Dick's Sporting Goods (DKS) matches the estimate of analysts with its Q4 report, but takes its guidance to below what analysts forecast.
The company saw same store sales for Dick's rise increase 7.9% during the quarter, while comps at weather-stricken Golf Galaxy fell 11.7%.
E-commerce penetration was 12.2% of total sales in Q4.
Looking ahead, Dick's sees same-store sales growth of 3% to 4% in 2014. The outlook from the company also includes Q1 EPS of $0.51-$0.53 vs. $0.54 consensus and FY14 EPS of $3.03-$3.08 vs. $3.11 consensus.
Retail analysts think some companies could surprise with December and January revenue totals despite the general trend of slow traffic as they picked up snow-related sales during the extended bout of winter storms which have hit the Midwest and East Coast.
What to watch: Major storms can push up the average basket price from consumers for select retailers.
Winter sellers: Dick's Sporting Goods (DKS), Home Depot (HD), Lowe's (LOW), Columbia Sportswear (COLM), Under Armour (UA).
BofAML analyst Robert Ohmes hikes his PT on a number of sports retail and apparel names.
VF (VFC -0.4%) is reiterated at Buy with an increased PT of $70 ($62.50 previously). Ohmes is bullish enough on VF's earnings mix move towards higher margin, faster growing segments to assign a premium relative to VF's historical multiple.
Dick's Sporting Goods' (DKS +0.1%) PT is raised to $68 ($65 previously). Ohmes notes Dick's "appeared to maintain strong traffic throughout the Holiday period supported by an increased TV/digital marketing effort and store payroll investments ... DKS remains our top pick following our post-Holiday store checks."
Under Armour (UA +0.4%) is reiterated at Buy with an increased PT of $95 ($85 previously). Ohmes: "Near-term top-line momentum should continue to be driven by expansion in core apparel, Direct to Consumer, and improving footwear trends. Longer term, UA should triple in revenues through growth in footwear (should become larger than apparel) and International (should become as large as the US)."
Foot Locker's (FL +0.5%) PT is raised to $45 ($43 previously) on the back of the retailer's improving cold weather category and athletic footwear outlook.
Columbia Sportswear (COLM +0.3%) is reiterated at Sell with a PT of $58 ($50 previously) due to the same drivers as Foot Locker. Risks to Ohmes' Sell thesis include favorable weather trends, EPS accretion from the Swire JV beginning in 2014, long term operating margin upside, and opportunities in the footwear and women's categories.
Analysts don't expect the fierce winter snowstorm that struck a wide swath of the Northeast and Midwest to significantly impact overall holiday sales, although a pickup in e-commerce channels could be seen. The trend sets up well for Amazon (AMZN), eBay (EBAY), FedEx (FDX), and UPS (UPS).
Retailers focused on winter gear and machinery such as Dick's Sporting Goods (DKS), Tractor Supply (TSCO), Home Depot (HD), and Lowe's (LOW) could also see some extra snow-related sales, note analysts.
More retail analysts now see holiday season sales coming in weak after early projections from the NRF and ShopperTrak called for a 3% to 4% rise. A number of firms agree with Hedgeye that the level of promotional activity will be very damaging when Q4 reports start rolling in.
Despite the broad carnage in the retail sector, there are some out-performers.
Discounters: Dollar General's increase in traffic and average basket size - along with a decent quarter from Stein Mart - could be confirming indicators that consumers are stepping down a bit with their shopping habits. Watch FDO, DLTR, FIVE, FRED, ALCS, GMAN, SMRT.
Luxury: Tiffany (TIF +0.5%), Coach (COH -1.2%), and Ralph Lauren (RL -0.4%) are cruising through the retail season with demand and pricing intact.
Powerful brands: Early channel checks on Lululemon (LULU -0.4%), Nike (NKE +0.1%), and Gap (GPS -1.2%) have been positive as consumers gravitate to what they know and like.
E-commerce stars: Visa (V -0.4%), MasterCard (MA +0.4%), eBay (EBAY +0.2%), Amazon (AMZN -0.8%), Dick's Sporting Goods (DKS +0.3%), and Under Armour (UA +1.2%) are some of the companies tapped to benefit as mobile/online is factored in to counterbalance reads on weak store traffic.
Underdogs: J.C. Penney (JCP -7.6%) is a $20 stock, according to Hedgeye. The retailer has upside to improve its embarrassingly low sales-per-square-foot mark during the holiday season and continue online momentum.
Shares of Dick's Sporting Goods (DKS -2.1%) are falling after BMO Capital downgrades the sports retailer to Perform from Outperform with a PT of $57.
Analyst Wayne Hood is concerned that the stock has outpaced the S&P 500 more than two-fold since March and believes "more aggressive promotions are needed to drive s ales growth in certain segments (golf, fitness/cardio) ... while the company is in a position of having to maintain margins."
Going forward, BMO calls management FY2013 guidance "a potential outcome," but one that would require "significant expense leverage in the face of upfront spending on future growth initiatives." Downside risks include sales cannibalization at new stores, growth in e-commerce, the threat of specialty store formats, continued store productivity declines, and margin pressure from free shipping offers. The list is a veritable kitchen sink, but underscores the obstacles Dick's will face in reaching its guidance.