Q4 2020 Dick's Sporting Goods Inc Earnings Call
Turning to our fourth quarter capital allocation net capital expenditures were $53 million and we paid $27 million in quarterly dividends.
Now, let me move on to our fiscal 2021 outlook for sales and earnings.
Due to the uneven nature of 2020, we planned 2021 off of 2019 baseline and for the same reason believe will be important to compare against both 2019 and 2020.
Furthermore, given the continued uncertainty around when athlete activities will normalize in 2021, and what the new normal b will be guiding to a wider range of possible outcomes that we typically do.
Let's start with the sales guidance, followed by EBT dollars and rate and then on to EPS.
For 2021 consolidated same store sales are expected to be in the range of negative 2% to positive, 2%, which at the midpoint represents a low double digit sales increase versus 2019.
Our square footage versus 2019 is about the same.
We have been pleased with our sales trends so far this year and for the first quarter. We expect significant consolidated same store sales and earnings growth as we anniversary the majority of our temporary store closures from last year.
Beginning in Q2, our guidance assumes comps will decline in the range of high single digits to low double digits as we anniversary more than a 20% cut.
On gain across those quarters in 2020.
Non-GAAP EBT is expected to be in the range of $550 million to $650 million, which at the midpoint and on a non-GAAP basis is up 36% versus 2019 and down 18% versus 2020.
At the midpoint non-GAAP EBT margin is expected to increase over 100 basis points versus 2019 and declined approximately 150 basis points versus 2020.
Within this gross margin is expected to increase versus 2019, driven by leverage on fixed expenses and higher merchandise margin when.
When compared to 2020 gross margin is expected to decline due primarily to gradually normalizing promotions and modest deleverage on fixed expenses beginning in the second quarter.
SG&A expense is expected to deleverage versus both 2019 and 2020 compared to 2019 SG&A is expected to deleverage primarily due to hourly wage rate investments compared to 2020 SG&A is expected to deleverage primarily due to normalizing advertising expense as a percentage of net.
Sales.
Our guidance also contemplates approximately $30 million of Covid related safety costs. During the first half of the year, the vast majority of which will fall within SG&A.
In terms of a premium pay program for hourly and store.
Hourly store and DC teammates at the beginning of fiscal 2021, we transitioned to a more or less in compensation programs, including increased again accelerating annual merit increases and higher wage minimums. The impact of these programs has also been included within our guidance, but falls outside of the aforementioned COVID-19 costs. As these changes are now permanent.
Lastly, we anticipate non-GAAP earnings per diluted share to be in the range of $4 42.
To $5 20, which at the midpoint and on a non-GAAP basis is up 30% versus 2019 and down 22% versus 2020.
On our earnings guidance is based on 96 million average diluted shares outstanding and an effective tax rate of approximately 23%.
This is lower than our traditional tax rate is due to the favorable tax impact of share based payments expected in 2021.
Our capital allocation plan includes net capital expenditures of $275 million to $300 million, which will be concentrated in improvements within our existing stores ongoing investments in technology as well as six new Dick's stores six from specialty concept stores.
And we will also convert to field <unk> stream stores into public land stores.
And relocate 11 Dick's stores.
In terms of returning capital to shareholders today, we announced an increase from our quarterly dividend of 16% to 36, and a quarter cents per share or $1 45 on an annualized basis.
In addition, our plan includes a minimum of $200 million of share repurchases. The effect of which is included in our EPS guidance. However, we will consider continuing to opportunistically repurchase shares beyond the $200 million.
In closing we are extremely pleased with our 2020 results. We're looking forward to continuing this success in 2021.
We remain very enthusiastic about our business.
Before concluding I want to highlight a new investor presentation that will be posted to our investor Relations website. Later today. The intent of this presentation is to serve as a resource to provide current and prospective investors an overview of our company strategy and competitive differentiation.
This concludes our prepared comments.
Thank you for your interest in Dick's Sporting goods operator, you May now open the line for questions.
We will now begin the question and answer session to.
To ask a question you May press Star then one on your telephone keypad.
You are using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two on.
