* Q1 adj. EPS $0.11 vs est of $0.07
* Q1 rev rises 5 pct
* Q2 EPS view $0.28-$0.31 vs est $0.30
* Says expects 2009 to be challenging
* Sees lower gross margins in 2009
(Adds conference call details, analyst comments, share
By Mihir Dalal
BANGALORE, May 19 Dick's Sporting Goods Inc
(DKS.N) posted higher-than-expected quarterly results as
revenue from new stores offset weakness in its golf category,
but said it sees gross margins falling in 2009 amid a tough
Shares of the Pittsburgh-based company, which sells
sporting equipment, apparel and footwear, reversed earlier
gains to trade down 6 percent at $18.65 Tuesday afternoon on
the New York Stock Exchange.
Dick's Sporting expects 2009 to continue to be a difficult
year, a company executive said on a conference call with
analysts. The company will tighten spending and effectively
manage inventory to weather the economic downturn, he said.
Gross margins, which fell 232 basis points to 26.1 percent
in the first quarter, are expected to fall in 2009 compared
with 2008, the company said.
"The one concerning component in Q1 was gross margin,
likely reflecting increased promotions and perhaps some other
remerchandising efforts at Golf Galaxy and Chick's stores,"
Credit Suisse analysts wrote in a note to clients.
The analysts said the decline was particularly concerning
since a significant part of the company's earnings growth over
the last few years had come through margin expansion.
"The promotional environment is intense so it was not
unexpected that they would see some gross margin erosion,"
Barclays analyst Michael Lasser told Reuters.
He said the promotional environment will stay intense in
2009 and expects the company to discount some of its
merchandise to keep up with competition.
The retailer said it plans to open about 20 new Dick's
Sporting Goods stores and one new Golf Galaxy store in 2009. It
opened nine Dick's Sporting Goods stores and one Golf Galaxy
store in the first quarter.
Q2 EPS OUTLOOK
However, the retailer forecast second-quarter profit
largely in line with analyst estimates.
It expects to earn 28 cents to 31 cents a share, excluding
items, compared with analysts' estimates of 30 cents.
"The road to recovery throughout retail will be gradual and
it is not going to quickly rebound and their conservative
outlook reflects that," Lasser said.
The analyst, who has an "overweight" rating on the stock,
said his $15 price target was under review.
The company sees same-store sales, which fell 6 percent in
the first quarter, declining 6 percent to 9 percent in the
second quarter and in 2009.
For the first quarter ended May 2, the company posted a
profit of $10.2 million, or 9 cents a share. Excluding items,
it earned 11 cents a share.
Revenue rose 5 percent to $959.7 million.
Analysts expected earnings of 7 cents a share, before
special items, on revenue of $914.3 million.
(Editing by Deepak Kannan)