Dicks Sporting Goods (DKS) has long been a favorite investment pick for Stone Fox Capital. Just search this blog and you'll see plenty of articles. Not to mention the recent post of the store openings in our area.
DKS reported strong earnings this morning and surprising established a dividend. DKS announced a $.50 dividend for 2011 payable on December 28th and plans to start a quarterly dividend in 2012. Does this mean that the growth story is over?
Hopefully is just means that with $483M in cash that DKS is over flowing with money and thinks dividends are the best way to reward shareholders. Unfortunately in the past it has signaled that companies lack growth opportunities to use that cash.
DKS is now in at least 43 states with the entry into Oklahoma at the beginning of November. Little growth opportunities exist in moving into new areas. Maybe it still has growth potential in existing states. The sporting goods industry does remain fragmented and less than 500 stores doesn't appear to be excessive. Looks like I need to undergo some research on this subject.
As an example, the Tulsa area just opened 3 stores and I could see maybe 1-3 more stores. At the least one to the North and one to the South. So if a metro area of less than 1M can support 5 stores than the whole US could support at least 1,000. 1,500 stores if just using a pure 300M population times 5. Something to ponder.
Back to the earnings of this phenomonal retailer. DKS reported Q3 earnings of $.32 vs expectations of $.26. Easily surpassing estimates yet again. Maybe an investor should only become worried about the growth potential when DKS no longer beats estimates.
Details from the press release:
--Consolidated non-GAAP earnings per diluted share
increased 45% to $0.32 per diluted share in the third quarter of 2011
as compared to consolidated non-GAAP earnings per diluted share of $0.22
in the third quarter of 2010
-- Consolidated same store sales increased 4.1% in the third quarter of 2011