Q4 2023 DICK'S Sporting Goods Inc Earnings Call
Operator: Good morning, my name is Dennis, and I will be your conference operator today. At this time, I would like to welcome everyone to the Dick's Sporting Goods, Inc. fourth quarter 2023 Arnie's conference. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. To withdraw your question, press star one again.
Good morning, My name is Dennis and I will be your conference operator today at this time I would like to welcome everyone to the Dick's Sporting goods, Inc. Fourth quarter 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer.
Sure.
If you would like to ask a question. During this time simply press Star then the number one onwards telephone keypad to withdraw your question Press Star One again I would now like to turn the conference over to Nathan <unk> Senior director of Investor Relations. Please go ahead.
Nathaniel A. Gilch: I would now like to turn the conference over to Nate Gilch, Senior Director of Investor Relations. Please go ahead. Good morning, everyone, and thank you for joining us to discuss our fourth quarter and full year 2023 results. On today's call will be Lauren Hobart, our President and Chief Executive Officer. Navdeep Gupta.
Nathan: Good morning, everyone.
Nathan: Thank you for joining us to discuss our fourth quarter and full year 2023 results.
Nathan: On today's call will be Lauren Hobart, our president and Chief Executive Officer.
Nathan: Pete <unk>, our Chief Financial Officer.
Nathaniel A. Gilch: Our playback of today's call will be archived on our investor relations website, located at investors.dix.com, for approximately 12 As a reminder, we will be making forward-looking statements, which are subject to various risks, causes, to differ materially from, Any such statements should be considered in conjunction with caution in our earnings release and risk factor discussions in our filing, including our last annual and our most recent forum, as well as Kashi. We assume no obligation to update any of these forward. Please refer to our investor relations website to find the reconciliation of our non-GAAP financial measures referenced in today's call. And finally, there are a few advertisements. First, a reminder about our comparable store sales reporting for fiscal 2020. It's important to note that fiscal 2023 was a 53-week year, and Commercials Calculations, votes for our full year 2020, fourth quarter. Thus, these metrics have been calculated.
Nathan: A playback of todays call will be archived on our Investor Relations website located at investors <unk> Dot com for approximately 12 months.
Nathan: As a reminder, we will be making forward looking statements.
Subject to various risks and uncertainties that could cause our actual results to differ materially from these statements.
Nathan: Any such statements should be considered in conjunction with cautionary statements in our earnings release and risk factor discussions in our filings with the SEC.
Nathan: Including our last annual report on Form 10-K, and our <unk>.
Nathan: Most recent Form 10-Q as well as cautionary statements made during this call.
Nathan: We assume no obligation to update any of these forward looking statements or information.
Nathan: Please refer to our Investor relations website to find the reconciliation of our non-GAAP financial measures referenced in today's call.
Nathan: Finally, a few add items.
Nathan: First a reminder, about our comparable store sales reporting for fiscal 2023.
Nathan: It's important to note that fiscal 2023 was a 53 week year.
Nathan: Comp sales calculations exclude the extra week from both our full year 2023, and fourth quarter 2023 results.
Nathan: Thus these metrics have been calculated on a 52 week 13 week comparable basis.
Nathaniel A. Gilch: 13-week comparable, Second, beginning in, or we are revising our comparable store sales, to include revenues from our Next, we'll be playing a short year-end video in advance of our prepared remarks, starting toward the end of Navdeep's prepared remarks. We'll also be sharing slides to visually support our prepared remarks. And finally, for your future schedules... We are tentatively planning to publish our first quarter 2024 earnings report on May 29, 2020. With that, let's play the video.
Nathan: Second beginning in fiscal 2024, we are revising our comparable store sales calculations to include revenue from our game changer business.
Nathan: Next will be playing a short year and video in advance of our prepared remarks and starting towards the end of these prepared remarks will also be sharing slides to visually support key discussion points.
Nathan: Finally for your future scheduling purposes, we are tentatively planning to publish our first quarter 2020 or earnings results on May 29 2024.
Nathan: With that let's play the video.
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Nathaniel A. Gilch: Music We are honored to commit $100,000! Music Music, Good morning, everyone. I hope you enjoyed the video.
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Lauren R. Hobart: Dick's is a really special company with 75 years of history of reinvention. It's been a terrific year, and I'm really proud of the team for their extraordinary efforts. Since our founding in 1948, Dick's has believed in the power of sports to change lives. We bring this to life every day through the experience we provide for our athletes. The differentiated products we offer. The marketing we create to connect our athletes deeply with our brands, and most importantly, our Through these strategic pillars, we are actively creating and defining our, and during this past year, it's evident just how far we've extended our leadership. For the full year, we delivered record sales of $13 billion.
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Speaker Change: Good morning, everyone I Hope you enjoyed the video <unk>.
Lauren R. Hobart: On a 52-week comparable basis, our comps increased 2.4%. Driven by Growth in Transactions, and we continue to gain market share. We added nearly 7 million new athletes during the year and reached record highs in our active athlete data.
Speaker Change: This is a really special company with 75 years of history reinventing support.
Speaker Change: It's been a terrific year and I'm really proud of the team for their extraordinary effort.
Speaker Change: Since our founding in 1948, Dick's has believed in the power of sport to change lives.
Lauren R. Hobart: It's clear that sport and leading healthy, active lifestyles are priorities for our customers, and they are increasingly looking to Dick's Sporting Goods to meet these. With our industry-leading assortment and strong execution, we capped off the year with an incredibly strong fourth quarter and holiday season. Including week 53, our quarterly sales grew 7.8% to $3.9 billion. On a 13-week comparable basis, our comps increased 2.8%, which was on top of a 5.3% comp increase last year. On a non-gap basis, our growth margin expanded more than 200 basis points, driven by higher merchandise. Our non-GAAP EBT margin was 11%, and we delivered non-gas EPS of $3.85, which included $0.19 for the extra.
Speaker Change: We bring it to life every day through the experience we provide for our athletes.
Speaker Change: She had a product we offer.
Speaker Change: The marketing we create to connect our athletes deeply with our brands.
Speaker Change: And most importantly, our teammates.
Speaker Change: Through these strategic pillars, we are actively creating and defining our future.
Speaker Change: And during this past year its evident just how far we've extended our leadership position.
Speaker Change: For the full year, we delivered record sales of $13 billion.
Speaker Change: On a 52 week comparable basis, our comps increased two 4% driven.
Speaker Change: Driven by growth in transactions as we continued to gain market share.
Speaker Change: We added nearly 7 million new athletes during the year and reached record highs and our active athlete database.
Lauren R. Hobart: On a 13-week comparable basis, our non-GAAP EPS was $3.00, an increase of 25% versus the prior year. For 2024, we're guiding to another strong year and expect to grow both our sales and our Positive Comps, Higher Merchandise Margin, and Productivity. Our inventory is well-positioned, and we're excited about the assortment we have curated for ourselves. We expect our comp sales to be in the range of 1% to 2%.
Speaker Change: Clear that sport.
Speaker Change: And leading healthy active lifestyles are priorities for our athletes.
Speaker Change: And they are increasingly looking to Dick's sporting goods to meet these needs.
Speaker Change: With our industry, leading assortment and strong execution, we capped off the year with an incredibly strong fourth quarter and holiday season.
Speaker Change: Including week 53, our quarterly sales grew seven 8% to $3 9 billion.
Speaker Change: On a 13 week comparable basis, our comps increased two 8%, which was on top of a five 3% comp increase last year.
Lauren R. Hobart: We expect our EPS to be in the range of $12.85 to $13.25. We're excited to continue redefining the future of, and with the continued success of our growth initiatives, we will increase our capital investment to drive our business forward, both digitally and in, gain market share in this fragmented $140 billion industry. The key driver of this growth is the repositioning of our portfolio. Including House of Sport, our next generation 50K, which completely revolutionizes our most typical 50,000 square foot Dick's store and GolfGal. Navdeep will share greater detail on how the sports compelling unit is performing. I'd like to thank all our teammates for delivering another strong year, for their passion, hard work, and dedication to our business. It's our people who make us great, and none of what we accomplish is possible without our exceptional talent. Before I go deeper into our growth strategies, I'll first turn the call over to Navdeep to share more detail on our financial... 2024 Outlook, and Capital Outlook. Thank you, Lauren, and good morning, everyone.
On a non-GAAP basis, our gross margin expanded more than 200 basis points driven by higher merchandise margin.
Speaker Change: Our non-GAAP EBT margin was 11%.
Speaker Change: And we delivered non-GAAP EPS of $3 85, which.
Speaker Change: Which included <unk> 19 for the extra week.
On a 13 week comparable basis, our non-GAAP EPS was $3 66 and.
Speaker Change: An increase of 25% versus the prior year.
Speaker Change: For 2024, we're guiding to another strong year and I expect to grow both our sales and earnings through positive comps.
Speaker Change: Merchandize margin and productivity gains.
Our inventory is well positioned and we're excited about the assortment we have curated for athletes.
Speaker Change: We expect our comp sales to be in the range of 1% to 2% and expect our EPS to be in the range of $12 85.
Speaker Change: To $13 25.
Speaker Change: We're excited to continue redefining the future of retail.
Speaker Change: With the continued success of our growth initiatives, we will increase our capital investment to drive our business forward, both digitally and in store and continue gaining market share in this fragmented $140 billion industry.
Navdeep Gupta: Let's begin with some highlights of our full year 2023 results, which was a 53 B. Consolidated sales increased 5% to $12.98 billion, which included $170 million from the 53rd. On a 52-week comparable basis, comps increased 2.4%, and we continue to gain market share. Comps were driven by a 1.6% increase in transactions and a 0.8% increase in average. On a non-gap basis, gross profit for the full year was $4.55 billion, or 35.01% of net profit, an increase of 36 basis points from last year. This increase was driven by lower supply chain costs, which led to a debate.
Speaker Change: A key driver of this growth is the repositioning of our portfolio, including houses sport. Our next generation 50, K, which completely revolutionize our most typical 50000 square foot Dick's store and golf Galaxy performance Center.
Speaker Change: How deep will share greater detail on houses sports compelling unit economics.
Speaker Change: I'd like to thank all our teammates for delivering another strong year and for their passion hard work and dedication to our business.
Speaker Change: Addicts, it's our people, who make us great and none of what we accomplished as possible without our exceptional team.
Navdeep Gupta: This was partially offset by lower merchandise margin of 53 basis points, which was entirely due to higher... To be clear, absent the headwind from shrink, our merchandise margin would have been flat. Non-GAAP EBT was $1.4 billion or 10.8% of net sales, and we delivered non-GAAP earnings per diluted share of $12.91. It included 19 cents from the 53rd.
Not Deep: Before I go deeper into our growth strategies I'll first turn the call over to not deep to share more detail on our financial results 2020 for outlook and capital allocation.
Not Deep: Thank you Laura and good morning, everyone.
Not Deep: Let's begin with some highlights of our full year 2023 results, which was up 53 Bts.
Not Deep: Consolidated sales increased 5% to $12 $98 billion.
Speaker Change: This included $170 million from the 50 <unk> week.
Navdeep Gupta: On a 52-week comparable basis, our non-GAAP earnings per diluted share were $12.72. This compares to a non-GAAP earnings per diluted share of $12.04 in 2022, an increase of 5.6% on a 52-week basis. I will remind you that our 2023 tax rate was lower than our typical tax rate, driven by the favorable impact of VESTA on Employee Equity Awards and exercises during the year. This positively impacted earnings for diluted shares by 44 cents compared to the prior year. As we have discussed on our prior calls, to continue fueling long-term growth, during the second half of 2023, we took actions to better align talent, organizational design, and spending in support of our This included actions to change our resourcing and organizational structure, primarily in our customer support, as well as the optimization of our outdoor specialty business. As part of this, we integrated operations of Moose Jaw into public lands and made decisions about the go-forward outdoor inventory assortment consistent with our prior activities.
