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Dick’s Sporting Goods posts nearly 18% growth in Q3 web sales

November 18, 2015 11:19 AM
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Online sales grew just under 18% in the fiscal third quarter for Dick’s Sporting Goods Inc., an increase many retailers would welcome but that represents a slowdown for Dick’s, whose web sales have increased nearly 25% in the first nine months of the fiscal year.

E-commerce represented 8.0% of sales during the fiscal third quarter, which ended Oct. 31, versus 7.3% during the same period a year earlier. Dick’s is No. 70 in the Internet Retailer 2015 Top 500.

The retailer, which operates 739 bricks-and-mortar stores across the United States as well as three e-commerce sites, took another step in the quarter to bring its web operation in-house when it launched FieldandStreamShop.com on its own platform. Dick’s previously had relaunched GolfGalaxy.com on its new in-house platform. Dick’s CEO Ed Stack told analysts today that the retailer remains on track to bring its primary e-commerce site, Dicks.com, in-house by January 2017. The former GSI Commerce has operated the e-commerce sites for Dick’s. EBay Inc. acquired GSI in 2012 for $925 million and spun it off earlier this month to private equity firm Sterling Partners.

Stack said bringing the e-commerce operation in-house will allow Dick’s “to capitalize on the significantly improved economics and other strategic benefits, including the control to create a differentiated online experience, easier access to data and the ability to leverage cross-channel data, control over development cycles, including faster testing times and implementation, and the ability to quickly stand up new sites.”

While not disclosing the fees Dick’s pays the former GSI, Stack said the retailer pays a percentage of online sales, even though it does not cost the service provider any more to ship a $100 pair of shoes than shoes costing $50. While Dick’s may initially use an outside fulfillment service, Stack said it should be able to significantly reduce e-commerce operations costs once its existing contract is up. “There is a very meaningful increase in profitability when we roll off this GSI contract,” he told analysts, according to a transcript of the Dick’s Sporting Goods earnings call provided by SeekingAlpha.

Dick’s reported late third quarter sales of winter apparel, both in stores and online, were lower than expected due to unusually warm weather in much of the country. Stack also warned of “a more promotional environment” in the fourth quarter—in other words, stiff price competition. And the company’s projection of same-store sales for Q4 ranging from a year-over-year increase of 1% to a decline of 2% was well below last year’s year-over-year same-store sales growth of 3.4% in the same quarter.

Soft Q3 sales and downbeat Q4 guidance from Dick’s “can’t be 100% weather,” investment analyst Matt Nemer of Wells Fargo Securities said in a note to investors. .“There is an argument that Amazon is taking share,” he said. Nemer estimates that Amazon.com Inc., No. 1 in the  Internet Retailer 2015 Top 500, accounted for 40% of U.S. retail growth, both offline and online, in the third quarter.

In terms of online customer service, however, Dick’s performed well in several respects in the calendar third quarter, according to StellaService Inc., which tracks the service provided by 40 major web merchants in the StellaService quarterly Ecommerce Index. For example, callers reached an agent in an average of 1 minute 12 seconds, well below the index average of 1 minute, 55 seconds, and all callers connected with an agent versus 93% for all the retailers tracked. Dick’s responded to emails in 9.0 hours, slightly faster than a year earlier and 40% faster than the index as a whole, while answering 99% of emails within three days, versus 86% for all index retailers. Dick’s also delivered orders faster, averaging 3.3 days to get an order to a customer versus an average of 4.2 days for all retailers in the survey, StellaService says.

For the fiscal third quarter ended Oct. 31, Dick’s Sporting Goods, reported:

  • Total net sales increased 7.6% to $1.643 billion from $1.527 billion in the same period a year ago.
  • E-commerce penetration increased to 8.0% from 7.3%. Dick’s does not break out online sales in its earnings report, but that suggests web sales grew 17.9% to $131.4 million from $111.5 million.
  • Net income decreased 4.1% to $47.2 million from $49.2 million.

For the first three quarters of its fiscal year, Dick’s reported:

  • Net sales of $5.031 billion, an increase of 8.1% from $4.654 billion in the same period during the prior fiscal year.
  • Net income of $201.4 million, up 6.7% from $188.7 million.
  • While Dick’s did not report online sales for the first three quarters, based on this and previous earnings reports, web sales for the year increased 24.8% to $397.4 million from $318.5 million. For the first three quarters the web accounted for 7.9% of sales versus 6.8% a year ago.
 

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