Our first question is from Simeon Gutman with Morgan Stanley. Please go ahead.
Hey, Good morning, everyone. My first question is on the outlook for 2021.
I get that gross margin is expected to be up from 2019 levels. Obviously, there's a very wide range of outcomes on there is there anything you can help us think through obviously on the mid point of a zero comp you would get back some of the maybe rent.
Average occupancy that you got so we can do that part, but as far as the remaining balance of product margin some of the puts and takes there.
Hi, Simeon.
Sure.
Yes.
The business the merchandise margin rates that we've obtained during the second through fourth quarter. This year were largely attributable to fewer far fewer promotions than we've had in <unk>.
We haven't thus far seen a need to add back promotions.
But as we get into the year end.
We believe that the supply of merchandise will become more more plentiful.
Out there that there is the potential.
Potential that the industry will return to more normal promotional levels as we get through the year.
It's hard to say exactly when that will happen or to what extent that will happen, but we're planning on the merchandise margins.
Gradually adding back.
Promotions.
Looking really at Q2 through Q4.
We don't intend to lead the promotional charge there its not really.
Our approach to this but we will have to react if the marketplace goes there right now inventories are in good shape with the right kind of across the industry and across categories right. Now so we don't see anything imminent, but.
We're being cautious about kind of the back half of the year this year with respect to promotions.
Okay.
Second question, maybe bigger picture.
Can you share are you, giving thought to the long term margin power of the business.
I don't know if youre planning to discuss that with investors over the next year or so.
It looks like the business historically peaked at around 9% EBIT margin and that looks like pre E Commerce days.
A lot of it looks like it is dependent on the gross margin so.
I don't know if theres a timeframe in which you could share maybe providing an update to the street on where you think the earnings power of the businesses. If 2000 Twenty's margin rate is a reasonable new level are feeling to get back to over time, how should we think about that.
Hi, Simeon.
Are not going to share our long term guidance on on.
On what our operating margin lumpy going forward. However, we definitely feel there is upside in the operating margin and we plan to continue to deliver that over the next few years average.
Online down commitment right now.
I would just add to that debt I think we want to see how the business settles out once we get past.
Kind of.
The pandemic driven demand and how much how much of that demand and hold on until we believe a lot of is the new normal will.
We will come out of this without meaningfully higher level of sales, but we'd like to see where that settles in so we understand what the basis that we can build off of going forward. So.
We'll have more information on that probably later in the year this year.
Okay, and if I can just back to the gross margin for a second I know theres not a lot of color, but if we get a little bit.
Our leverage actually on occupancy versus 19.
And hunted down which should be good.
A positive.
Better E comm margin should be.
It could be 25 50 basis points.
It's possible we could pencil out.
<unk>.
32, and change, but I don't know if you can comment on I think on my math.
Yes.
I'm not really prepared to comment on the math now, but we do believe that there is look there continues to be opportunity.
On the gross margin side.
Fair enough. Okay. Thanks take care good luck. Thank.
Thank you.
The next question is from Adrienne <unk> with Barclays. Please go ahead.
Good morning, and congratulations on a strong year, all year long and that any on on high net.
This is for Ed and our Lauren excuse me on.
Can you talk about long term store target and maybe on a three to five year basis, what your annual growth from new store and net.
Net store growth should be how we should think about that.
Also for Ed Lori.
Can you talk about the team sports opportunity.
Can you give us some characterization of how large that is as a percent on sales historically and what the relative merch margin of that debt net debt and.
And finally for Lee.
The quarter to day comp.
And.
Just any comments on delayed port congestion and how thats impacting the flow of product. Thank you very much.
Okay Adrian Thank you.
So starting with the long term store targets I think one thing that has become very very clear to us. This year is that our stores are an enormous asset to us as part of our whole omni channel ecosystem and so we are we view our store growth and our e-commerce growth as a very symbiotic and hand in hand and so.
We you will see us continuing to experiment with different types of store prototypes and we've got our new house sports that range that we mentioned on which the larger prototype and we will continue to be looking at where we would want to penetrate that said I would not expect a radical change in our start growth in the next few years. So it can be laid out what we thought.