Not Deep: On a 52 week comparable basis, our comps increased two 4% and we continue to gain market share.
Not Deep: Comps were driven by a one 6% increase in transactions and a 0.8% increase in average ticket.
Not Deep: On a non-GAAP basis gross profit for the full year was $4 $55 billion.
Not Deep: 35.01% of net sales an increase of 36 basis points from last year.
Not Deep: This increase was driven by lower supply chain cost, which leveraged 80 basis points.
Not Deep: This was partially offset by lower merchandize margin of 53 basis points, which was entirely due to higher shrink.
Not Deep: To be clear absent the headwind from shrink our merchandise margin would have been flat.
Not Deep: non-GAAP EBT was $1 $4 billion or 10, 8% of net sales and we delivered non-GAAP earnings per diluted share up $12 91.
Not Deep: Which included <unk> 19 from the 50 <unk> week.
Navdeep Gupta: Additionally, we conducted a comprehensive review of our store portfolio with respect to our outdoor specialties. We completed our business optimization review during the fourth quarter. In total, we incurred pre-tax charges of $84.8 million for the full year 2020. These charges were included in our GAAP earnings per diluted share of $12.18.
Not Deep: On a 52 week comparable basis, our non-GAAP earnings per diluted share were $12.72.
Not Deep: This compares to a non-GAAP earnings per diluted share of $1 <unk>.
Not Deep: In 2022, an increase of five 6% on a 52 to 52 week basis.
Not Deep: I would remind you that our 2023 tax rate was lower than our typical tax rate driven by the favorable impact of vesting of employee equity awards and exercises during the year.
Navdeep Gupta: For additional details, you can refer to the non-GAAP reconciliation in the tables of the press release issued this morning. Now, moving to our results for Q4, which also included the X, we are very pleased to report a consolidated sales increase of 7.8% to $3.88 billion, which included $170 million from the 53rd quarter. On a 13-week comparable basis, this was the largest sales quarter in the history of the company.
Not Deep: This positively impacted earnings per diluted share by 40% compared to the prior year.
Not Deep: As we have discussed on our prior calls to continue fueling our long term growth during the second half of 2023, we took actions to better align talent organizational design and spending in support of our most critical strategies, while also streamlining our overall cost structure.
Navdeep Gupta: Also, on a 13-week comparable basis, our comps increased 2.8% on top of a 5.3% increase in the same period last year. Our strong comps were driven by a 2.8% increase in average ticket on flat runs. Within our portfolio, we were very pleased with the performance of our key holiday categories, modestly offset by the performance of our outerwear business due to warm weather. On a non-gap basis, gross profit in the fourth quarter was $1.34 billion, 34.57% of net sales, and expanded 213 basis points compared to last year.
Not Deep: This included actions to change our Resourcing and organizational structure, primarily at our customer support center as well as the optimization of our outdoor specialty business.
As part of this we integrated operations of Mojo into.
Not Deep: Into public clients and made decisions about the go forward outdoor inventory assortment consistent with our prior expectations.
Not Deep: Additionally, we conducted a comprehensive review of our store portfolio with respect of our outdoor specialty business.
Not Deep: We completed our business optimization review during the fourth quarter.
Navdeep Gupta: This year-over-year expansion was a sequential improvement from Q3 and in line with our expectations. Gross margin expansion for Q4 was driven by higher merchandise margin of 124 basis points as well as lower supply chain costs and leverage on occupancy. This increase in merchandise margin was primarily driven by the quality of our assortment and favorable sales. This was partially offset by higher shrink of approximately 50 basis points, in line with the prior quarter. On an on-gap basis, SG&A expenses increased 12.6% to $915.8 million, or 23.63% of net sales, and deleveraged 102 basis points compared to last year. As we have highlighted on prior calls, the year-over-year de-leverage in the fourth quarter and throughout 2020 was driven by investments in our hourly wage rate, talent, and technology to create better athletics, and many more. Thank you. Thank you.
Not Deep: In total we incurred.
Not Deep: Pre tax charges of $84 8 million for the full year 2023.
These charges were included in our GAAP earnings per diluted share of $12 18.
Not Deep: For additional details you can refer to the non-GAAP reconciliation in the tables of the press release issued this morning.
Not Deep: Now moving to our results for Q4, which also included the extra week.
Not Deep: We are very pleased to report a consolidated sales increase of seven 8% to $3 eight 8 billion.
Not Deep: Which included $170 million from the 50 <unk> week.
Not Deep: On a 13 week comparable basis. This was the largest sales quarter in the history of the company.
Also on a 13 week comparable basis, our comps increased two 8% on top of a five 3% increase in the same period last year.
Not Deep: Our strong comps were driven by a two 8% increase in average ticket on flat transactions.
Not Deep: But there are portfolio, we were very pleased with the performance of our key holiday categories.
Navdeep Gupta: Savings from our business optimization helped to offset these losses. Driven by strong sales and higher gross margin, non-GAAP EBT in the fourth quarter was $427.7 million, 11.03% of net. This is up from non-GAAP EBT of $350.5 million on 9.74% of net sales in Q4 of 2020. In total, we delivered non-GAAP earnings per diluted share for the quarter of $3.85, which included $0.19 from $0.53. On a 13-week comparable basis, our non-GAAP earnings per diluted share were $3.66. This compares to a non-GAAP earnings per diluted share of $2.93 in 2020, an increase of 24.9% on a 13 to 13 week basis. During the quarter, we incurred pre-tax charges of $32.3 million related to our business operations.
Not Deep: Obviously offset by the performance of our outerwear business due to warm weather.
Not Deep: On a non-GAAP basis gross profit in fourth quarter was $1 $34 billion, a $34 five 7% of net sales and expanded 213 basis points compared to last year.
Not Deep: This year over year expansion was a sequential improvement from Q3 and in line with our expectations.
Not Deep: Gross margin expansion for Q4 was driven by higher merchandise margin of 124 basis points as well as lower supply chain cost and leverage on occupancy costs.
Not Deep: This increase in merchandise margin was primarily driven by the quality of our assortment and favorable sales mix.
Not Deep: This was partially offset by higher shrink of approximately 50 basis points in line with prior quarter.
Not Deep: On a non-GAAP basis, SG&A expenses increased 12, 6% to $915 8 million or $23 six 3% of net sales and Deleveraged 102 basis points compared to last year.
Navdeep Gupta: These charges were included in our GAAP earnings for diluted share of $3.57. For additional details, you can refer to the non-GAAP reconciliation in the tables of the press. Now let's look at our balance. We ended Q4 with approximately $1.8 billion of cash and cash equivalents and no borrowings on our $1.6 billion unsecured credit.
As we have highlighted on prior calls.
Not Deep: The year over year deleverage in fourth quarter and throughout 2023 was driven by investments in our hourly wage rate.
Not Deep: <unk> and technology to create better athlete experience as well as investments in marketing.
Navdeep Gupta: Our year-end inventory levels increased 1% compared to last year. We believe our inventory is clean and well-positioned. In fact, our clearance penetration ended the year amongst the lowest it's ever been.
Not Deep: Savings from our business optimization actions helped to offset these investments.
Not Deep: Driven by our strong sales and higher gross margin non-GAAP EBT in fourth quarter was $427 7 million, 11.0% to 3% of net sales.
Navdeep Gupta: Turning to our fourth-quarter capital elements, net capital expenditures were $151 million, and we paid $81 million in quarterly dividends. Now moving to our outro. In 2024, we expect to grow both sales and profitability. Consolidated sales are expected to be in the range of $13 billion to $13.13 billion; we anticipate comparable store sales growth in the range of 1% to 2%. The EVT margin is planned to be at 10.9% at the mid- We anticipate gross margins to be approximately 35% and in line with 2023 non-GAAP.
Not Deep: This is up from non-GAAP EBT of $355 million on $9 seven 4% of net sales in Q4 of 2022.
Not Deep: In total we delivered non-GAAP earnings per diluted share for the quarter of $3 85.
Not Deep: Which included 19 from 50 therapy.
Not Deep: On a 13 week comparable basis, our non-GAAP earnings per diluted share were $2 66.
Not Deep: This compares to a non-GAAP earnings per diluted share of $2 93 in 2022, an increase of 24, 9% on a 13 to 13 week basis.
Navdeep Gupta: Within this, we expect merchandise margin to expand modestly, offset by occupancy de-leverage as we invest to reposition our portfolio. SG&A expenses are expected to leverage modestly compared to 2023 non-GAAP results driven by our ongoing focus on improving productivity and reducing discretionary costs, as well as the expected benefits from our business optimization. We anticipate full year earnings per diluted share to be in the range of $12.85 to $13.25.
Not Deep: During the quarter, we incurred pre tax charges of $32 $3 million related to our business optimization.
Not Deep: These charges were included in our GAAP earnings per diluted share of $3 57.
Not Deep: For additional details you can refer to the non-GAAP reconciliation in the tables of the press release issued this morning.
Navdeep Gupta: Our earnings guidance is based on approximately 83 million average diluted shares outstanding and an effective tax rate of approximately 24%. As we model 2024, I want to point out a few things that we expect to impact the comparability of our financial results. First, keep in mind that the extra week in 2023 will create a shifted calendar. As a result, when we report our comp sales results, we will compare week 1 through 52 in 2024 with week 2 through 53 in 2021. We do not expect this shift to have a material impact on comp sales for the full year. However, we do expect our reported sales to be positively impacted by the shifted calendar in the first half with an offset in the second half.
Not Deep: Now looking to our balance sheet.
Not Deep: We ended Q4 with approximately $1 $8 billion of cash and cash equivalents and no borrowings on our $1 6 billion unsecured credit facility.
Not Deep: Our year end inventory levels increased 1% compared to last year.
We believe our inventory is clean and well positioned and in fact, our clearance penetration ended the year amongst the lowest it's ever been.
Not Deep: Turning to our fourth quarter capital allocation net capital expenditures were $151 million and we paid $81 million in quarterly dividends.
Speaker Change: Now moving to our outlook.
In 2024, we expect to grow both sales and profitability.
Speaker Change: Consolidated sales are expected to be in the range of $13 billion to $13, one 3 billion.
Navdeep Gupta: During the first quarter, we will be investing in several exciting brand campaigns, as well as supporting our Q1 House of Sports Grand Open. Next, as a reminder, in Q1, we will see an unfavorable impact on our gross margin from higher shrink rates, which we will anniversary starting. And finally, recall that our Q1 2023 tax rate was meaningfully lower than normal driven by the favorable impact of the vesting of Employee Equity Awards and we do not anticipate this again. I'll now discuss our capital allocation. Investing in our business to drive profitable organic growth remains a top priority. And as Lauren said, in 2024, we will increase our capital investment to drive our business forward. For 2024, our capital allocation plan includes a net capital expenditure of approximately $800,000.
Speaker Change: We anticipate comparable store sales growth in the range of 1% to 2%.
Speaker Change: EBT margin is planned to be at 10, 9% at the midpoint.
Speaker Change: We anticipate gross margins to be approximately 35% and in line with 2023 and non-GAAP results.
Speaker Change: But then this we expect merchandise margin to expand modestly offset by occupancy deleverage as we invest to reposition our portfolio.
SG&A expenses are expected to leverage modestly compared to 2023, non-GAAP results driven by our ongoing focus on improving productivity and reducing discretionary costs as well as the expected benefits from our business optimization actions.
Speaker Change: We anticipate full year earnings per diluted share to be in the range of $12 85.
