Dick's Sporting Goods 2015 Annual Report Download - page 26

ITEM 7.€€MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis should be read in conjunction with Part II, Item€6, "Selected Financial Data" and our
Consolidated Financial Statements and related notes appearing elsewhere in this Annual Report on Form 10-K. This Annual
Report on Form€10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act
of 1995. See "Forward-Looking Statements" and Part€I, Item€1A. "Risk Factors".
Overview
The Company is a leading omni-channel sporting goods retailer offering an extensive assortment of authentic, high-quality
sports equipment, apparel, footwear and accessories through a blend of dedicated associates, in-store services and unique
specialty shop-in-shops. The Company also owns and operates Golf Galaxy, Field & Stream and other specialty concept stores
as well as eCommerce websites at www.DICKS.com, www.golfgalaxy.com, www.fieldandstreamshop.com and
www.caliastudio.com.
The primary factors that have historically influenced the Company's profitability and success have been the growth in its
number of stores and selling square footage, the integration of eCommerce with its brick and mortar stores, positive
consolidated same store sales, which include the Company's eCommerce business, and its strong gross profit margins. For
example, in the last five years, the Company has grown from 444 Dick's Sporting Goods stores at the end of fiscal 2010 to 644
Dick's Sporting Goods stores at the end of fiscal 2015. The Company's eCommerce sales penetration to total net sales has
increased from 2.8% in fiscal 2010 to 10.3% in fiscal 2015.
In recent years, the Company has innovated its eCommerce sites with enhancements in the customer experience, new releases
of its mobile and tablet sites, and development of capabilities that integrate the Company's online presence with its brick and
mortar stores, including ship-from-store; buy-online, pick-up in-store; return-to-store and multi-faceted marketing campaigns
that are consistent across our stores and our eCommerce websites. On average, approximately 80% of the Company's
eCommerce sales are generated within brick and mortar trade areas.
The Company's senior management focuses on certain key indicators to monitor the Company's performance including:
• Consolidated same store sales performance€– Our management considers same store sales to be an important indicator
of our current performance. Same store sales results are important to leverage our costs, which include occupancy
costs, store payroll and other store expenses. Same store sales also have a direct impact on our total net sales, cash and
working capital. See further discussion of the Company's same store sales in the "Results of Operations" section
herein.
• Operating cash flow€– Cash flow generation supports the general operating needs of the Company and funds capital
expenditures related to its omni-channel platform, distribution and administrative facilities, costs associated with
continued improvement of information technology tools, costs associated with potential strategic acquisitions or
investments that may arise from time to time and stockholder return initiatives, including cash dividends and share
repurchases. We typically generate significant positive operating cash flows and proportionately higher net income
levels in our fiscal fourth quarter in connection with the holiday selling season and in part to sales of cold weather
sporting goods and apparel.€See further discussion of the Company's cash flows in the "Liquidity and Capital
Resources" section herein.
• Quality of merchandise offerings€– To measure acceptance of its merchandise offerings, the Company monitors sell-
throughs, inventory turns, gross margins and markdown rates on a department and style level. This analysis helps the
Company manage inventory levels to reduce cash flow requirements and deliver optimal gross margins by improving
merchandise flow and establishing appropriate price points to minimize markdowns.
• Store productivity€– To assess store-level performance, the Company monitors various indicators, including new store
productivity, sales per square foot, store operating contribution margin and store cash flow.
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