Dick's Sporting Goods Sets Growth Plans

Tickers in this article: DKS

New York (TheStreet) -- Dick's Sporting Goods on Wednesday revealed long-term plans that included sales reaching $10 billion and for its operating margin to be at 10.5% by the end of 2017.

Speaking at its annual analyst day, the Pittsburgh-based sporting goods and apparel retailer will drive profitability by investing $1.8 billion in capital expenditures over the next five years, primarily by adding physical stores, stores remodels, expanding its e-commerce platform and growing its Field & Stream outdoor specialty brand.

The sales target represents a five-year compounded annual growth rate (CAGR) of approximately 11% from fiscal 2012 sales of $5.8 billion, the retailer said in a press release. Dick's Sporting Goods also believes it can expand its operating margin by approximately 150 basis points to 10.5% in fiscal 2017, up from 9.0% in fiscal 2012, via gross margin expansion and expense management.

"To support our long-term goals, we intend to make meaningful investments in our business in the near-term," Edward W. Stack, the company's chairman and CEO, said in the release. "We are timing these investments to stay ahead of our needs and to produce sustainable, long-term advantages. Even with approximately $1.8 billion of capital expenditures to support our $10 billion sales target, we expect to expand our operating margins."

The company plans to add 300 stores over the next four years to total more than 800 DICK'S Sporting Goods stores by the end of fiscal 2017. At the end of 2012, the company had 518 flagship stores.

Dick's plans to grow e-commerce sales by to approximately $1.1 billion from $292 million at the end of 2012 by the end of 2017. It also announced plans to grow Field & Stream to approximately 55 stores and $750 million in sales by the end of fiscal 2017.

Last month, the company reported second-quarter earnings of $84.1 million, or 67 cents a share. Adjusted earnings were $88.9 million, or 71 cents a share, which excluded an asset impairment charge. Wall Street was looking for 74 cents a share.

Dick's second quarter net sales rose 6.6% to $1.5 billion, however comparable store sales fell 0.4% when taking into account the calendar shift for 2012.

The company revised its outlook lower for the rest of the year over lower sales expectations for the second half of the year as consumers remain cautious, it said in August.

"Our second quarter results were below our guidance as a sluggish consumer environment along with higher levels of precipitation and cooler temperatures contributed to a decrease in traffic, resulting in lower than expected same store sales," Stack said. "The current challenges we are facing are short-term in nature and we are actively pursuing strategies to address them. This does not change our view of the profitable long-term growth opportunities for our business."

Shares closed up 3.6% to $52.69 on Wednesday.

-- Written by Laurie Kulikowski in New York.