Navdeep Gupta: As we continue to reposition our portfolio, these investments will be concentrated in store growth, relocations, and improvements in our existing stores, along with ongoing investments in technology and supply chain. Our 2024 CapEx plan also includes the purchase of certain real estate assets related to the House of Sport, for which we are evaluating potential sale leaseback. How's the sport is one of the most exciting concepts.
Speaker Change: The $13 and 25.
Speaker Change: Our earnings guidance is based on approximately 83 million average diluted shares outstanding and an effective tax rate of approximately 24%.
Speaker Change: As you model 2024, I want to point out a few things that we expect to impact comparability of our financial results.
Navdeep Gupta: And in 2024, we expect to open eight new locations. As we enhance our store portfolio, seven of these are planned relocations or conversions of existing Dick's stores, along with one new store at Prudential Center in Boston. Additionally, we expect to begin construction on approximately 15 houses for locations that are scheduled to open throughout 2025.
Speaker Change: First keep in mind that the extra week in 2023 will create a shifted calendar.
Speaker Change: As a result, when we report our comp sales results, we will compare weeks one through 52 in 2024 <unk> two through 53 in 2023.
We do not expect this shift to have a material impact on comp sales for the full year. However, we do expect our reported sales to be positively impacted by the shifted calendar in the first half, but then offset in the second half.
Navdeep Gupta: We will also open Next Generation 50K Dick's Stores in 2024. As part of this, we will relocate or remodel 12 existing Dick's stores into this innovative new format and open four new locations. Additionally, across our footprint, we will add approximately 50 premium full-service footwear decks, taking this elevated athlete experience to nearly 90% of our debt. In 2024, we are also excited to grow the footprint of our Golf Galaxy business and plan to open 10 new Golf Galaxy performances. As part of this, we will relocate or remodel five existing GOG Galaxy stores into this immersive new format and open five new GOG Galaxy performances.
Speaker Change: During the first quarter, we will be investing in several exciting brand campaign as well as support our Q1 also support Grand openings.
Speaker Change: Next as a reminder, in Q1, you will see an unfavorable impact of our gross margin from higher shrink rates, which we will anniversary starting in Q2.
Speaker Change: And finally recall that our Q1 2023 tax rate was meaningfully lower than normal driven by favorable impact of the vesting of employee equity awards and exercises we.
Speaker Change: We do not anticipate this again in 2024.
Speaker Change: I will now discuss our capital allocation priorities.
Speaker Change: Investing in our business to drive profitable organic growth remains our top priority.
Navdeep Gupta: Through these investments, we expect to increase our square footage by approximately 2% in 2024, marking our most significant expansion since 2017. Additionally, we plan to begin construction on a new regional distribution center opening in 2022. This new DC will play an important role in supporting the long-term growth of our business. Before continuing, I want to share why we are so excited about these investments, especially the houses for our next generation. As you will see on the slide, for a new house of sport in year one, we expect approximately $35 million in Army Channel sales and very strong profitability, with a target of approximately 20% EBITDA. In terms of capital, we take about 11 and a half million dollars of net capex to open houses, resulting in an expected year one cash-on-cash return of approximately $35,000. We also expect attractive returns from our next-generation $50K Dick's 20.
Speaker Change: And as Lauren said in 2024, we will increase our capital investment to drive our business forward.
Speaker Change: For 2024, our capital allocation plan includes net capital expenditure of approximately $800 million.
Speaker Change: As we continue to reposition our portfolio. These investments will be concentrated in store growth relocations and improvements in our existing stores, along with ongoing investments in technology and supply chain expansion.
Speaker Change: Our 2020 for Capex plan also includes purchase of certain real estate assets related to the house's port for which we are evaluating potential sale leaseback opportunities.
Speaker Change: All the sports is one of the most exciting concepts in retail today.
Speaker Change: And in 2024, we expect to open eight new locations.
As we elevate our store portfolio seven of these are planned relocations are conversions of existing Dick's stores, along with one new store at Prudential Center in Boston.
Speaker Change: We expect to begin construction on approximately 15 houses port locations that are scheduled to open throughout 2025.
We will also open 16 next generation 50, K Dick's stores in 2024.
Speaker Change: As part of this we will relocate our remodel why does the existing Dick's stores into this innovative new format and opened four new locations.
Speaker Change: Across our footprint, we will add approximately 50 premium full service footwear decks, taking this elevated athlete experienced nearly 90% of our decks locations.
Navdeep Gupta: We also remain committed to returning significant capital to our shareholders through our quarterly dividend and opportunistic sharing program. In 2023, we returned $1 billion to shareholders while continuing to invest in the profitable long-term growth of our business. All of this is underpinned by our commitment to a healthy balance sheet and maintaining our investment grade credit card. Today, we announced an increase in our quarterly dividends of 10% on an annualized payout of $4.40 per share. $1 and on a quarterly basis.
Speaker Change: In 2024, we are also excited to grow the footprint of our golf Galaxy business and plan to open 10 golf Galaxy performance Center locations.
Speaker Change: As part of this we will relocate our remodeled five existing golf Galaxy stores into this immersive new format and opened five new golf Galaxy performance Center locations.
Speaker Change: Through these investments we expect to increase our square footage by approximately 2% in 2024, marking our most significant expansion since 2017.
Speaker Change: Lastly, we plan to begin construction on our new regional distribution center opening in 2026.
Lauren R. Hobart: This is on top of a 105% increase last year and marks the 10th consecutive year that our shareholders have benefited from a dividend. In addition, our 2024 plan includes our expectation for fair repurchases of $300 million, which is included in our EPS guidance. As always, we will opportunistically look at additional share repurchases throughout the year. With that, I'll turn it back over to Lauren to review some of the key initiatives that will drive our profitable growth in 2024 and over the long term. Thanks, Navdeep.
Speaker Change: This new DC will play an important role in supporting the long term growth of our business.
Speaker Change: Before continuing I want to share why we are so excited about these investments, especially the house's sport in our next generation Silicon gate tax locations.
Speaker Change: As you can see on the slide for a new house sport in year, one we expect approximately $35 million in Omnichannel sales and a very strong profitability.
Speaker Change: Target of approximately 20% EBITDA margins.
Speaker Change: In terms of capital it'll take about $11 5 million of net Capex to open houses port location.
Lauren R. Hobart: As we turn to 2024, our focus is on driving sustained profitable growth by innovating within the omni-channel athlete experience, curating a compelling and differentiated product, providing a best-in-class teammate experience, and driving deep engagement with the Dick's. Industry leaders consistently innovate from a foundation of strength, positioning themselves ahead of the curve. With this mindset, a key part of our growth strategy for this year and future years, continuing to drive omni-channel athlete engagement by repositioning our portfolio and experience through Health is Sport and our next generation 50K and House of Sport, we are truly redefining sports. Since we launched our first location in 2021, this highly experiential... has brought very strong engagement with our athletes, brand partners, and has delivered powerful financial returns. Compared to a typical Dick's store, athletes are traveling farther to visit their houses... Thank you for watching.
Speaker Change: <unk> and an expected year, one cash on cash return of approximately 35%.
Speaker Change: We also expect attractive returns from our next generation 50, K Dick's store investments that we are targeting approximately $14 million in year, one omni channel sales and our comparable EBITDA margin of approximately 20%.
Speaker Change: We also remain committed to returning significant capital to our shareholders through our quarterly dividend and opportunistic share repurchases.
Speaker Change: During 2023, they returned $1 billion to shareholders, while continuing to invest in the profitable long term growth of our business.
Speaker Change: All of this is underpinned by our commitment to healthy balance sheet and maintaining our investment grade credit ratings.
Speaker Change: Today, we announced an increase in our quarterly dividend of 10% on an annualized payout of $4 40 per share.
Lauren R. Hobart: Because of the engagement and experience at House of Sport, our national brand partners are providing access. Standard Assortment, while new and emerging brands see it as a platform for growth, with a total of 12 housesport locations now. We look forward to opening another eight locations in 2020. Next month, we are so excited to open a house of sport in our hometown of Pittsburgh and at the Prudential Center in downtown Boston.
Speaker Change: $1.10 on a quarterly basis.
Speaker Change: This is on top of a 105% increase last year and marks the 10th consecutive year that our shareholders have benefited from a dividend increase.
Speaker Change: In addition, our 2024 plan includes our expectation for share repurchases of $300 million.
Speaker Change: Which is included in our EPS guidance.
Speaker Change: As always we will opportunistically look at additional share repurchases throughout the year.
Lauren R. Hobart: We will support these grand openings with high impact. With the compelling economics Navdeep outlined, House of Sport is a significant part of our future growth. As we've said, by 2027, we expect to have between 75 to 100 House of Sport locations across. The vast majority of these will be relocations or conversions of existing Dick's Stores into housing.
Speaker Change: With that I'll turn it back over to Loren to review some of the key initiatives that will drive our profitable growth in 2024 and over the long term.
Loren: Thanks Sandeep.
Loren: As we turn to 2024, our focus is on driving sustained profitable growth by innovating within the Omnichannel athlete experience.
Lauren R. Hobart: At the same time, we're continuing to innovate with our next generation 50..., which completely revolutionizes our most typical 50,000-square-foot store. Inspired by House of Sports, this store has a similar elevated assortment and service model, premium experience, and Enhanced Visual Expressions. And the format is delivering great results. We opened 11 Next Generation 50K locations in 2023 and are excited to open another 16 locations in 2024. This one-two punch of House of Sport and our next generation 50K is the future of our Dick's Stores, serving as the hub for our athletes, and Ami champions. Golf Galaxy is another important part of our growth. This past year, we grew our Golf Galaxy footprint to over 100 locations.
Loren: Curating, a compelling and differentiated product assortment.
Loren: Providing a best in class teammate experience.
Loren: And driving deep engagement with the Dick's brands.
Loren: Industry leaders consistently innovate from a foundation of strength.
Loren: Turning themselves ahead of the curve.
Loren: With this mindset a key part of our growth strategy for this year and future years is continuing to drive omnichannel athlete engagement by repositioning our portfolio and experiences through houses sport in our next generation 50, K Dick's store.
Loren: With houses sport, we are truly redefining sports retail.
Loren: Since we launched our first location in 'twenty 'twenty. One this highly experiential destination has brought very strong engagement with our athletes brand partners and communities.
Lauren R. Hobart: As Navdeep said, we plan to further grow our footprint through Golf Galaxy performance centers, which offer an immersive experience for golf enthusiasts of all levels. With 14 performance centers now open, we're excited to open another 10 locations throughout 2024. This spring, we're investing in marketing to drive market share and elevate the Golf Galaxy brand perception in a memorable and relatable way for golf. During 2023, golf rounds played in the U.S. will hit an all-time high.
Loren: And has delivered powerful financial result.
Loren: Compared to a typical dicks door athletes are traveling farther to visit houses sport.
Loren: Increasing the time they spend in the store and visiting more frequently.
Loren: Because of the engagement and experience at houses sport, our National brand partners are providing access to unique and expanded assortments.
Loren: While new and emerging brands and see it as a platform for growth.
Loren: With a total of 12 houses support locations now open we look forward to opening another eight locations in 2024.
Loren: Next month, we are so excited to open houses sport in our hometown of Pittsburgh and at the Prudential Center in downtown Boston.
Lauren R. Hobart: And we believe golf is a compelling long-term growth opportunity. When we talk about drivers with success, it's critical to mention our strong brand. With these strategic partnerships, we've built our industry-leading assortment, making Dick's the go-to destination for differentiated and on-trend products. We'll continue to make big bets with our partners, while also working with new and emerging brands. At the same time, we will continue to invest in our highly profitable portfolio of powerhouse verticals, including Burst, DSG, and CALEA, that are gaining meaningful traction with our assets. For DSG, which is our largest vertical brand, we expect to build on the success of our Q4 campaign, always on approach, focused on family, and value. Kalia, our second largest women's apparel brand behind Only Nights, we recently launched the Inspire.