We're on plan for this year and will continue to.
Seize opportunities as they come up.
Talking about team sports.
We think theres a huge tailwind in team sports there was a lot obviously of kids, who did not get to play this past year and while the season started a little slow slow year to date due to some cold weather and still Covid concerns. We fully believe football is sort of playing in many parts of the country now in <unk>.
Baseball is next and we see team sports.
Large.
And big Helen while people are still also buying.
Health and fitness and other outdoor activities that have become part of their lifestyle.
Lee do you want to take the.
Port delays.
So.
With regard to supply chain.
We have seen some delays across some product categories that we have.
Our inventories are a little bit lower than than we would like them to be we were a little bit constrained in the fourth quarter not so much due to the port delays, but due to some categories of merchandize not being manufactured goods.
As highly as we would've liked.
But we don't we don't anticipate that being a significant impediment to our business at this point now that could change it looks like the.
Ply chain issues I'd say over the last couple of weeks have gotten a little bit better they had been trending worse for a while but.
It seems like what we see Asia as cash catching up a little debt right. Now of course are getting a little bit better in the U S.
We're in a pretty good inventory position at this point, so we don't really see debt as an impediment to.
During the business, we need to do.
Over the next couple of quarters.
Great. Thank you and any comment on quarter to date.
We're really pleased with our quarter day sales.
So.
Is that.
Thank you very much and best of luck.
Okay.
The next question is from Kate Mcshane with Goldman Sachs. Please go ahead.
Hi, Good morning. Thanks for taking my question I was wondering if you could comment at all about what Youre seeing of the golf business and warmer weather regions and how it might be providing a brief true to the spring and summer season for golf nationally and then my second question was just around the store relocations I think you mentioned that Youre getting 11.
This year I think this is a little bit higher than what you traditionally do I wondered if there were more real estate opportunities on new real estate opportunities and whats youre relocating into net debt at more favorable rates.
Great.
Hi.
I'll start with the golf business, we are incredibly bullish on the golf business has remained strong through through the pandemic in the warm weather markets.
Still strong nationally across the board. So participation rates are up there is new there's new athletes on the golf sector and we see we see a lot of growth ahead of US there in terms of relocations, we definitely have on multiple opportunities in a big part of our strategy that real estate right now has been to either renegotiate or relocate.
And we do see a nice.
When we do relocate into a into a new store from net sales and profit standpoint.
It's a big big driver on the relocations as more the lift in sales we get from it then the savings in rent from time, sometimes that rent is reduced but typically we get a fresh new store and we see a significant sales and profitability lift as well our new stores continue to perform very well as.
As well so we're we've been selective in picking our targets for new stores and the economics have been very good.
So we're not discouraged from opening new stores in any way, but we do want to continue to be selective.
Thank you.
Thank you. The next question is from Mike Baker with D. A Davidson. Please go ahead.
Hi, Thanks, guys, one one bigger picture question.
Why do you think you're better positioned today than you were pre pandemic is it.
Vendor relationships is that E. Commerce is it technology is it all day, Bob I think one thing.
Important to note that even before the pandemic in 2019, I think that was your best comp in four or five years. So clearly things are moving in the right direction pre pandemic, what do you think.
Due to that better positioning.
Mike. Thank you for your question I Couldnt agree more with you. This is this is not just a pandemic pumps that we had this past year we have been.
Many years now working on a new strategy too.
Develop our entire omnichannel ecosystem to make the most out of our stores to make the most out of our online sales.
And I would say that on top of amazingly strong vendor relationships, which have only gotten stronger through the pandemic.
The ecosystem that we've created with curbside now, making our stores a really critical part of our digital experience.
Our technology investments over the past few years helped us not just grow and spin up curbside in two days once the pandemic hit but also leverage our fixed expenses in a way that we couldnt have if we hadn't invested in technology a few years ago. So so I do feel like.
We had our best quarters right before the pandemic and then we had our best quarter as during the pandemic and we look forward to returning to a little bit of normalcy and working through our operating model and just to add to Lauren's comments.
