Dick's Suffers from Mild Winter

When one thinks of Dick's Sporting Goods, a plethora of sports-related items come to mind: golf clubs, basketballs, running shoes, and football gear. It would be natural to think that a mild winter would cause sales and profits to spike, as people can continue to engage in outdoor activities. However, as seen in a recent Forbes article, Dick's last quarter's woes during an exceptionally mild American winter have proved otherwise.

While Dick's still earned a net income $111.1 million last quarter, a 27% increase from last year, it was disappointing as previously projected sales goals were not reached. This could be due to less demand for harsh-weather wear such as winter jackets, Under Armour ColdGear tops and leggings, and snow pants. The increase in sales (which were up 6.6% last quarter) can be mostly attributed to the opening of new stores, exemplified by the fact that same-store sales only rose by 0.1%.

This underwhelming quarter performance comes about a a time where the sports retailer is re-tooling their CVP in order to maintain steady success throughout the year. They are now focusing on stocking more sports equipment, shifting from the current product mix with high levels of clothing and other goods. This shift should allow the company to be more resilient through harsh winters and unexpectedly hot or cool summers. The sales and earnings forecasts will also likely become more accurate as sports seasons will follow similar trends year after year irrespective of fluctuating temperature changes.

I believe that Dick's is making the right move by focusing more on sporting equipment instead of other goods. "Sporting Goods" is in the name of the company, and that is where the retailer retains its value over companies that focus more intently on clothing and other items. In order to shake off a quarter of less than stellar performance and poised itself for future growth, it makes sense for Dick's to realign its focus to a fundamental branch of the company's business model.

More information can be found about Dick's Sporting Goods' recent financials via Wolfram Alpha, as well as information about the company's ideals on their website.

Note: Dick's was one of few retailers to be burdened by the mild winter. Many other retailers, ranging from Gap to Nordstrom, experienced an influx of sales this season due to the warmer weather.

"Good things come from Sysco"...Except Stock Returns?

In the food delivery service, there are always going to be difficulties in meeting quarterly goals. For a company like Sysco, there are concerns of inflation, ever-increasing shipping costs, and fluctuating demand for products. A recent article read on Forbe's outlines these issues, along with others, that have led to Sysco's stock price dropping after 2nd quarter profits were down 3% from 2011.

Sysco's primary activity is pretty simple: deliver desired quantities of food to restaurants and other buyers in a timely fashion. However, during the last quarter, Sysco saw both of these tasks become more expensive.

In order to maintain their shipping processes, the food service giant had to invest some $33 million in order to replace their delivery vehicles and facilities. As transportation costs continue to rise (due to oil prices as well as the cost of purchasing and maintaining vehicles), Sysco may have to review the distribution and logistics aspect of its value chain. This review may lead to the hiring of outside delivery services if it would mean more efficient delivery and less cost for the company. It could also lead to the development of a more efficient system within the company:focusing their efforts on the delivery of their good as a primary activity that must take place within the bounds of the company.

In addition to rising transportation costs, there is also the problem of inflation that Sysco must deal with. Inflation has risen 6.3% from the same time last year, making their food products increasingly expensive. It would be advisable for Sysco to continue to maintain negotiations with food suppliers in order to make sure that they are able to provide customers with quality, low-priced ingredients.

The article also points out that Sysco increased their payroll by $58 million. While this does not help their other rising expenses, this does not worry me as a potential investor. This pay increase is not likely to be repeated in the near future, so I don't see this as a recurring expense in coming quarters.

Although I don't personally like Sysco products (I'd prefer my cattle grown on an organic pasture), I don't see the recent expense spikes as a bad sign for the future. They seem to be temporary hikes that will lead to more efficient operations moving forward.

Sources

I found this article at Forbes. More can be read about Sysco at their website. Finally, additional financial information about the company can be found at WolframAlpha.