Dick's Sporting Goods 2008 Annual Report Download - page 28

The Company expects to continue to generate positive cash fl ow to fund its operations and to take advantage of growth opportunities.
The Company believes its existing Credit Agreement is suffi cient to support its ongoing operations and future plans for fi scal 2009.
In order to monitor the Company’s success, the Company’s senior management monitors certain key performance indicators, including:
Comparable same store sales growth
• – Fiscal 2008 comparable store sales decreased 4.8% compared to a 2.4% increase in fi scal 2007.
The Company believes that its comparable stores sales performance was affected by numerous challenges including a diffi cult
macroeconomic environment, declining consumer confi dence resulting in lower than anticipated customer traffi c and particularly
cautious spending. Although the Company believes it has made noticeable progress in improving its merchandise offerings, the effect
of those improvements have been hampered by the macroeconomic environment. The Company’s current strategy is to target a
general overall trend to return to positive comparable store sales growth; although it recognizes that it continues to be affected by many
of these factors. The Company believes that its ability to realize such a general overall positive trend in comparable store sales will
prove to be a key factor in achieving its targeted levels of earnings per share and continuing its store expansion program to an ultimate
goal of at least 800 locations across the United States.
Positive operating cash fl ow –
•The Company generated $159.8 million of cash fl ow from operations in fi scal 2008 compared with
$262.8 million in fi scal 2007. Although operating cash fl ow decreased in the current fi scal year compared to last year, the Company
believes it will generate positive operating cash fl ow, together with its other sources of liquidity, suffi cient to fund the ongoing
needs of the business. The Company believes that historically, a key strength of its business has been the ability to consistently
generate positive cash fl ow from operations. Strong cash fl ow generation is critical to the future success of the Company, not only
to support the general operating needs of the Company, but also to fund capital expenditures related to new store openings,
relocations, expansions and remodels, costs associated with its corporate headquarters and its distribution centers, costs
associated with continued improvement of information technology tools and costs associated with potential strategic acquisitions
that may arise from time to time. See further discussion of the Company’s cash fl ows in the Liquidity and Capital Resources
section herein.
Quality of merchandise offerings –
•To monitor and maintain 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 receipts and markdowns to reduce cash fl ow requirements and deliver optimal gross margins by improving
merchandise fl ow and establishing appropriate price points to minimize markdowns.
Cost reduction efforts –
•The Company implemented numerous initiatives during fi scal 2008 aimed at maintaining tighter expense
controls. These initiatives included optimizing the Company’s overall advertising costs, costs associated with operating its stores
and distribution centers as well as general and administrative costs. The Company has redirected a portion of its advertising costs
to enhance consumer penetration by focusing on events, frequency, distribution, media types and sponsorships. The Company
has adjusted store staffi ng levels and operating hours to refl ect current and anticipated traffi c levels and has focused on energy
conservation programs to further lower store operating costs. Staffi ng adjustments at the Company’s distribution centers,
including the planned closure of the Conklin return to vendor facility in March 2009, have been made to refl ect anticipated
merchandise receipt volumes. The Company has also implemented various administrative cost reduction initiatives, including a
freeze on corporate staffi ng levels other than those necessitated by our back offi ce consolidation of recently acquired businesses,
efforts to manage compensation related expenses and reducing travel and entertainment expenses.
Capital reduction efforts –
•The Company expects to reduce its capital spending in fi scal 2009 to a projected target of $60 million
compared to $115 million in fi scal 2008. The Company plans to scale back its store expansion program to approximately 20 stores
during fi scal 2009. This level of store expansion is signifi cantly lower than historical levels and is largely driven by the current
economic conditions. The Company has created a capital appropriations committee to approve all capital expenditures in excess
of certain amounts and to group and prioritize all capital projects between required, discretionary and strategic.
Executive Summary
The Company reported a net loss for the year ended January 31, 2009 of $35.1 million, or $0.31 per diluted share, which included
impairment charges of $161.7 million, net of tax, or $1.45 per share, and merger and integration costs of $12.3 million, net of tax,
or $0.11 per share, as compared to net income of $155.0 million and earnings per diluted share of $1.33 in 2007.
Net sales increased 6% to $4,130.1 million in 2008 from $3,888.4 million in 2007 due primarily to new store sales, which include
Chick’s Sporting Goods in fi scal 2008, partially offset by a comparable store sales decrease of 4.8%. Golf Galaxy is included in the
Company’s comparable store sales calculation beginning in the second quarter of 2008 and will be included in the full year
comparable store sales calculation beginning in fi scal 2009.
DICK’S SPORTING GOODS, INC. 2008 ANNUAL REPORT
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