From a from a consumer trends perspective and activity trends.
We're excited about some of the new habits that debt.
Our athletes have picked up during the year, whether it's whether it's golf where running or other outdoor activities.
On that require footwear.
Clinic apparel so on.
In addition to what is.
Likely to be some more work from home, which should.
Add more time to peoples.
Life lifestyle.
So we like the product trends going forward and we think that.
Demand is going to settle in at a higher level than it was pre pandemic as well as a result of all these new activities.
Athletes has got engaged with.
Alright.
I just wanted to add one more thing which is one of the most.
Please income to see over the past few quarters is that as we launched curbside and includes our digital on our E. Commerce experience and then we opened up our stores, but our stores are comping positively, while we're still getting incredibly strong growth out of E. Com. So so that feels like a long lasting trend.
I was just going to add.
Selling a lot of layer type under armour or do you see similar product for winter football in New England.
You called out.
Yes, there is on many football season going on who now.
Okay.
Landmark's, but there is and yet you need some under armour.
Awesome.
Yeah.
You guys goods right.
I'll turn it over to someone else. Thanks.
Okay.
Operator, we're ready for the next question Christopher Christopher Harbors. Your line is open on a range. It from Jpmorgan. Please go ahead. Thanks.
Thanks, Good morning, everybody can you talk a little bit about.
You talked about strong performance in Heartland in apparel and.
And where can you talk about sort of the relative performance and perhaps how that change versus what you saw on third quarter and any comment any comment on on how stimulus impacted those trends.
Yes, hi, Chris So hard lines were incredibly strong in the fourth quarter net similar categories doing loans in Q3, but fitness.
Outdoor equipment, which is where our bikes paddle sports on the headlines were really quite a champion spike despite supply constraints.
Challenges that we are getting a lot of product they really dominated this year, but footwear this quarter.
On the year, but footwear and apparel also also were strong.
Maybe I'll turn it over to year day stimulus, we don't have we actually we do not we cannot quantify how much.
Stimulus checks helped us and may help us in the future, but it's not something we're planning against.
There's just so much noise in the business in terms of China measure what the exact impact of that is that we are.
Yes.
Understood and then.
Can you talk a little bit about.
Working capital outlook the balance sheet.
What's the right level from and days of inventory perspective should we look at 2019. This is the right level.
You ended the year with one.
$1 7 billion of cash or you are baking in sort of a minimum $200 million share repurchase most of the difference between the EPS outlook versus the street was really driven on debt on the share count lines. So is there something that you're holding on to that cash for is there a big working cap.
Little drain that your expected expecting and why wouldn't you buyback significantly more than $200 million.
Well a couple of things I'll, just a couple of questions.
With regard to working capital.
We are planning on planning two and.
'twenty, one with our inventory levels approximately even.
Even to 2019.
So we.
We expect sales to be up about.
Low double digits and thank.
Take the math comes out to like 11% and we expect the inventory to be about the same at the end of the 19th so.
While we while the inventory turns will probably be a little bit lower than it is in 2020 expected to be meaningfully higher than it was in 2019.
On the accounts payable leverage will be greater than 2019 will be less in 2020.
But theres no unusual drain on on working capital that's expected.
With regard to share buybacks.
We've said that at a minimum of $200 million.
For this year and we've also said that and that's what we baked into the forecast right now, but we will also look at.
The pace of our business as we go forward and measure that measure what's happening with the pandemic.
If there are any changes to demand, resulting from net in our business and we leave open the possibility of buying back more shares it's appropriate for the business.
Understood and then one last question do you expect ecommerce growth to be up in 'twenty, one and to the extent that you expect it down how might that impact your gross margin. Thank you.
So we're planning on our ecommerce business to be down versus 2020, we just had a really unusual lift in the business, particularly.
Back half of the first quarter and into the second quarter. When the stores were closed. So we are going to come up against some really big E. Commerce numbers certainly on a run rate in the ecommerce business coming out of Q4 is a lot higher than it was last year. So we're very optimistic about the E com business.
So that's good for us on the AUR as have been has been good for us there.