Loren: We will support these grand openings with high impact marketing.
Loren: With the compelling economics and have deep outlined how sport is a significant part of our future growth story.
Loren: As we said by 2027, we expect to have between 75 to 100 houses support locations across the country.
Loren: The vast majority of these will be relocations, where conversions of existing Dick's stores into houses sport.
Loren: At the same time, we're continuing to innovate with our next generation 50, K, which completely revolutionize our most typical 50000 square foot Dick's store.
Loren: Spider bite houses sport. This store has a similar elevated assortment and service model premium experiences and enhanced visual expression and the format is delivering great results.
Loren: We opened 11 next generation 50, K locations in 2023 and are excited to open another 16 locations in 2024.
Lauren R. Hobart: This is our most versatile collection yet and features an innovative new fabric. We're supporting this important launch through a campaign that uniquely positions Kalia as a performance brand that embodies strength. Our digital capabilities are also core to our omni-channels. We continue to see growth in our omni-channel apps. Spend more with us and shop more. Single Channel F, As part of this.
Loren: This one two punch of houses sport in our next generation 50, K is the future of our <unk> stores and will serve as the hub for our athletes omnichannel experience.
Loren: Golf Galaxy is another important part of our growth story.
Loren: This past year, we grew our golf galaxy footprint to over 100 locations.
As now deep said, we plan to further grow our footprint through golf Galaxy performance centers, which offer an immersive experience for golf enthusiasts of all levels.
Lauren R. Hobart: We continue to rapidly advance our capabilities in getting products into the hands of our athletes very quickly. And throughout 2024, we'll look to drive consideration for Dick's.com through a marketing campaign where we're teaming up with A-list celebrities and adding some humor to really make it matter. As we expand our leadership position in, Game Changer, another incredibly strong digital capability we have, plays a pivotal role. Game Changer has become a leader in the multi-billion dollar youth sports technology industry. It is a go-to destination for millions of parents, grandparents, and families to watch games, track stats, and share video highlights for athletes of all ages. Last year, over one million users Game Changer to capture moments from 7 million to create 110 million highlights. In fact, more games are covered on Game Changer in a single spring month than have been played in the entire history of Major League Baseball.
Loren: With 14 performance centers now open we're excited to open another 10 locations throughout 2024.
Loren: This spring, we're investing in marketing to drive market share and elevate the golf Galaxy brand perception, and a memorable and relatable way for golfers.
Loren: During 2023 golf rounds played in the U S hit an all time high and we believe golf is a compelling long term growth opportunity.
Loren: When we talk about drivers of success, it's critical to mention our strong brand relationship.
Loren: With these strategic partnerships, we've built our industry, leading assortment, making decks the go to destination for differentiated and on trend product.
Loren: We will continue to make big bets with our partners. While also actively seeking to work with new and emerging brands.
Loren: At the same time, we will continue to invest in our highly profitable portfolio of powerhouse vertical brands.
Lauren R. Hobart: As a recurring revenue, software-as-a-service platform, Game Changer is very profitable, and its sales have grown at over a 35% CAGR since 2017. We expect Game Changer to reach approximately $15 million in sales. Importantly, Game Changer families are some of Dick's Sporting Goods' most valuable customers. A Game Changer customer who also has a Dick's scorecard spends over two times more per year at Dick's than a typical scorecard customer, while customers visiting the app over 13 times. I believe there are numerous opportunities to reach these customers in unique and authentic ways to drive brand loyalty. Lastly, we will continue to invest in Dick's brand building through our Sports Change Live program. At Dick's, we believe sports have the power to change lives. And our objective with this work is to unequivocally communicate who we are and what we stand for. We're pleased with the first year results and the way the campaign is responding with our athletes and increasing brand connection. This is the second year of this campaign, and you'll see new creative expressions during high-profile sports, like the NCAA tournament, the Summer Olympics, and NFL games.
Loren: Including burst DSG in Korea that are gaining meaningful traction with our athletes.
Loren: For DSG, which is our largest vertical brand we expect to build on the success of our Q4 campaign with an always on approach focused on family value and sport.
Loren: With Korea, our second largest women's apparel brand behind only Nike, We recently launched the inspire collection.
Loren: This is our most versatile collection, yet and features an innovative new fabric.
Loren: We're supporting this important launch through a campaign that uniquely positions Korea as a performance brand.
Loren: <unk> strength is beautiful.
Loren: Our digital capabilities are also core to our Omnichannel success, and we continue to see growth in our Omnichannel athletes.
Loren: <unk> more with us and shop more frequently than single channel athletes.
Loren: As part of this we continue to rapidly advance our capabilities and getting product into the hands of our athletes very quickly.
Loren: And throughout 2024, we'll look to drive consideration predict dotcom through a marketing campaign, where we're teaming up with a list celebrities and adding some humor to really make it memorable.
As we expand our leadership position in youth sports game changer, another incredibly strong digital capability, we have plays a pivotal role.
Lauren R. Hobart: In conclusion, we are extremely optimistic about our future and the opportunities ahead of us. We are very pleased with our results and accomplishments in 2020, especially our progress in advancing House of Sports, our next generation 50K, and upgrades to our existing footprint to enhance the athletic experience. We're continuing to innovate our omni-channel approach, which is further improving convenience and satisfaction and driving higher sales and market share. Our decision to step up our investment, I'm incredibly proud to be working alongside such talented and motivated people across every part of our business, from our stores, to our corporate teams, to our distribution centers, to our game centers. And I'm so excited about it.
Loren: Game changer has become a leader in the multibillion dollar youth sports technology market.
Loren: It is the go to destination for millions of parents grandparents and fans to watch games track stats and share video highlights for athletes of all ages.
Loren: Last year over 1 million teens used game changer to capture moments from 7 million game.
Loren: And create 110 million highlight clips.
Loren: In fact more games are covered on game changer, and a single spring months.
Loren: Have been played in the entire history of major League baseball.
Loren: As our recurring revenue software as a service platform game changer is very profitable and has grown sales at over a 35% CAGR since 2017.
Loren: We expect game changer to reach approximately $100 million in sales this year.
Operator: This concludes our prepared statement. Thank you for your interest in Dick's Sporting Goods. Operator, you may now open the line for questions. At this time, I would like to remind everyone, in order to ask a question, simply press star, then the number one on your telephone keypad. Please limit yourselves to one question and one follow-up question. Your first question is from the line of Simeon Gutman with Morgan Stanley. Please go ahead. Hi, good morning, everyone.
Loren: Importantly game change your families are staying with Dick's sporting goods most valuable customers.
Loren: A game changer customer, who also has a deck scorecard spends over two times more per year at decks and a typical scorecard member.
With customers visiting the App over 13 times a month, we believe there are numerous opportunities predict to reach these customers and unique and authentic ways to drive brand loyalty and sales.
Loren: Lastly, we will continue to invest in Dicks brand building through our sports change lives campaign.
Loren: It takes we believe sports have the power to change lives and our objective with this work it's unequivocally communicate who we are and what we stand for.
Lauren R. Hobart: My first question is on margins for growth going forward. The business looks like it's rebased. And you now have the House of Sport coming in, which sounds very positive for both growth and margin. Curious how we should think about the business from this point going forward. Are you thinking in terms of earnings growth, or should we think about the margin growing and making this a margin story as well? Thanks, Simeon.
Loren: We're pleased with the first year results and the way the campaign is resonating with our athletes and increasing brand connection.
Loren: And the second year of this campaign, you'll see new creative expressions during high profile sports moments like the NCAA tournament, the Summer Olympics and NFL game.
Lauren R. Hobart: We are incredibly excited about the momentum that we have in our business, just coming off of this Q4 with a 2.8% comp on top of a 5.3% comp, and then looking forward to the year, we are driving growth in the top line, margin, and profitability overall. And I think the key driver of the margin story is really the differentiated product that we continue to have access to and expand access to. That product is responding with athletes.
Loren: In conclusion, we are extremely optimistic about our future and the opportunities ahead of us.
Loren: We're very pleased with our results and accomplishments in 2023, especially our progress in advancing houses sport. Our next generation 50, K and upgrades to our existing footprint to enhance the athlete experience.
Loren: We're continuing to innovate our omnichannel approach, which is further improving convenience and satisfaction and driving higher sales and market share gains.
Loren: Our decision to step up our investments in 2024 to fuel our future growth clearly demonstrates the confidence we have in our business and our team.
Lauren R. Hobart: It's creating newness and innovation and just a feel in the store of energy. And it's also enabling us to navigate this past Q4, a fairly promotional environment, where we were able to navigate without having to be extremely promotional. And actually, we drove over 200 basis points of gross margin. So House of Sport is a great lever in that it enables us to provide a completely immersive experience for athletes.
Loren: I'm incredibly proud to be working alongside such a talented and motivated group across every part of our company from stores to our corporate teams our distribution centers to our game changer team and I'm. So excited about the future.
Speaker Change: This concludes our prepared remarks, thank you for your interest in Dick's Sporting goods.
Speaker Change: Operator, you May now open the line for questions.
At this time I would like to remind everyone in order to ask a question simply press Star then the number one on your telephone keypad.
Lauren R. Hobart: We've got rock climbing walls and track and field and a whole bunch of elevated service and visual presentation. But importantly, from a margin standpoint, House of Sport does encourage our brand partners, both our strategic partners and our new and emerging brand partners, to experiment. We can bring a brand to life in our co-lab space in a really exciting way, and it's therefore enabling us to drive even deeper partnerships and more access. So, overall, I'm very confident about the results. Okay, and I'll paraphrase it, but I don't want it to be my follow-up.
Speaker Change: Please limit yourselves to one question and one follow up question.
Speaker Change: Your first question is from the line of Simeon Gutman with Morgan Stanley. Please go ahead.
Simeon Ari Gutman: Hi, Good morning, everyone. My first question is on margins and growth going forward the business looks like it's rebased.
And you now have the helps us support coming in which sound very positive to both growth and margin.
Simeon Ari Gutman: How we should think about the business from this point going forward or are you thinking about in terms of earnings growth or should we think about the margin growing and making this a margin story as well.
Lauren R. Hobart: But to paraphrase, it sounds like in the future, a combination of margins and earnings growth; it's not just about dollar growth, but margins can expand as well. And then my follow-up is thinking about the industry and market share for 2024. Among the categories that you sell, it's just hard because we don't see a clean benchmark for how the industry can grow. But do you assume the industry will grow? And are we reaching some type of normal industry growth CAGR and market share growth CAGR? And how do you, what should we think about that for the next several years?
Speaker Change: Thanks Simeon.
We are incredibly excited about the momentum that we have in our business just coming off of this Q4 with a two 8% comp on top of a five 3% comp and then looking forward to the year, we are driving growth in topline.
Speaker Change: And profitability overall and I think the key driver of the margin story is really a differentiated product that we continue to have access to and expand access to that that product is resonating with athletes, it's creating newness and innovation and and just a feel in the store energy.
Lauren R. Hobart: Yes, so our strategy is to continue to gain market share in this industry, and we're doing that in several ways. We're doing it with the strategic pillars that we've talked about, be it the differentiated products, our investment in athlete experience, our investment in our brand, and our teammate experience, which is really an incredible asset that we have because we have the best teammates in the business, and they have incredible momentum. So when we look at the growth, it's coming from market share gains. We're also reimagining our portfolio such that we're going to have 20 houses sports and 27 new prototypes of our 50K, new experience, which is really a takedown of House of Sport and a super exciting place. So to answer your question directly, we're not counting on a significant amount of category growth because we think we have so much momentum to drive share. I'll just build on what Lauren said. If you look at it, it's a $140 billion overall industry, which is highly fragmented.
