that channel has grown significantly over the last several years.

And just one real quick question on Field & Stream, when you launch your online capabilities, any chance that you will be able to start using the Field & Stream URL, or will it have to remain Field & Stream shops to avoid conflict with the magazine?

For right now, it will have to remain that way.

Okay.

Thank you.

Paul Swinand of Morningstar, Inc.

Good morning, and thank you for taking the questions, as always.

I wanted to ask about TaylorMade and the golf business.

Obviously, you are seeing a little more stability.

But you've also talked about TaylorMade being the industry leader, and them being your biggest vendor.

Is there anything that they are still maybe not back to normal on?

And is there something that you can do together to still improve the business?

I think you can see from their release, the adidas release, that the TaylorMade business is still not back to where it was.

I think they've got more -- this is probably grammatically not correct -- they have more better competition out there right now.

Ping has done very well with the G30.

Titleist has done very well with the 915 driver.

Callaway with the Big Bertha product has done very well.

So, it's a more competitive environment out there on the golf side.

TaylorMade continues to try to improve that business.

We actually -- we are going to be looking at their product for next year tomorrow, and I will have a better -- I could answer that question better tomorrow than I can today.

Okay, great.

I'll call you after tomorrow then.

(laughter)

Can't wait.

I am sure you will be right on the phone.

I wanted to ask about the Olympic sponsorships, too.

I know you are just the retail partner.

And, of course, Polo is still the actual official uniform.

Can you give us any more color on what you actually have the rights to?

And is there any opportunity from Polo to actually tie into the Olympics, or is that just the Polo Sport line is a pretty narrow line?

It's Polo Sport.

It's the Polo Sport brand.

And we're very excited about it.

We think they've done a great job with that.

We've been working on this for a while with them, and we are pretty enthusiastic to get this up and running.

As it relates to the Olympics, we're the official sporting-goods sponsor.

We get to use that from an advertising standpoint.

And we are really enthusiastic about what we're doing with the Olympic hopefuls -- these athletes that really still have to work and pay their way to get to the Olympics.

They don't have a sponsor, and we're trying to help them with flexible work hours, and give them a job that they can train to get to the Olympics and still be able to feed themselves and feed their families.

So, we're really excited about this.

And we've got a marketing campaign that we will be launching shortly all around this we think will be very successful.

So, it's just brand marketing; there's not really any merchandise tie-in?

Yes, there is no merchandise tie-in right now.

No.

We just wanted this to be a marketing event, and really try to help these young men and women who are trying to achieve their dream of participating in the Olympics and hopefully winning a medal.

Great.

Thank you very much.

Best of luck.

Scot Ciccarelli, RBC Capital Markets.

Hey, guys.

Given your comments on the combo stores and some of the expected merchandise changes in the stand-alone DICK'S Sporting Goods stores, do you think you are actually space-constrained in your existing DICK'S Sporting Goods boxes?

We definitely are, based on what we could be doing in the women's business, the footwear business, the team sports business.

We're definitely space-constrained.

We have been saying that for a while.

Okay.

And then, secondly, regarding some of the -- I think it was about a year ago you made some significant labor changes on the golf business with the transition of the PGA pros.

Have those changes had the desired impact on the profitability of that category?

And how big of a difference do you think the service levels have been since that change?

I think we are back to the service levels that we are comfortable with.

And the profitability of the golf business is meaningfully more profitable than it was a year ago, not only based on the changes that we made in the store, but also how we consolidated the operation in the back office here.

So, it's a meaningfully more profitable business than it was a year ago.

Got you.

All right.

Thanks a lot, guys.

John Kernan, Cowen.

Good morning, guys.

Thanks for taking my question.

If we think about the long-term targets you recently put out, the 50 to 70 basis points in gross margin expansion, and then the 30 to 60 basis points of SG&A leverage, how doable are those targets if comps stay around this 1% level?

What type of comp do you think you need to really start accelerating towards those targets?

This is Andre, John.

I think what we laid out at the analyst meeting, or the last targets, I think we feel relatively comfortable probably in that 2% to 3% range, that we would be able to get to some of the numbers.

And, again, the last couple of quarters, and we've been pretty clear about the headwinds that we face as a business, but as we lap the World Cup here, and as we go into Q3 and Q4, we feel very confident in our abilities to deliver the targets that we've laid out for this year, and clearly the ones that we shared with you all for 2016 and 2017.

So, we feel relatively confident in the numbers that we've laid out for you all.

Okay, that's helpful.

And then, you mentioned M&A as a potential opportunity.

Can you just elaborate on what you would be looking at there?

Is there a specific category or channel that you would look to expand into?