We're using ship from excuse me, we are using the curbside pickup and in in store pickup as well, which which doesn't have the delivery costs. So the impact on our overall gross margins.
Couldnt be.
<unk> from.
From the from the E com business coming down as a percentage of the mix.
Modestly.
Thank you have a great spring.
Thank you. Thank you.
The next question is from Seth Sigman with Credit Suisse. Please go ahead.
Hey, good morning, everybody and congrats on the quarter I was hoping you could frame a little bit more incremental costs in FY 'twenty I think you had talked about $175 million for the year.
That included the $30 million donation and also I assume there was higher incentive comp and maybe some other factors. So that we may be can you confirm that and help us think about how much was in the base for 'twenty.
Then for the outlook.
I want to make sure we have this right it sounds like Youre, saying don't necessarily assume that these costs come back because youre going to reallocate that to more permanent wages and things like that can you just confirm that as well.
Yes, so a couple of points to $175 million.
Sure.
We've got $163 million of.
You've seen the $175 million.
<unk>.
Covid costs day.
Non include the $30 million of additional foundation.
Contributions.
No.
Those are where incremental.
2020.
However, the COVID-19 costs going forward, a large piece of that has been kind of reallocated into more permanent wage increases we continue to see wage pressures.
In order to get the right kind of talent in our stores.
We're continuing to have to invest more on our hourly wages to maintain maintain those.
The right kind of people both on their stores in our distribution centers. So a large part of that is being reinvested.
As you said going forward.
The other piece I want to mention is that advertising expense this past year.
It was pretty much nonexistent between March and May while we were trying to figure out how we're going to manage liquidity through the pandemic itself.
That is another cost that will be normalizing next year.
Okay. That's helpful. And then just another follow up on clarification. When you talked about earlier upside to the long term operating margins of this business just to confirm is that versus the five 1% in 2019 or versus what you just saw in 2020.
I would say it's vs R R.
Our guidance for this year, if you take the midpoint of our guidance. We think we can establish that as a.
New basin, and then keep building off of that so its over and over 6% operating margin we can build from there.
Okay, great very helpful. Thanks, so much.
Your next question is from Michael Lasser with UBS. Please go ahead.
Hi, Mike Swartz on for Michael Lasser, Thanks for taking our question.
Looking back at the sales growth you saw over the past year would you be able to parse out how much of that was driven by new customers versus increased spend from existing customers and how do new customers compared to existing customers in terms of ticket frequency.
Yes, Hi, Mike.
We have had a significant increase in new customers over the over the course of this past year, we had $8 5 million new customers over the full year and $2 5 million in the fourth quarter.
We're very pleased with the makeup of the new customers they tend to skew a little younger than our average.
Former customer or a current customer.
It'll bit slightly more female and slightly more urban so we do think a lot of the exits from the city people engage with the brand for the first time on we're working very hard to keep those people in our database and encourage second purchases.
It's a big piece of our growth.
Thank you and as a follow up.
Is it all with index ability to drive a more limited promotional stance.
From 2019 levels or low it depend on pricing and promotional intensity in the marketplace.
I Couldnt hear the first part of your question, but I think you were asking.
It gets able to lead a less promotional environment on 2019 without without your question.
Sure, just whether or not the company that the levers to drive a more limited promotional stands on its own or if it's more of a market dynamic.
We do not plan to be very promotional moving moving on to you of course, we will respond to any market pressure that way.
But we have already environmental or economic pressure.
We do not plan to lead a heavily promotional cycle here and we believe we have the levers to net.
Which appropriately true.
Okay.
The next question is from Chuck Grom with Gordon Haskett. Please go ahead.
Hey, Thanks, good morning longtime Ed.
Just on the on the lease from I know you have a number of leases coming up for renewal over the next several years just wondering how we should think about.
The impact from that to the occupancy cost line over the next couple of years.
Well, we've got about two thirds of the leases coming due over the next five years and we have an option on those leases.
As we go forward.
The majority of those stores as we negotiate.
On new leases, we've been able to negotiate net reductions along the way and it also gives us leverage to drive better deals when we relocate stores. So I would expect.