Speaker Change: It's also enabling us to navigate this past Q4, a fairly promotional environment, where we were able to navigate without having to be extremely promotional and actually we drove 200 over 200 basis points of gross margin. So how's the sport is a great lever in that it enables us to provide a completely immersive.
Speaker Change: Experience for athletes, we've got it we've got rock climbing walls, and track and field and a whole bunch of elevated service and visual presentation, but importantly from a margin standpoint also sports does encourage our brand partners with our strategic partners and our new and emerging brand partners.
Speaker Change: Experiment, we can bring our brand to life in our co lab space and a really exciting way and therefore, enabling us to drive even deeper partnerships and more access to new and different products. So overall very confident about the long term margin story.
Speaker Change: Okay.
Navdeep Gupta: And what we reiterated today is our core strategies are working really well, and we actually gained almost 50 basis points of market share in 2023. So really excited about the results we are posting as well as the core strategies and how those core strategies are responding with our app. I'm going to add one last thing to Navdeep's comments, which is that the consumer has held up incredibly well. We saw that in Q4, and we saw it all last year, where we didn't see a trade-down from best to better, better to good. We saw growth across all income demographics, so we do have a healthy consumer, and they are increasingly choosing Dick's to meet their needs. Okay, thanks, and good luck! Your next question is from the line of Adrienne Yih with Barclays. Please go ahead.
Speaker Change: Paraphrase, but I don't want it to be my follow up but to paraphrase. It sounds like in the future combination of margins and earnings growth is not just about dollar growth, but margin can expand as well and then my follow up is thinking about the industry and market share for 2024.
Speaker Change: The categories that you sell it's just hard because we don't see a clean benchmark for what the industry can grow but do you assume the industry grows and are we reaching some type of normal industry growth CAGR and market share growth CAGR and how do you how should we think about that for the next several years.
Speaker Change: Yes, so our strategy is to continue to gain market share and in this industry and we're doing that in several ways. We're doing it with the strategic pillars that we've talked about be it the differentiated product to our investment in athlete experience our investment in our brand and our.
Operator: Good morning, Lauren and Navdeep. Congratulations on the quarter and the year. A really, really great phenomenal institution. So, Lauren, I'm going to stick with the House of Sports.
Lauren R. Hobart: You know, the notion that the kind of four-wall EBITDA is higher than the core. What exactly, and I know you touched on this earlier, but can you describe sort of the revenue model, how much is from goods, I guess, primarily versus services, the goods that are in there, I assume they sound like they're better and best. And then how much of the House of Sports is sort of exclusive and differentiated versus core Dick's?
Speaker Change: Teammate experience, which is really an incredible asset that we have because we have the best teammates in the business and they have incredible momentum.
Speaker Change: So when we look at the growth we're comment is coming from market share gains. We're also re imagining our portfolio such that we're going to have 20 houses where it's at.
Speaker Change: 27, new prototypes of our 50 HAE.
Lauren R. Hobart: And then for Navdeep, my follow-up is, I mean, inventory is so clean, right across kind of the landscape. So, two things here. Can you first discuss the level of innovation and trends that you're seeing in 2024? And then, secondarily, can you talk about sort of the need and the potential for replenishment, given that inventory levels are pretty low? Thank you.
Speaker Change: New experience, which is really a takedown of houses sport and super exciting place. So.
Speaker Change: So to answer your question directly we are not counting on a significant amount of category growth is we think we have so much momentum to drive share.
Speaker Change: I mean I'll just build on what Ron said, if you look at it right at the $140 billion overall, industrial which is highly fragmented and what we reiterated today as our core strategies are working really well and we actually gained almost 50 basis points of market share over 2023, so really exciting about the results we are posting as well as the core strategy.
Lauren R. Hobart: Yes. So, when you look at a house support store, it's important to note that all of our core strategies are coming to life in just a dialed-up way. So, our differentiated product, the access we have there, the service model, the experiences, all coming to life in a really fantastic way. The vast majority of our revenue still comes from product. Obviously, we also have service revenue in there, but it's a typical business model, and I think what's really driving that is how the athlete is responding. We've got athletes who are driving further.
Speaker Change: And how are those core strategies are resonating with that athlete.
Speaker Change: I'm going to add one last thing and so now keeps comments, which is the consumer has held up incredibly well and we saw that in Q4, we saw all last year, where we didn't see a trade down from best better better. Good we saw growth across all income demographics. So we do have a healthy consumer and they are increasingly choosing <unk> meet their need.
Speaker Change: Yes.
Speaker Change: Okay. Thanks, good luck.
Speaker Change: Thanks.
Speaker Change: Your next question is from the line of Adrienne <unk> with Barclays. Please go ahead.
Navdeep Gupta: They're coming more frequently, and they're spending more time when they get to the house support, and overall, the sales per square foot, as a result of that, are higher. So, it's really – it's our core business model, just really elevated. I'll start with the answer to the question you asked, Navdeep, just about the newness and the innovation for 2024. We are really excited, and I would say if you go into our stores right now, you can see our spring set. You can see it on the soft line side, as well as the hard lines and team sports. We are very excited about the innovation that's coming down the pike and our increased access to some of the very hot products that people are reacting to, and the athletes are reacting really well to. Navdeep, I'll turn it to you for the inventory.
Adrienne: Good morning, Lauren and Nancy Congrats on the quarter and the year really.
Adrienne: Really great Nonetheless execution.
Adrienne: No.
Adrienne: Laurence I'm going to stick with the house's sport.
Adrienne: The notion that the kind of four wall EBITDA is higher than the core what exactly and I know you touched on this earlier, but can you describe sort of the revenue model. How much is from good I guess primarily versus services. The goods that are in there I assume they sound like they are better and best.
Adrienne: And then how much of the house at sports at some exclusive and differentiated versus core decks and then Bernard deep My follow up is I mean inventory, so clean right across kind of like the landscape. The key thing here can you first discuss the level of innovation and trends that youre seeing in 2024, and then secondarily can you talk about.
Adrienne: The need and the potential for replenishment given the inventory levels are pretty low. Thank you.
Speaker Change: Thanks, Adrian yes, so when you look at our house of sports store, it's important to note that all of our core strategies are coming to life.
Lauren R. Hobart: Good morning, Adrienne. Thanks for the question. So really pleased with the overall inventory and the quality of the inventory that we finished 2023 with. You know, our inventory grew just about 1% on top of a 5% growth in sales. And as we reiterated this morning, the focus that we have on keeping our inventory clean and well-positioned is the core tenet and the core strategy of the company.
Speaker Change: Even a dialed up way so our differentiated product the access we have there the service model the experiences all coming to life and really in a really fantastic way.
Adrian: The vast majority of our revenues come from product. Obviously, we also have service revenue in there, but it's it's a it's a typical business model and I think what's really driving that is how the athlete is responding we've got athletes who are driving further there they're coming more frequently.
Navdeep Gupta: And that is what is allowing us to continue to differentiate our results versus our competition. And in terms of our expectations for 2024, like Lauren said, there is so much innovation and newness available to us in the market, not only from the national brands but also from emerging brands. So looking deeper into it, I'm really excited about the spring assortment, as well as the more variety that we see coming into our stores, both in House of Sports and in the next 1050K location. Fantastic.
Adrian: <unk> frequently they're spending more time, when they get to a house of sport and overall the sales per square foot as a result of that is higher so it's really it's our core business model just really elevated.
Adrian: I'll start with the answer to the question you are asking how deep just about the newness and the innovation for 2024, we are really excited and I would say if you go into our stores right. Now you can see our spring set and you can see that on the soft line side as well as the hard lines in team sports. We are very excited about the innovation, that's coming down the pike and our increased.
Navdeep Gupta: Great job. Thank you. Your next question comes from the line of Chris Horvers with J.P. Morgan. Please go ahead. Thanks. Good morning, everybody.
Operator: So my first question is trying to pull together some of the different commentary and questions that we've already had. As you think about you get, you gave the EBITDA margin for both concepts. Can you talk about the retail margin? It sounds like it's higher. How does that affect how you think about the other lines in the P&L? Is the occupancy cost higher?
Speaker Change: Access to some of the very hot product that people are reacting to the athletes are reacting really well to achieve I'll turn it to you for the inventory question. Good morning, Adrian Thanks for the question. So really pleased with the overall inventory and the quality of the inventory that we finished 2023 that.
Navdeep Gupta: And, you know, and then what about the cost to actually operate the store in terms of trying to understand the breakdown to get to that 20% four-wheel EBITDA margin? And how does that compare to the existing box? Yeah, Chris, you know, first of all, really excited to be able to share the economics of our houses for location and the 50k next gen store. This has been something that has been requested for a while, but we wanted to make sure we had enough maturity as well as enough time behind us to be able to share these economics. So let's start with the top line. You know, really great to see, first of all, our stores opening at full maturity because of the strong brand awareness and the brand positioning that we have in these markets. The houses for locations are opening on an omnichannel basis, almost about $33.5 million in top line sales and almost about $14 million when it comes to the next gen 50k.
Adrian: Inventory grew just about 1% on top of a 5% growth in sales and as we reiterated this morning that the focus that behalf of keeping our inventory clean and well positioned as the core tenant and the core strategy of the company and that is what is allowing us to continue to differentiate our results versus our competition and in <unk>.
Adrian: Terms of our expectations for 2020 forward like Laurent said that is so much of innovative and newness available to us in the market not only from the national brands, but also from the emerging Bryan so looking deeper into it and really excited about the spring assortment as well as the.
Adrian: Tomorrow assortment that we see coming into our stores both in house, the sport and the Nextgen 50 Colocation.
Adrian: Fantastic great job.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Chris <unk> with J P. Morgan. Please go ahead.
Chris: Thanks, Good morning, everybody. So my first question is trying to pull together some of the different commentary and questions that we've already have as you think about you gave the EBITDA.
Chris: Four wall EBITDA margin for for both concepts.
Navdeep Gupta: And like you like, I think that you called it out, you know, that we have comparable EBITDA margins between both these boxes. And, you know, as you can expect, there's a little bit of an interplay that happens between the margin and the SG&A. You have a little bit more of the elevated experience being provided in houses for locations. And so, therefore, there is a little bit of a higher service level component to it. But the service also comes with revenue associated with it. So there's a little bit of a higher margin you get from that, I would say. And, you know, I think that you called out occupancy.
Chris: Can you talk about the merch margin it sounds like it's higher.
Chris: How does that how do you think about the other lines of the P&L is the occupancy cost higher than.
Chris: Yes.
Chris: And then what about the cost to actually operate the store in terms of trying to understand the breakdown to get to that 20% four wall EBITDA margin and how does that compare to the existing box.
Speaker Change: Yes, Chris.
Speaker Change: First of all really excited to be able to share the economics of our houses forward location on the 50 K on next Gen stores. This has been something that has been a question for a while but we wanted to make sure we had enough maturity as well as enough time behind us to be able to share. These economics.
Navdeep Gupta: There's a little bit of more capital investment that we are putting into it, so that plays into the depreciation. But when you look at the overall operating EBITDA margin rates that we are driving, we are very happy with the returns that we are driving and the strong profitability that we are delivering out of both these boxes.
Let's start with the top line really great to see first of all our stores open at full maturity because of the strong brand awareness on the brand positioning is actually having these markets. The harvest forward locations are opening on an omnichannel basis, almost about a $35 million of topline sales and almost about $14 million when it comes to the next Gen <unk>.
