J.P Morgan Raises Price Target On Dicks Sporting Goods Following Solid Earnings

As J.P Morgan reflects on Dick's Sporting Goods DKS results, every box that investors could hope for was checked. First, on the topline side, comps accelerated on a two year basis, their merchandising efforts all are generating above average comp growth, and the company alluded to a longer and faster store growth runway. Comps in DKS' Texas stores are outperforming the company average by a wide margin (a region that has been difficult to get traction in) and on-line sales have surged without pick- up in store capabilities. Finally, in 2011, DKS is accelerating its core store growth to 34 from 26 in 2010 and it plans to add five GG stores. DKS reported adjusted EPS of $0.22, above consensus of $0.17. Total sales rose 9.0%, with total same-store sales of 5.1% as apparel, footwear and hardlines products were all positive. By segment, Dick's comps rose 3.8%, GG comps increased 2.4%, and e-commerce comps rose 82.4%. For DKS stores, transactions increased 5.2%, while ticket was down 1.4%. New store productivity was 102.3% vs. 67.9% LY. Gross margin came in better than expected, increasing a very strong 150 bps YOY driven by an increase in merchandise margins (128 bps) and occupancy leverage. The YOY increase was primarily related to the previously announced $8MM for recurring expense for infrastructure, regionalization, and e-commerce. DKS closed Tuesday at $33.51