Modest declines year over year on the rent line going forward.
As we as we have all along.
Got you Great and then just one quick question on I apologize for being near term oriented, but I'm wondering if you're seeing any different from the regional performance, where there's been fewer COVID-19 restrictions, particularly in <unk>.
It's like Florida, Georgia, Texas versus maybe say up here on the northeast.
I think the best way to answer that is just that obviously COVID-19 restrictions have allow different levels of activity in team sports coming back and we are looking at the business that way and where they are coming back we're seeing strength in those businesses.
Got it thanks.
Okay.
The next question is from Paul <unk> with Citi. Please go ahead.
Hey, Thanks, guys Karen.
If you could talk about the mix.
Performance on the impact it had on gross margin this year.
One on just how you think the mix could have an impact on that merch margin line in F. 'twenty, one maybe talk from a category perspective on for private label perspective in terms of.
In terms of how you're managing that business and then secondly, just on.
So curious if you can comment on what's going on on the competitive landscape just how much of your F. 'twenty. One guidance is driven by what you think will be market share opportunities from competitor store closings either medium sized chain small sized competitors any numbers you can share on that thank you.
Mix in 2021 should be a little bit favorable to 2020.
Because the.
The strongest part of the business.
The strongest part of the business in 2020 was really at the hard lines categories outdoor equipment and fitness and so on and as we go forward, we expect to see a recovery in team sports. We can expect to see continued strength in athletic apparel and athletic footwear businesses, which are which are higher margin businesses. In addition to that we.
Expect to see our private brands that our vertical brands continue to growth.
Which is also a positive from a mix perspective, and beyond business coming down which should be favorable from a from a margin.
Perspective, so there is some basis points of mix favorability I would expect to see.
In 2021.
With regards to the competitive landscape.
I don't see that much changing from a brick and mortar perspective.
The sporting goods sector is generally in good shape right now.
Pandemic has spurred sales across that across our sector. So I don't expect to see.
Closures really in any kind of meaningful way this year with regards to department stores.
Some of the department stores are closing some stores, which should be favorable but on the other hand some of them are going after kind of the athletic apparel space, a little bit more aggressively which will work. The other way so long and short of it is I don't really see a meaningful change in the competitive landscape this year and the brick and mortar space.
Thank you good luck.
The next question is from John Kernan with Cowen. Please go ahead.
Hey, good morning, everybody and congrats on a phenomenal year.
Thank you.
Can you talk to.
Inventory levels in.
The middle of 2020 were down pretty significantly supply constrained in any key categories, where you felt.
Like you potentially will have some comps on that day.
Probably phenomenon just curious.
Yes, there was.
And you Couldnt fulfill.
Yes, Hi, John there definitely was some demand we've been chasing all year and categories that were surging due to the pandemic and managing through it.
It's on a hand to mouth basis for some of these categories. We left some sales on the table.
But let me turn it over to Lee.
Yes, I mean, the categories that we were chasing all year or fitness.
From golf equipment from Atlantic apparel, So certainly if we had more inventory over the course of the year on certain key categories or SaaS was a bit higher we are in much better shape in inventory right now so.
We're down 10%, we feel pretty good about our inventory levels right now there's still a few pockets, where we're short, but we don't have any kind of widespread inventory outages that we get through made in the latter part of the year last year.
Got it and maybe my follow up question goes back to the mix.
On a question how will mix affect comps this year I know ticket was the big driver.
Overall comps in fiscal 'twenty, just curious how you expect.
Mixed to affect not only the gross margin, but also accounts this year.
Well.
That remains to play out I think for us to take a look at it and see how well the big ticket items holdup part of the recently average retails up so much because we were less promotional so.
That drove a lot of the average ticket, but we did have strength in big ticket items like in the fitness area on kayaks golf clubs, so on and.
I think we feel really good about the golf business, we feel feel good about we feel good about all of those categories right now.
Time will tell as we get later in the year.
When the new activities kind of normalize what will happen to the sales there.
Sounds good thank you.
Your next question is from Scot Ciccarelli with RBC capital markets. Please go ahead.