Navdeep Gupta: So succinctly, it allows you, and I think Lauren said this earlier, it's basically, this is the next sort of lever to continue to gain share. And the components might be different, but at the end of the day, the margin returns are comparable, and it's the opportunity to continue to grow. Yeah, Chris, I will build on what we have been saying that, you know, the financial returns are great, but what is even better is how well this overall concept is responding not only with our brand partners, with our athletes, but also with the community. And that's what we see as the long-term drivers of the differentiation of getting better access, getting more allocated product available to us, having the emerging brands come to us and want to partner with us in these really, And that is what we consider a true differentiator for Dick's Sporting Goods. That's very helpful.
Speaker Change: I like.
Speaker Change: I think that you've called it out.
Speaker Change: Have a comparable EBIT down margins between both of these boxes and as you can expect that there's a little bit of an interplay that happens between the margin and the SG&A you have a little bit more of the elevated experience being provided in houses port locations and so therefore, there is a little bit of a higher service level component to it but the service also.
Speaker Change: As with the revenue associated with it so there's a little bit of a higher margin you'll get from that I would say and I think that you called out occupancy theres, a little bit of a more capital investment that we're putting into it so that plays into the depreciation but when you look at the overall operating EBITDA margin rates that we are driving very hard.
Speaker Change: But other times like we are driving and the strong profitability that we are delivering on both of these boxes.
Speaker Change: Got it so simply it allows you and I think Lauren you said this earlier. It's basically this is the next sort of lever to continue to gain share.
Speaker Change: And the components might be different but at the end of the day the margin and returns are comparable and it's the opportunity to continue to grow.
Navdeep Gupta: And my follow-up question is, Navdeep, you talked about some particular headwinds in the first quarter. Maybe there, maybe could you just bring those all together? And is there a certain way that we should be thinking about, you know, the investments and how that's going to affect SG&A? And you talked about shrinking in terms of the gross margin; would you still expect, you know, merchandise margin to be up? So maybe just a finer point around the first quarter.
Yeah of course, I will build on what we have been saying that the financial returns.
Speaker Change: Right, but what is even better is although this the overall concept is resonating not only with our brand partners with our athletes and also with the community and that's what we see as a long term drivers of the differentiation of getting better <unk> is getting more allocated product available to us having the emerging brands come to us and want to.
Navdeep Gupta: Thank you. Yeah, so we have prepared comments that we gave out today. First of all, I'll start with the sales, right? We're going to have a shifted calendar, so there'll be a little bit of an impact on our offline sales total revenue, but not a significant impact when you think from a shifted basis on com. What we did call out was just a reminder, you know, we saw elevated levels of shrink in Q2 of 2023. So in Q1, we haven't even lapped that yet. So as you all are modeling, it will be helpful to keep that in mind. The other thing is the tax rate.
Speaker Change: Augment with us in these really really exponential destination and that is what we can say that is a true differentiator for Dick's sporting goods.
Speaker Change: Understood. That's very helpful and my follow up is you talked about some headwinds in.
Speaker Change: In the first quarter, maybe is there maybe you could just bring those all together and there is there a certain way that we should be thinking about the investments and how that's going to affect the SG&A and you talked about shrink in terms of the gross margin would you still expect merchandise margin to be up so maybe just a finer point around the first quarter. Thank you.
Navdeep Gupta: If you remember, our tax rate in Q1 was significantly low compared to a normalized tax rate, and you will see that piece play out as well. And finally, you know, hopefully you all have watched some of the exciting brand campaigns that we have going on right now between brands campaigns associated with our launch of our Clio Inspire Collection and our Dick's.com campaign. And so we are investing in that. In addition, we're going to be opening two really exciting outdoor sports locations here in Q1 between Ross Park Mall here in Pittsburgh and our Prudential Center. So you will see some of the investments associated with those two stores in Q1 as well. So, slightly elevated levels of pre-opening expenses. Maybe I'll just put a final point on that. I got it.
Speaker Change: Yes.
Speaker Change: Comments that we gave out in our prepared comments today first of all I'll start with the sales right and you're going to have a shifted calendar so there'll be a little bit of an impact.
Speaker Change: Offline sales total revenue, but not a significant impact when you think on a shifted basis on comp what.
Speaker Change: What we did call out was just a reminder, we saw the elevated levels of shrink in Q2 of 2023. So in Q1, we haven't lapped that yet so as you all are modeling it would be helpful to keep that in mind. The other is the tax rate. If you remember our tax rate in Q1 was significantly lower compared to a normalized tax rate and you will see that.
Speaker Change: I'll play out as well and finally on.
Speaker Change: Hopefully you all have watched some of the exciting brand campaigns that we have going on right now between.
Speaker Change: Again, Brian campaigns associated with our launch of our CLIA inspired collection.
Operator: Thank you very much. Your next question is from the line of Kate McShane with Goldman Sachs. Please go ahead. Hi, good morning.
Speaker Change: Our <unk> Dot Com campaign, and so we are investing in to that in addition to be able to we are going to be opening two really exciting also spud locations here in Q1 between Rosbach models, yet in Pittsburgh and our Prudential Center. So you will see some of the investments associated with those two stores in Q1 as well.
Lauren R. Hobart: Thanks for taking our questions. I wanted to ask you about just if there was any more detail on the performance of footwear versus apparel versus hard lines in the fourth quarter. And our second question was if there would be any impact on the 2024 comp guide as a result of the relocations that you're doing for House of Sports. Thanks, Kate.
Speaker Change: So a slightly elevated levels of Preopening expense, maybe I'll just put a final point on that one.
Speaker Change: Got it thank you very much.
Speaker Change: Your next question is from the line of Kate Mcshane with Goldman Sachs. Please go ahead.
Lauren R. Hobart: So in terms of category performance with the 2.8% COP this past quarter, we saw growth across all of our key categories. So growth in footwear, growth in apparel, and growth in some of the key hardline categories. So it really was across the board. The only area of softness was in the cold weather categories, which didn't come as we had hoped they would.
Speaker Change: Hi, good morning, Thanks for taking our question.
Katharine Amanda McShane: I wanted to ask about.
Katharine Amanda McShane: Just if there was any more detail on the performance of footwear versus apparel versus hard lines in the fourth quarter and our second question was if there was any impact to the 2024 comp guide as a result of the relocations that youre doing for half the sport.
Navdeep Gupta: And so there was some softness in outerwear, but across the board, really strong growth in our core categories. I'll turn it on to, Okay, in terms of the comp guidance overall, like we said, because of the shifted calendar, there was no material impact on the comp cadence itself when you look at it. However, keep in mind last year, we were converting eight combo locations into houses, which were closed during the first half of last year. So, you know, we expect our comp in the first half to be slightly stronger than the comps in the back half of the year, But there won't be any impact from store closures as you relocate this year. No, we're not doing the clothes remodels as we did last year. Got it, okay, thank you. Your next question is from the line of Robby Ohmes with Bank of America. Please go ahead.
Katharine Amanda McShane: Thanks, Kate so in terms of category performance with the two 8% comp this past quarter, we saw growth across the across all of our key categories. So.
Katharine Amanda McShane: Growth in footwear growth in apparel and growth in some of the key hard lines categories. So it really was across the board. The only area of softness was in the cold weather didn't come as we had hoped it would and so there was some softness in outerwear, but across the board really strong growth in our core categories I'll turn it certainty for the next question, yes in terms of the car.
Katharine Amanda McShane: Guidance overall, like we said because of the shifted calendar no material impact to the comp cadence itself. When you look at it however, keep in mind last year, we were converting eight humbled.
Operator: Oh, hey, guys. Great quarter. And thanks for all the commentary on the store economics. Really appreciate that. A couple of follow-ups on just the fourth quarter.
Combo locations into houses board, which will close during the first half of last year. So we expect our comp in the first half to be slightly stronger than the comps in the back half of the year.
Operator: Can you give us a sense of sort of digital transactions versus in-store transactions in the fourth quarter? Were in-store transactions, you know, positive? Hi, Robbie.
Katharine Amanda McShane: But there won't be any impact from store closures as you relocate this year.
Katharine Amanda McShane: No we are not doing the closed remodels as we did last year.
Lauren R. Hobart: Thanks for the question. We're not guiding to digital versus in-store overall. In the fourth quarter, transactions were flat.
Speaker Change: Got it okay. Thank you.
Speaker Change: Your next question is from the line of Robbie <unk> with Bank of America. Please go ahead.
Robbie: Oh, Hey, guys, great quarter, and thanks for all the commentary on the store economics really appreciate that a couple of follow ups on just the fourth quarter can you give us some.
Lauren R. Hobart: Most of the growth came from tickets. However, it's really important to note that in Q4 of last year, we were up over 7.6% in transactions. So from a two-year basis, really, really strong growth in transactions. Digital business remains really strong, but we're not going to get into that. And then just for the comp guidance you're giving for 2024, how should we think about the ticket versus transaction component? Yeah, Ravi, we won't break that down any further.
Robbie: A sense of sort of digital transactions versus in store transactions in the fourth quarter were were in store transactions positive.
Speaker Change: Hi, Robbie Thanks for the question, we're not guiding digital versus in store overall in the fourth quarter transactions were flat most of the growth came from ticket. However, it's really important to note that in Q4 of last year, we were up over seven 6% in transactions.
Navdeep Gupta: I'm really excited about, you know, being able to guide on a positive basis on top of a 2.4% come from from last year. And our focus is continuing to be about driving sales and profitability growth for the business. Overall, we did have the majority of growth come from transaction growth. If you look at the 2.4%.
Speaker Change: So from a two year basis on an omni channel standpoint, really really strong growth in transaction digital business remains really strong.
Speaker Change: Im going to get into more detail than that.
Speaker Change: And then just for the comp guidance, you're giving for 2024 should we how should we think about the ticket versus transaction component.
Navdeep Gupta: So, you know, we are very confident in our, in our computer guidance. And then just one quick clarification on the, you know, for the store economic models, when you guys say omnichannel sales, is it is that, is it a web sale that's fulfilled by the store? To quote, you know, to quote, you know, what gets included in omnichannel sales at a house of sport or, or the new 50k store? Yeah, no, Robbie, that's exactly what it is.
Speaker Change: Yes, Ravi we won't break that down any further really excited about to be able to guide on a positive basis on top of a two 4% comp from last year and our focus is continuing to be about driving sales and profitability growth for the business.
Speaker Change: Overall, just here we did have.
Speaker Change: The majority of growth did come from transaction growth. If you look at the two 4%.
Speaker Change: So.
Speaker Change: We are very confident in our in our comp guidance.
Navdeep Gupta: It's not only the stores that are fulfilled from a store with an athlete walking in; even an omni-channel sale or a digital sale that gets fulfilled by the store is also included in that, because that's what we look at as the four-wall performance of the store, including the work that our team members are doing in fulfilling an omni-channel order. Yeah, and the stores are fulfilling over 80% of e-comm orders, 90% of orders across the board, if you include brick and mortar, so it's appropriate to think of it as an omni-channel. I got it. That's really helpful.
And then just one quick clarification on the.
Speaker Change: For the store economic models, when you guys say omnichannel sales.
Speaker Change: Is it is that is it.
Speaker Change: Is it a web sales thats fulfilled by the store too.
Speaker Change: What gets included in Omnichannel sales at our house of sport or where the new 50 Kay store.
Speaker Change: Yes, no that Robyn.
Robyn: Exactly it is it's not only the stores that are fulfilled.
Robyn: From a store, but they're not be backing and even on Omnichannel sales are in digital sales that gets fulfilled by the store is also included in that because that's what we look as the four wall performance of the store, including the work that our team members are doing in fulfilling an omnichannel order and the stores are fulfilling over 80%.