I don't believe we necessarily talked about M&A, but one of the things I did mention when the question was asked about what could you use the expanded facility for, I said it's for general corporate purposes, it could be for share buyback, and it could be for M&A.

I believe that's the way the question was posed.

So, nothing imminent, and nothing we certainly would discuss at this stage of the game.

Okay.

Thank you.

Sam Poser of Sterne Agee CRT.

Good morning.

Thank you for taking my questions.

The later back-to-school, it sounds like you feel pretty confident about it.

Can you give us some idea, with the later Labor Day and the inventory levels, is that really the effect of the inventory levels?

And given the guidance, I would assume you'd expect to see a little bit of acceleration from second quarter in the same-store sales.

The later Labor Day is real.

There are a lot of schools, especially in the Northeast, that go back after Labor Day, and Labor Day is a week later this year.

So, that's a big shift.

And it is really around the inventory for back-to-school.

And what we have seen is an acceleration in our Business on the outdoor category.

So, in order to keep up with the sales in the outdoor category, and to be in a better position for back-to-school this year than we were last year, has made a big difference.

Last year, there were some orders that were received late that -- when we started back-to-school, we weren't in as good an inventory position as we should have been last year.

But we are this year; we made those changes.

Thank you.

And then just a quick two follow-ups: You've given the ex hunt-camp-fish and golf comp.

I wonder if you would give us that?

And can you give us also some detail as to what the product is, the Polo Sport product that's going into those shops, how we should envision what that's going to look like from a product mix standpoint?

It's athletic apparel, the Polo product.

So, it's running shorts, it's athletic shorts, it's tanks, Tech tees, it's fleece product.

It's all very athletically based.

And Polo is very enthusiastic about participating in this.

They came to us and asked us if we would be interested in participating in this and taking a look at this.

They have been terrific to work with, and we are very enthusiastic about where this might go.

And, Sam, we're eventually going to wean you all off this drug that you keep asking about -- what is it without golf and without hunt.

But we're going to do it one more time.

For DICK'S omni, instead of a 1.5 comp, we would have been at a 2.8 comp for this quarter.

But, again, I want to let our investors know that this is going to become less of a headwind for us, and we're going to start to just stay very focused on the comps we normally give.

But it would have been 2.8 versus 1.5.

And just a quick follow-up -- lastly, that would've had something to do with the shift of that later back-to-school?

You have to look at the two combined now because of the way the calendar's working these two quarters, I assume?

No, I think the way I am answering your question was, what would our comps have been in this quarter ex the hunting and golf equipment, which is the same number we've talked about in the past.

But, in fairness, yes, because back-to-school is one week out later, you could argue that some of our sales that we didn't get in Q2, we will be getting it in Q3 now as Labor Day has moved and back-to-school has moved in some jurisdictions.

Thank you very much.

Continued success.

Rick Nelson, Stephens.

Thanks, good morning.

The hunting category, if you could provide some color there, as well as firearms and ammo, and what you are thinking about for the back half of the year?

Rick, we won't get too granular on category, but we're happy with our total outdoor business.

The hunt piece of that has been behind the total outdoor business.

We still think there is a bit of a hangover from last year when all that product was accelerated.

But we are relatively confident that that hunt business will be relatively flat to next year, and the total outdoor business will be up for the third and fourth quarter.

Thanks for the color.

Also, I'd like to ask you about golf -- how that compared -- the Golf Galaxy comps.

You obviously report how the DICK'S stores performed in that category, and how the profitability compares between the two concepts?

We haven't broken out profitability between the two concepts.

But the Golf Galaxy comps were slightly better than the DICK'S comp.

And both concepts are much more profitable than they had been a year ago, driven by two things: a reduction of cost, and an increase in margin rate.

So, although some people are still not happy about the golf business from a sales standpoint, from a profitability standpoint it's much more profitable than it was a year ago.

Okay, great, thanks for the color.

Also, if I could ask one more about Texas and energy markets, if you are seeing anything different in those states?

Not as of right now.

Thank you.

Mike Baker, Deutsche Bank.

Thanks, guys.

Appreciate that you had a difficult comp versus last year, and so that impacted the same-store sales.

But your total sales growth is growing a little bit less than the industry, which was putting up 5%, 6%, 7% growth the last couple of months.

Typically you have been at or even better than that.

Is that just a function of the categories where you guys are heavier in, or is there any kind of share loss or anything along those lines?

Can you address that gap?

Mike, I'm a bit confused.

Where did you get the 5% number?

From the retail sales numbers that come out every month, NAICS.

I think it's 45111 sales through sporting-goods stores.

I don't think that's a comp number.

Our total business was up roughly 10%.

Right, understood.

