Dick's Sporting Goods 2008 Annual Report Download - page 27

Management’s Discussion and Analysis of
Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with “Selected Consolidated Financial and Other Data” and our
consolidated fi nancial statements and related notes appearing elsewhere in this report. This Annual Report contains forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995. See page 37 – “Forward Looking Statements”.
Overview
Dick’s is an authentic full-line sporting goods retailer offering a broad assortment of brand name sporting goods equipment,
apparel and footwear in a specialty store environment. On February 13, 2007, the Company acquired Golf Galaxy by means of
merger of our wholly-owned subsidiary with and into Golf Galaxy. On November 30, 2007, the Company completed its acquisition
of Chick’s Sporting Goods, Inc. The Consolidated Statements of Operations include the results of Golf Galaxy and Chick’s for
fi scal 2007 from their respective dates of acquisition.
As of January 31, 2009 we operated 384 Dick’s stores, 89 Golf Galaxy stores and 14 Chick’s stores, with approximately 23.6 million
square feet, in 42 states, the majority of which are located throughout the eastern half of the United States. On September 12, 2007,
the Company’s board of directors approved a two-for-one stock split of the Company’s common stock and Class B common stock
in the form of a stock dividend. The split was effected by issuing our stockholders of record as of September 28, 2007 one additional
share of common stock for every share of common stock held, and one additional share of Class B common stock for every share
of Class B common stock held. The applicable share and per share data for periods prior to fi scal 2007 included herein have been
restated to give effect to this stock split.
The primary factors which historically infl uenced the Company’s profi tability and success have been its growth in the number of
stores and selling square footage, its positive comparable store sales, and its strong gross profi t margins. In the last fi ve years,
the Company has grown from 163 stores as of the end of fi scal 2003 to 487 stores as of the end of fi scal 2008, refl ecting both
organic growth and acquisitions. The Company continues to expand its presence through the opening of new stores although
its rate of growth has decreased from the rate of growth experienced in earlier years refl ecting the current economic conditions,
lack of available real estate, the Company’s larger size, its decision to adopt more manageable store growth goals and the more
recent experience of negative same store sales.
Fiscal 2008 was a diffi cult operating environment for our industry due to numerous external factors weighing on specialty retail
sales. The pressures on the consumer have intensifi ed as unemployment has risen, equity markets have declined, and concerns
about the broader economy have grown. These factors, combined with falling home prices and tight credit markets, suggest
continued pressure on specialty retail consumers in the near term. The Company continues to see the greatest sales weakness
in bigger ticket, discretionary purchases such as golf and exercise equipment, while the lodge business has benefi ted from higher
gun and ammunition sales. However, since the balance of macroeconomic factors that impact the Company’s business remains
unfavorable, the Company will continue to take a cautious approach to ensure that it is well-positioned to capitalize on
opportunities as they develop.
As a result, the Company has implemented numerous strategies to help it manage through these uncertain times, including
remaining focused on reducing costs, conserving cash and managing inventories in line with sales trends. The Company has
trimmed planned fi scal 2009 capital expenditures to approximately $60 million compared to $115 million in fi scal 2008, net of
proceeds from sale leaseback transactions and allowances received from landlords. The Company believes its strong balance
sheet, which includes $74.8 million in cash and cash equivalents, no outstanding borrowings under its $440 million Second
Amended and Restated Credit Agreement (“Credit Agreement”) and an inventory per square foot reduction of 13.9% compared
to fi scal 2007 year end, increases its fi nancial fl exibility and further strengthens its ability to successfully manage through this
economic crisis.
DICK’S SPORTING GOODS, INC. 2008 ANNUAL REPORT 25