Navdeep Gupta: Thanks so much, guys. Thanks, Robbie. Your next question is from the line of Brian Nagel with Oppenheimer. Please go ahead. Hey, good morning.
Operator: Congratulations on another nice quarter. Thank you. First question I have, just to go back, it wasn't that long ago we were talking a lot about short.
Robyn: E Com orders, 90% of orders across the board at the include the brick and mortar. So it's appropriate to think of it as omnichannel sales.
Speaker Change: Got it that's really helpful. Thanks, so much guys.
Lauren R. Hobart: Looking at the results today in your commentary, you know, it seems as though you've done a nice job of kind of getting your arms around shrink. The question I have is, as we're looking now into 2024, how should we be thinking about the trajectory in shrink or the mitigation efforts that are ongoing at Dick's to manage it. Thanks, Brian. Yes, we do feel that we are appropriately reserved for shrink.
Speaker Change: Thank you thanks Ravi.
Speaker Change: Your next question is from the line of Brian Nagel with Oppenheimer. Please go ahead.
Brian William Nagel: Hey, good morning.
Brian William Nagel: Congrats on another nice quarter.
Speaker Change: Okay. Thank you.
First question I have just to go with.
Speaker Change: It wasn't that long ago, we were talking a lot about shrink.
Speaker Change: Looking at the results during your commentary it seems as though you've done a nice job kind of getting your arms around the shrink but the question I have is this we use we're looking now into 2024, how should we be thinking about the trajectory and shrink or.
Speaker Change: The mitigation efforts that are ongoing to manage shrink.
Lauren R. Hobart: We've been doing significantly more inventory pulses and do believe that we have an appropriate reserve going forward. For Q1, it's important to note that we are still up against the headwind of the fact that we didn't put the extra shrink reserve in until the end of Q2 last year. But overall, we're doing a lot of things in store to mitigate these problems. We're working with loss prevention and local law enforcement, as well as moving products to the back of the store that are high-shrinking. So we have a lot going on. But overall, we are okay. Got it.
Speaker Change: Thanks, Brian Yes, we do feel that we are appropriately reserved or shrink we've been doing significantly more inventory pulses and <unk>.
Speaker Change: We do believe that we have an appropriate.
Speaker Change: Going forward in Q1, it's important to note that we are still up against the headwind of the fact that we didn't put the extra shrink reserve in until the end of Q2 last year, but overall, we're doing a lot of things in store to mitigate we're working with loss prevention and local law enforcement as well as moving products through the <unk>.
Lauren R. Hobart: Thank you. And then my follow-up question, this is a bit of a follow-up to the prior question, but just with regard to transaction growth, so you know, Dick's have done a phenomenal job here driving transactions, clearly standing out amongst most. You're recognizing all the changes that happen in business and retailing. Is there anything you can kind of help us understand better, the underlying drivers of that transaction growth? Are you seeing any type of variability across across the chain, maybe within departments, so we get a better understanding of the kind of sustainability of that?
Speaker Change: The store that are high shrink so we have a lot going on but overall, we are appropriately reserved.
Speaker Change: Got it.
Speaker Change: Thank you and then my follow up question. This is a bit of a I think a follow up to the prior question, but just with regard to transaction growth. So Dick's has done a phenomenal job driving transaction growth and Youre clearly standout amongst most retailers do itself.
Speaker Change: Youre recognizing all the changes that happen in the business and the merchandising or is there anything you can kind of help us understand better.
Speaker Change: Underlying drivers of that transaction growth are you seeing any type of variability you're across.
Speaker Change: Across the chain, maybe within departments, so we get a better understanding of kind of the sustainability of that.
Lauren R. Hobart: Brian, I really think the transaction growth has so much to do with things like our differentiated product and the access that we have. But on top of that, when athletes are coming into our stores, or shopping online, our team is striving to make that omni-channel athlete really happy, and they're making great progress there. And then also, I think the brand and the fact that, you know, we are a brand that is very much based on our values. Thank you for joining us.
Speaker Change: Brian I really think the transaction growth has so much to deal with things like our differentiated product and the access that we have but on top of that when athletes are coming into our stores our team or shopping online. Our team is striving to make that omnichannel athlete experience really satisfy and Theyre made.
Speaker Change: Great progress there and then also I think the brand and the fact that we are a brand that is very much based on our values and we continue to talk about the power of sports. So all of those things are working together and driving strong transaction.
Navdeep Gupta: Yeah, Brian, I'll add to the fact that, you know, if you look at in 2023 and in fourth quarter, we gained 7 million new athletes in 2023, and just in fourth quarter alone, we gained 2 million new athletes. So, back to Lauren's point, you know, the athlete database that we have, the work that we have been doing around personalization and the loyalty and our scorecard program, in addition to having the right product, our ability to be able to go and address and, you know, discuss those type of features and product availability in our store is resonating very well as well with our athletes, very helpful, I appreciate it. Thank you. Your next question is from the line of John Kernan with T.D. Cowan.
Speaker Change: Yes, Brian I'll add to the fact that if you look at it in 2023 fourth quarter, we gained 7 million new athletes.
Speaker Change: In 2023, and just in the fourth quarter alone, we gained 2 million new livelihoods back to Lauren's point.
Speaker Change: Absolutely database that we have the work that we have been doing around personalization and loyalty and our scorecard program.
Speaker Change: In addition to having the right product ability to be able to go and address.
Speaker Change: This was those type of features and product availability in our store is resonating very well as well but that outlet.
Speaker Change: Very helpful. I appreciate it congrats again.
Speaker Change: Thank you.
Speaker Change: Your next question is from the line of John Kernan with TD Cowen. Please go ahead.
Operator: Please go ahead. Thanks for taking my questions. Congratulations on another great year. Navdeep, I think. I think you said the House of Sports.
John David Kernan: Thanks for taking my question congrats on another great year.
John David Kernan: Thank you.
John David Kernan: Thank you said the house of sport.
Navdeep Gupta: They open at maturity. How do we think about the comp contribution from both House of Sport and the next-gen 50,000-square-foot stores if they're opening at maturity? How do we think about them, the comp contribution in year two and beyond going forward? Yeah, um, John, I think there is a two part question there. So I'll start with the second part in terms of the comp contribution as we look at, you know, the growth in the second year. And that has been one of the questions.
John David Kernan: They opened at maturity.
John David Kernan: Do we think about the top contribution from Bolthouse and sport and with Nextgen 50000 square foot stores, if they're opening at maturity, how do we think about them.
John David Kernan: The count contribution in year, two and beyond going forward.
Speaker Change: Yeah, John I think that there are two part question there. So I'll start with the second part in terms of the comp contribution as we look at that.
Speaker Change: The growth in the second year and that has been one of the question.
Navdeep Gupta: We are very optimistic and confident in the results that we are seeing. So the first of all, we don't have a live sample, there are two stores of ours that got opened in 2021. And 2022, they actually have comped for the second full year.
Speaker Change: Im very optimistic and confident in the results that we are seeing for the first of all we don't have a blood sample there are two stores of ours.
Speaker Change: Or is that going to open.
Speaker Change: In 2021, and 2020, we do actually have comp the second full year and what we saw was in 2023, they actually posted comp sales growth again, and yet so really happy with the overall performance in terms of the comp contribution and so the opportunity is when we are relocating let's say a 50 hour in ATCA box there.
Navdeep Gupta: And what we saw was in 2023, they actually posted comp sales growth again in year two. So, really happy with the overall performance in terms of comp contribution. And so the opportunities when we are relocating, let's say a 50k or an 80k box that goes from somewhere to 19 to $20 million, going closer to $35 million in omni channel sales. That's the comp contribution that we are really excited about as well. And then, and I would be remiss if I didn't add the differentiated product that we are able to get through these things, through the next gen 50k or house of sport location, that allows us to cascade that innovation and newness down into the normal Dick stores as well, is allowing us to continue to elevate the overall portfolio of the stores and the performance that we are seeing out of those. That's helpful.
Speaker Change: Goes from somewhere to $19 million to $20 million going to <unk>.
Speaker Change: Those are the about $35 million of Omnichannel sales as the comp contribution that we are really excited about as well and then.
Speaker Change: I would be <unk>, the differentiated product that we are able to get through these things through the Nextgen 50 yard house's port location, but that allows us to cascade and innovation and newness down into our into the normal Dick's stores as well as allowing us to continue to elevate the overall portfolio of the stores and the PERC.
Speaker Change: <unk> that we are seeing out of those.
Navdeep Gupta: Thanks. I guess my follow-up just shifts to more of a category level. Softline apparel footwear, I think it's going to be around 60% of the business this year. It's not terribly different from where it was historically, but I think we can all see that the allocations from vendors have gotten significantly better. The private label offering has clearly increased as well. I think this has contributed to 255 basis points of Merge Margin Expansion since pre-COVID levels.
Speaker Change: That's helpful. Thanks, I guess.
Speaker Change: My follow up just.
Speaker Change: Shifts to more of a category level.
Speaker Change: Top line apparel footwear.
Speaker Change: It's going to be around 60% of the business are terribly different from where it was historically, but I think we can all see that the <unk>.
Speaker Change: The allocations from vendors have gotten.
Speaker Change: Significantly better.
Speaker Change: Private label offering.
Speaker Change: Has clearly increased as well I think this has contributed to 255 basis points.
Speaker Change: Merch margin expansion since pre COVID-19 levels, how should we think about.
Navdeep Gupta: How should we think about future merchandise margin, particularly as all of the soft line categories seem to be elevated at this point? Yeah, um, so, John, I would say that, you know, the overall composition of the product continues to be the biggest driver of our merchandise margin expansion when you look at it versus 2019, and we are confident that that will continue to be one of the biggest drivers. The two other drivers that we talk about internally a lot are our excitement about the vertical brand work, and hopefully, you have seen some of the work that we have recently launched in terms of the Kalia Inspire product that we launched here in 2024. The DSG brand is responding really well with our athletes. We actually have now an always-on kind of message around the DSG brand.
Speaker Change: Future merch margin, particularly if that's all of the soft line categories seem to be elevated at this point.
Speaker Change: Yes, so yes.
Speaker Change: John I would say that the overall the composition of the product continues to be the biggest driver of how much margin expansion. When you look at it versus 2019, and we are confident that that will continue to be one of the biggest driver. The two other drivers that we talk about internally a lot is our excitement about the vertical Brian book and hopefully you've seen some of the book.
Speaker Change: And that we have recently launched in terms of the Korean inspired a product that we launched here in 2020 for the DSG, Brian is resonating really well with our athletes we actually have now an always on kind of a message and R&D as you Brian So the.
Navdeep Gupta: So the Softline vertical brand product is responding really well with our athletes. So the vertical brand and continuing to lean into that with moving towards the $2 billion long-term goal that we have will be another big driver of the margin in recent years, as well as as we look forward on a go-forward basis. And finally, we are constantly improving some of the promotional optimization and pricing optimization capabilities as well. So we'll continue to lean into the same things that we have leaned on and are really confident about the differentiated product. John, it's also, it's across the board. It's not, there isn't just a soft line story here.
Speaker Change: A soft line vertical Brian product is resonating really well with that object, so devoted there, Brian and continuing to lean into that.
Speaker Change: Moving towards the $2 billion long term goal that we have will be another big driver of the margin and the <unk>.
Speaker Change: <unk> as well as we look forward on a on a on a go forward basis and finally, we are.
Speaker Change: We are constantly evolve.
Speaker Change: Elevating our some of the promotional optimization pricing optimization capabilities as well. So we'll continue to lean into the same things that we have leaned on and really confident about the differentiated product.
Speaker Change: Yeah, John It's also it's across the board it's not it isn't just the topline story here. We are we are focused on margin gains across the entire portfolio.