But just historically, if you just look at the comp, even without the new stores, your comp has been closer to the industry, and there's been a little bit of a gap the last few months.

My view is it's just a function of the categories you are in, but wondering if you guys have any perspective?

I don't.

I'm not sure we are comparing apples and apples.

But if you wanted to -- you take a look at -- the golf business isn't growing, but if you take a look at -- if that golf business is in your numbers.

I'm just not sure we are comparing apples to apples.

Because the 5% number that you're talking about is not a comp-store sales number.

Right, fair enough.

Okay, understood.

One other follow-up, if I could?

Some of these shifts in tax-free holidays and the later Labor Day we talked about a little bit.

But do you think that that actually did impact the second-quarter sales, and would benefit the early back-to-school in the third quarter, in particular the tax-free holidays?

It affected it a bit.

But will it help the third quarter?

It will help the third quarter a little bit.

But we don't think it was real meaningful.

Okay.

I appreciate the color.

Thanks.

Chris Svezia, Susquehanna Financial Group.

Good morning, everyone, and thanks for taking my questions.

First, I'm intrigued by the Skechers brand coming into your stores.

Maybe just a little more color, whether it's men's, women's, kids?

Are you doing anything special make-up related or is it just regular product categories, doors?

Any additional color would be helpful.

It's going to be men's, women's, and kids.

And we're not getting into special makeups right now.

That's something that we'll talk about down the road.

But we're pleased to be adding them to the assortment, and we think that they will be additive to our footwear business and our overall Business.

Is that all doors, just to clarify, or is it a slow ramp-up?

It will be all doors in 2016.

Okay, fair enough.

Profitability just on the eCommerce side, I know you keep mentioning that the profits are up significantly.

Any color, if you can just talk about from a margin perspective, maybe from an operating margin perspective?

I know it's still broadly below the Company average, but is that -- every quarter as you continue to grow and make progress, are you narrowing that operating profit or EBIT margin gap each sequential quarter or year over year?

Just any color about that.

We are, and we will expect to continue to do that.

And when we flip over to our own platform, it becomes meaningfully more profitable, to the point where it will be almost the same, whether it's by online or in the store.

Okay.

And then the last question I have is just, I know in the past, prior to the issues with golf and the markdowns and ammunition, et cetera, you guys have always seen merchandise margin improvement coming from things like the mix of business, more [permal] footwear, private label, private brand, and systems.

I guess private label and private brand continue to grow.

I think mix continues to be somewhat favorable.

Any color about the systems piece -- if that continues to help you drive that product margin as you move forward?

Yes, we continue to work the systems.

We think that there are some systems help that we can do from a planning and allocation of inventory.

We think that as we move forward from an online standpoint that will help our profitability, too, as we direct ship-from-store product to stores where the product isn't selling.

And although the freight may be a bit more expensive, the markdown associated with that product will be accretive to us.

So, yes, there are still systems opportunities here to help drive margin rate and turn.

Okay, great.

Thanks, and all the best.

Robby Ohmes, Bank of America Merrill Lynch.

Hi, good morning.

This is Rafe Jadrosich on for Robby.

Thanks for taking our questions.

I just want to follow up on the last question on Skechers.

Can you just talk about some of the trends you are seeing within footwear between running and basketball?

And then, are you seeing a pick-up in casual athletic trends?

The basketball area is growing faster than the running area, for sure.

There is definitely a change in silhouette that's been going on for a little while now.

The basketball silhouette is trending faster than the running silhouette.

And then the casual athletic footwear piece is growing at a faster rate than the running silhouette, also.

So, the growth drivers would really be basketball, the casual silhouette, followed by the running business.

Are you seeing allocations improve heading into back-to-school?

And how are you positioned differently for this back-to-school versus last year?

Do you feel like your allocations are better in casual athletic?

Yes, we feel that they are better in casual athletic.

We have a great relationship with the brands Nike, Under Armour, adidas.

And we are very pleased with what is going on right now.

And last question: You closed three Golf Galaxy's in the quarter.

Do you see additional opportunities through the back half of this year or maybe into 2016 to close additional stores?

We will take a look.

As Andre said, those stores weren't making our hurdle rates.

And as we take a look at these stores when they come up, as we've talked about for the last year or so, if they are not making our hurdles that we will close them, and if they are, we will renew them.

And we have renewed a number of Golf Galaxy stores, also.

Okay.

Great.

Thank you.

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

I would like to hand the conference back over to Ed Stack for his closing comments.

I'd like to thank everyone for participating with us on our second-quarter earnings call, and look forward to talking to everybody for our third quarter.

Thank you.

This concludes today's conference call.

We thank you for your participation.

You may now disconnect your lines.