Good morning, guys Scot Ciccarelli.
So it seems like your net.
Men's athletic apparel brand burst is aimed right in the middle of the core merchandise offering for some of your most important vendor partners I'm. Just curious how you guys are planning to introduce that brand and any potential conflicts that can create with those partners, especially given your comment on the improving vendor relationships.
Yes, Hi, Scott.
Diverse brands that we mentioned on women's premium athletic apparel brand. We believe it is very much on white space in our stores right now.
It's competing with other specialty, but we do believe when you see it it will be it's a very different product assortment from what we have with our Clark on for partners right now and it is the white space.
You can think of it sort of is that the CLIA version on the non side in terms of selling a white space that we that we have that our current partners are just not are not in.
So can you provide any more detail on why that's going to be different than say.
Nike under armour type offerings.
Yes.
I would say, it's closer to it's closer to Lulu lemon and the Assortments that they've got.
It's more.
Lifestyle apparel that you can wear to work.
You can travel in.
There is you can work out and if you if you choose to so it covers a broader range of activities than kind of the Nike, which is a little bit more athletes focused.
Then our new brands coming out.
Okay. Thanks, a lot guys.
The next question is from Steven Forbes with Guggenheim. Please go ahead.
Good morning so.
So given given the comments right on the income.
Moving to the stores I think Lee spoke to that six plus percent operating margin.
If you could remind us.
The four wall margin profile is across the mature store base and what sort of four wall margin target.
We are looking at when Youre identifying.
Relocations or new store opportunities.
Yes.
We really run on a return on investment.
And our new stores.
With that we're aiming force at least an 18% IRR.
On the stores, including Inc.
Including relocations SPN IRR over.
<unk> remains in the existing store so in order to in order to start a new investment and typically we can do that because we have it we get a large sales lift Abbott force when they move.
And then just a follow up breakeven that ROI. Okay. Any any comment you can return to sort of these premium footwear decks on the IRR attached to that initiative or any color on what we should think about in terms of progress.
We're not going to share the IRR on the tax other than to say that the deaths have unlocked.
A lot of assortment on a much better athlete experience and so on.
It's really been on game changer, very positive game changer for our entire footwear business.
Thank you best of luck.
Thank you.
Next question is from Joe Feldman with Telsey Advisory. Please go ahead.
Hey, Thanks, guys and good quarter.
Wanted to ask you.
You've mentioned.
Last month.
On some things to enhance the mobile experience.
Could share a little more color on that and how you would be better immigrating.
I guess.
That experience for the consumer.
Yes.
We're working on a relaunch of our mobile App that said mobile is already 50% of our e-commerce sales and.
The plans we have right now are just fully integrate both the store experience and the scorecard experience into the online.
Shoppers experience and in particular with making mobile app.
<unk> of the square card users.
<unk> card members entire Dick's experience.
More to come got it okay.
Sure.
Okay. Thanks, and then the other topic I wanted to ask about was sort of on the last mile.
Obviously, you've made great strides this past year, where are you headed in 'twenty, one Mike do.
Do you kind of go back and <unk>.
Find ways to make curbside more efficient both those things like that or.
How do you do that.
Yes, if you could share some plans for that.
Yes, we are focused on the last mile and we are focused on trying to improve that.
Profitability, but also the profitability greatly in that channel, but the customer experience. So we're working on things like speed to athletes. So right now people are getting notified that their purpose curbside order is ready.
We promised under an hour, it's a lot faster than that.
Within 30 minutes or faster.
Curbside weighted is there.
Just a couple of minutes very quick and.
And so we're trying to just make the experience become so convenient debt that people do that people love it and the other thing we did this past year as tested in CCAR for same day delivery and not just a small test to see whether our athletes want.
Same day delivery and we'll be looking inside of the year goes on.
That's great. Thanks, Thanks, and good luck this spring.
<unk>.
The next question is from Warren Cheng with Evercore ISI. Please go ahead.
Mr. <unk>. Your line is open on our end is it muted on yours.
Sorry about that yes.
Yes.