Lauren R. Hobart: We are, we are focused on margin gains across the entire company. Understood. Thank you. Your next question is from the line of Joe Feldman with Chelsea Advisory Group. Please go ahead.
Speaker Change: Understood. Thank you.
Speaker Change: Your next question is from the line of Joe Feldman with Telsey Advisory Group. Please go ahead.
Operator: Hi, good morning, guys. Thanks for taking the question and a great quarter. I was wondering if you could share a little more thought on the share game that you're seeing and where that may be coming from.
Joseph Isaac Feldman: Hi, Good morning, guys. Thanks for taking my question and Great quarter. I was wondering if you could share a little more fun on on the share gains that youre seeing and where that may be coming from like is it.
Lauren R. Hobart: Like, is it, I'm just curious. I mean, you guys continue to do so well, and maybe you could share some thoughts. Thanks, Joe. I mean, we are gaining market share due to our differentiated experience, the reimagining of our portfolio, the experience we're providing. I think it's coming from a lot of places. And as we continue to get differentiated access to product, and I believe that we'll. And then, just a quick unrelated follow-up, but, With regard to freight, and I have, you know, it's been a tailwind When do we lap up some of that?
Joseph Isaac Feldman: I'm just curious I mean, you guys continue to execute so well and maybe you could share some thoughts there.
Speaker Change: Thanks, Joe I mean, we are gaining market share.
Speaker Change: Our differentiated experience that re imaging of our of our portfolio the experience we're providing.
Speaker Change: I think it's coming from a lot of places and as we continue to get differentiated access to product I believe that will continue to come.
Speaker Change: And then just a quick one.
Speaker Change: Unrelated follow up but.
Speaker Change: With regard to freight.
Speaker Change: Right.
Speaker Change: It's been a tailwind for you guys and when does do we lap some of that and also have you seen any pressure on.
Navdeep Gupta: And also, have you seen any pressure on future costs related to what's going on in kind of the global supply chain network with the Red Sea, the Panama Canal issues, all those kinds of things? Yeah, Joe, like you called out in 2023, we saw a tailwind from freight. As we look to 2024, we're not expecting any kind of tailwind or headwind right now.
Speaker Change: Future costs related to what's going on in kind of the global supply chain network with the Red Sea, the Panama Canal issues, all those kinds of things.
Speaker Change: Yeah Joe.
Speaker Change: You called out in 2023, and we saw the tailwind from the freight.
As we look to 2024 again aren't expecting any kind of tailwind not had been right now but to your point, yes. We are definitely evaluating on the evolving situation that we have across the world right now, but overall, we feel great about the inventory position and we will continue to monitor how these.
Navdeep Gupta: But to your point, we are definitely evaluating the evolving situation that we have across the world right now. But overall, you know, we feel great about the inventory position, and we'll continue to monitor how these overall situations evolve. At it. Thanks. Good luck with this quarter.
Speaker Change: Hum.
Speaker Change: Overall situations evolve.
Speaker Change: Got it thanks, good luck with this quarter.
Operator: Thank you. Your next question is from the line of Warren Cheng with Evercore ISI; please go ahead. Hey, good morning, Lauren and Navdeep.
Speaker Change: Thank you.
Speaker Change: Your next question is from the line of Warren Cheng with Evercore ISI. Please go ahead.
Warren Cheng: Hey, good morning Lauren.
Navdeep Gupta: I was wondering how the shift to the newer concepts and also the rollout of the footwear decks will impact the assortment on a couple dimensions. So first, if we think about sort of the big global brands versus smaller brands or your own private label, how will that mix skew as you build out some of the newer concepts? You know, sounds like, from your answer to an earlier question, that vertical brand penetration is going to go up from here and that it carries some of the global brands. Yeah, Warren, we are excited, I would say, across the board, right? Our partnership with national brands is at an all-time high. We continue to differentiate not only our service levels but the experience that we provide within our stores. And the national brands; all of them want to be rooted in sports.
Warren Cheng: I was wondering how the shift to the newer concepts and also the rollout of the footwear decks will impact your assortment on a couple of dimensions. So first if we think about sort of the big global brands versus smaller brands or your own private label.
Warren Cheng: And that mix shift skew as you build out some of the newer concepts sounds like from your answer to an earlier question that vertical brand penetration is going to go up from here.
Warren Cheng: Some of the global brands aspect.
Warren Cheng: Yes.
Warren Cheng: We are excited I would say across the board Ryan our partnership.
Warren Cheng: The National brands is an all time high and we continue to differentiate not only our service levels, but the experience that we provide them within our stores and the national brands all of them want to be entered in sports. So they've been they look to a partner that can not only bring their full assortment and breadth of our product lines, but actually can bring that across.
Navdeep Gupta: So when they look to a partner that can not only bring their full assortment and breadth of product to life but actually can bring that to life across the nation, we are the destination for that. So we continue to see a very strong level of partnership and interest and the innovation and newness that is coming into our stores. Likewise, we are very excited about some of the emerging brands like On and Hoka and Free People Movement.
Warren Cheng: That's the life across the nation. These beyond the destination for that so we continue to see a very strong level of partnership and interest and the innovation and newness that is coming into our store. Likewise, we are very excited about some of the emerging brands like on an organic free people movement and we see the opportunity not only to continue to have deeper partnership with these <unk>.
Navdeep Gupta: And we see the opportunity not only to continue to have deeper partnerships with these brands but also to expand that relationship deeper into our own chain. And finally, the work that our vertical brand team has done is phenomenal. Really excited about the launches that we have done this year and what more is to come in 2024. Thanks, Navdeep. And I also wanted to ask about your latest view on where you see long-term normalized gross margins and EBIT margins as you shift to these newer concepts. There are a lot of moving parts here, and I'm curious if you can give us your view on the level and also the ongoing drivers that will shape margins as we move forward. Yeah, Warren, today we are not going to be providing a long-term algorithm.
Warren Cheng: Ryan, but also expand that relationship deeper into auto and chain and finally, the work that our vertical Brian team has done is phenomenal really excited about the launches that we have done this yet on what more is to come in 2024.
Ryan: Thanks, Deep and I also wanted to ask about your latest view on where you see long term normalized gross margins and EBIT margins as you shift to these newer concepts.
Speaker Change: There's a lot of moving parts here and.
Deep: So you can give us your view on the level and also the ongoing drivers that will shape margins as this year.
Deep: Yes.
Speaker Change: Today, we are going to be providing the long term algorithm, but what we are we have consistently said is and what we are consistently delivering is the fact that we are confident in driving the long term sales and profitability of the company and leaning into the core strategies that Loren has laid out today. So we'll continue to execute and confident in the guidance that we've provided.
Navdeep Gupta: But what we have consistently said, and what we are consistently delivering, is the fact that we are confident in driving the long-term sales and profitability of the company by leaning into the core strategies that Lauren has laid out today. So we'll continue to execute and be confident in the guidance that we have provided to be able to drive positive comps in 2024 on top of a strong 2.4% comp that we posted in 2023. Thanks, Navdeep. Thanks, Warren. Today's final question will come from the line of Mike Baker with DA Davidson. Please go ahead.
Speaker Change: It will be able to drive positive comps in 2024 on top of a strong two 4% comp that we posted in 'twenty three.
Speaker Change: Excellent thanks Laurence.
Laurence: Thank you.
Laurence: Today's final question will come from the line of Mike Baker with D. A Davidson. Please go ahead.
Operator: Okay, thanks. You know, I wanted to ask a follow-up on the outdoor concepts. You talked about bigger picture restructuring or changing some things there, but more specifics, what is the plan in terms of store count there? Are you closing those stores down? And just longer term, you know, a couple iterations you've had on the outdoor business in your history. What's sort of the long-term thought process there?
Michael Allen Baker: Okay. Thanks, I wanted to ask a follow up on the outdoor concept you talked about bigger picture restructuring or changing some things there, but more specifics what are what is the plan in terms of store count there are you closing.
Michael Allen Baker: Those stores down.
Michael Allen Baker: And just longer term you know a couple of iterations you got on the outdoor business in your history.
Michael Allen Baker: It's sort of the long term thought process there. Thanks.
Navdeep Gupta: Thanks. Yeah, Mike, we continue to be really excited about the outdoor category. When you look at it at the macro level, this is a $40 billion highly fragmented TAN that is out there.
Michael Allen Baker: Mike.
Continue to be really excited about the outdoor category. When you look at the macro level. This is a $40 billion highly fragmented time that.
Michael Allen Baker: Is it out there and we know there is an opportunity, but similarly differentiate.
Navdeep Gupta: And we know there is an opportunity to similarly differentiate in terms of some service product experience, as well as the overall assortment that we can provide. So what we did in 2023, we acquired Moose Jaw. And the work that we did last year was actually bringing the back office operation of Moose Jaw and Public Lands together to be able to drive the long-term profitability of that business. And what we have called out in the business optimization actions are actually rationalizing some of the investments that we have made. You're not closing Moose Jaw locations, but we are confident in the go forward business and continue to continue to evaluate that space. But overall, on a long term basis, we continue to remain really confident about the opportunity in the outdoor sector.
Michael Allen Baker: In terms of some so this product experience as well as the overall assortment that we can provide so what we have done in 2023.
Michael Allen Baker: We've acquired Mojo and the work that we did last year was actually bringing the back office operation the Mojo and public plans together to be able to drive the long term profitability in that business and.
Michael Allen Baker: We have gone out in the business optimization actions are actually rationalizing some of the investments that we've made we're not closing.
Michael Allen Baker: Most geo locations, but we are confident in the in the both our business and continue we will continue to evaluate that space, but overall on a long term basis continue to remain really confident about the opportunity in the outdoor segment.
Navdeep Gupta: Okay, thanks. One quick follow up. I may have missed it. I was just looking for a number. Did you tell us how much it cost to build the 50k stores? So I think you gave us the sales volume and the EBITDA margin. I may have missed it. I didn't hear the cost to build and therefore the cash in cash. Yeah, actually, all both these metrics are in the slide that will be on our investor relations web page, both the net capital investment inventory as well as the pre opening and then the cash on cash return.
Okay. Thanks, one quick follow up I may have missed it just looking for a number did you tell us how much of cost the cost to build the 50 K stores. So I think it gave us the sales volume in the in the EBITA margin I may have missed it I didn't hear the cost to build and therefore, the cash on cash returns.
Speaker Change: Yeah, I actually might on both of these metrics are in the slides that will be data on our investor relations webpage on both the net capital investment inventory as well as the Preopening and then the cash on cash return.
Navdeep Gupta: Got it. Sorry. I was doing the call on the phone, so I missed that.
Speaker Change: Sorry, I joined the call on the phone so I missed that I. Appreciate the color. Thank you. We appreciate the flexibility that joining us early here.
Lauren R. Hobart: I appreciate the caller. Thank you. We appreciate your flexibility in joining us early here. This concludes the question and answer session. I will now turn the call over to Lauren Hobart, President and Chief Executive Officer, for closing remarks. Thanks, everybody, and thanks for your interest in Dick's Sporting Goods. I wanted to give a shout out to our 50,000 teammates who really are the reason that we are driving these incredible results. Thank you all very much. This concludes the Dick's Sporting Goods fourth quarter 2023 earnings conference call. Thank you so much for participating.
Speaker Change: This concludes the question and answer session I will now turn the call over to Lauren Hobart, President and Chief Executive Officer for closing remarks.
Lauren R. Hobart: Thanks, everybody and thanks for your interest in Dick's Sporting goods and I wanted to give a shout out to our 50000 teammates who really are the reason that we are driving these incredible results. Thank you all very much see you next quarter.
Speaker Change: This concludes the Dick's Sporting goods fourth quarter 2023 earnings conference call. Thank you so much for participating.