Great quarter I, just had a follow up question on Finian's question and fully on questions on gross margin.
So if I just tried to sort out what's happening to your gross margin structurally.
And Phil charts on the noise in 2020, and even 2021.
In a scenario, where we're back to a post COVID-19 sales mix post COVID-19 more normalized promotional environment whenever that may be.
Can you maybe just rank order the biggest changes to your structural underlying gross margins relative to 2019 levels.
But I would say the largest one we believe we will see the merchandise margin being higher due to due to mix shift and.
Due to better promotions management, particularly online.
That's the largest I'd say the second largest is going to be around leverage of occupancy expense and to the extent, we've got the same square footage in.
2021, as we did in 19, and we're able to continue to drive some rent reductions along the way you should be able to continue to leverage our occupancy expense.
Going the other way.
E Commerce is a larger part of the business there is some.
Pressure from.
Additional additional.
Delivery.
<unk> to get products to customers, we did a really good job on the fourth quarter mitigating that through more through more of office.
Average sized pickup in higher AUR as we think we'll be able to hold on to some of that but it will be it will be so accounts.
<unk>.
On a very detailed management effort on our expenses there to try to keep that down, but I would expect versus 19, the delivery expenses to grow a little bit higher as a percentage of sales.
From from.
From ecommerce business.
Thank you good luck.
The next question is from Seth Basham with Wedbush Securities. Please go ahead.
Thanks, a lot and good morning, my questions are on SG&A, if you could contextualize the underlying growth in net G&A that we're seeing in the business. Maybe if you think about it on two year basis from 2019 or should we be looking at 3% to 4% growth on an annual basis underlying.
So vs versus 19.
The main drivers of growth.
Are really going on.
Our store payroll expenses.
And Thats really driven by.
The higher wage rates that are across the board.
I'm not going to comment on the exact amount, but it is going up but.
On the deleverage that we are experiencing is really attributable to two debt factor.
Wage rates.
Advertising is in good shape admin expenses.
We're in good shape as well, so it's really driven by store payroll.
Great.
Okay, but no problem on our underlying growth rate then.
Okay.
I don't want to comment on net at this point.
Okay, and just as a follow up thinking about from the smaller elements of SG&A looking at DNA on the Capex step up and other.
That might fall out with those increased capital investment.
Is that a headwind in 2021.
Not not really not really.
As we know we've got investments coming in throughout the year. This year partial year depreciation expense is not really a headwind for this year.
Yeah.
Thank you.
And our final question today will be from Tom <unk> with Wells Fargo. Please go ahead.
Okay.
Hey, everybody. Thanks for squeezing me in.
Yeah.
Sure.
Laura I just wanted to ask quickly on the scorecard loyalty program.
I think something like 18 months ago.
It seems like you've gotten a pretty good uptake there.
70%.
I just wanted to ask.
Are there meaningful differences.
The metrics, you're seeing of score card members, which non scorecard numbers John in terms of.
Buying frequency or average basket or anything like that and then just also do you think that debt.
70% penetration can move even higher from here.
Kind of.
Situations, where you can see it becoming 80, 90% of sales.
Thanks.
Yeah. Thanks, Tom just to clarify one thing our scorecard program has been around for actually many many years and 70% penetration.
Has been civil.
Similar for the past few years, we always hope its going to increase but it's a very very high number as it is I think you're referring to is our scorecard gold program, which we launched.
Probably about 18 months ago, now, which is for our best customers, who do account for.
Our highest level of sales over $500 a years once the criteria is and they contribute on an awful lot of our total sales are.
Higher on an AUR.
Average transactions.
Every levers is higher.
Okay.
Got it.
So yes. So you think 70% is kind of based on the steady state penetration for the flip from the loyalty program at World.
The reasonable assumption.
Yes.
Okay. Thanks.
Thank you.
This concludes our question and answer session.
I'd like to turn the conference back over to Lauren Hobart for any closing remarks.
Alright. Thank you everybody for your interest index and a final. Thank you to our teammates on for their amazing performance. This year. Thanks, everybody.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Non.
Good day.
Yes.
Okay.