May 19, 2015
Executives
Anne-Marie Megela - VP of Treasury Services and IR Ed Stack - Chairman and CEO Andre Hawaux - CFO
Analysts
Chris Horvers - JPMorgan Seth Sigman - Credit Suisse Simeon Gutmann - Morgan Stanley Camilo Lyon - Canaccord Genuity Brian Nagel - Oppenheimer Ray Shatterstich - Bank of America Merrill Lynch Paul Swinand - Morningstar Stephen Tanal - Goldman Sachs Eric Tracy - Janney Capital Markets Sam Poser - Sterne Agee CRT Sean McGowan - Needham & Company Scott Ciccarelli - RBC Capital Markets Michael Lasser - UBS Mike Baker - Deutsche Bank
Operator
Good morning and welcome to the Dick's Sporting Goods First Quarter 2015 Earnings Results Conference Call. All participants will be in listen only mode.
[Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.
I would now like to turn the conference over to Anne-Marie Megela, Vice President of Treasury Services and Investor Relations. Please go ahead.
Anne-Marie Megela
Thank you. Good morning and thank you for joining us to discuss our first quarter 2015 financial results.
Please note that a rebroadcast of today's call will be archived on the Investor Relations portion of our Web site located at dicks.com for approximately 30 days. In addition, as outlined in our press release, the dial-in replay will also be available for approximately 30 days.
In order for us to take advantage of the Safe Harbor rules, I would like to remind you that today's discussion includes some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which include but are not limited to our recent expectations concerning our future results. Such statements relate to future events and expectations and involve known and unknown risk and uncertainties.
Our actual results or actions may differ materially from those projected in the forward-looking statements. For a summary of the risk factors that could cause results to differ materially from those expressed in the forward-looking statements, please refer to our periodic reports filed with the SEC including the Company's Annual Report on Form 10-K for the year-ended January 31, 2015.
We disclaim any obligation and do not intend to update these statements except as required by the Securities laws. We’ve also included some non-GAAP financial measures in our discussion today.
Our presentation of the most directly comparable financial measures calculated in accordance with Generally Accepted Accounting Principles and related reconciliations can be found on the Investor Relations portion of our Web site at dicks.com. Leading our call today will be Ed Stack our Chairman and Chief Executive Officer.
Ed will review our first quarter results, key business drivers and outlook. After Ed's comments, Andre Hawaux will provide greater detail regarding our results, capital allocation and guidance for the second quarter and full year 2015.
I will now turn the call over to Ed Stack.
Ed Stack
Thank you, Anne-Marie and thanks to all of you for joining us today. As we announced this morning, we generated first quarter earnings per diluted share of $0.53 achieving the high-end of our guidance of $0.49 to $0.53.
First quarter consolidated same-store sales of 1% was within our guided range of between flat to 2% and on top of 1.5% cap in the first quarter of 2014. As expected, our first quarter results reflect the slower start to the spring selling season as we highlighted in our year-end earnings call.
Since February, the sales trend has notably improved. Dick’s omni-channel comp sales increased 1.8% in the quarter with growth across the hard lines apparel and footwear categories and supported by an increase in both traffic and ticket.
We’re pleased with this performance and are encouraged by the improving trend in our Golf business. While Golf Galaxy comps were down 11% and in line with the big Golf business, both showed significant, sequential comp improvement during the quarter as we weather improved especially in the Northeast.
We’re seeing the golf recovery continue into the second quarter and expect margin improvement year-over-year in the second quarter. We’re also pleased with our Women’s Athletic Apparel.
A significant amount of research has gone into our women strategy which encompasses our product content, merchandise presentation, shopping experience and marketing. During the quarter, we augmented our women fitness apparel selection by launching CALIA by Carrie Underwood.
This is a higher margin, exclusive, private brand offering that serves the athletic female. CALIA is off to a great start and we believe it will become our number three women’s athletic apparel brand by the end of 2016.
On the marketing front, we’ve recently launched our first campaign targeted directly to women. It speaks to all the pressures women are under today, the sacrifices they make for their families and work and how difficult it is to find those few precious moments for themselves.
And finally, new store that will be opening up this year, we’re redeveloping the shopping environment for the athletic female including updated dressing rooms and improved merchandising presentation which effectively pulls the entire women’s concept together. Our focus on e-commerce continues to pay-off with the e-commerce penetration growing to 8.5% of sales in the first quarter of this year, compared to 7% in the first quarter of 2014.
We’ve significantly outpaced the market and have picked up market share in the online space. We moved up to number 70 on the internet retailer top 500 lists and in 2014 and we grew nearly choice the pace of the industry.
Additionally, we continue to make progress toward our goal of moving our Dick’s Sporting goods e-commerce site on to our own exclusive platform by January 2017. This quarter, we completed a key step by successfully re-launching golfgalaxy.com and later this year, we plan to launch Field & Stream transactional sites.
By having two sites on our own platform, we were able to operate and learn from the multi-tenancy dynamics prior to re-launching dicks.com on the same platform. Finally, we’re also excited about our first combo store that is set to open in July in Mobile Alabama, which combined store will place a Dick’s and Field & Stream right next to each other with the interior walls opened up in the middle of the store, so customers can cross shop between chains.
As we move forward with this format, the unfinished camp product will all be in Field & Stream, leaving more room in the Dick’s stores for high margins, faster turning categories such as our women’s, youth and teens sports businesses. We believe this will be a very compelling shopping experience and plan to have four of these combo stores in placed by the end of 2015.
Our balance sheet remained strong from both the level and quality of our inventories well positioned. Dick’s sales growth outpaced inventory growth existing the first quarter with the incremental inventory in our balance sheet supporting the growth of our Field & Stream concept.
We also continue to return capital to shareholders through our quarterly dividends and share repurchases, completing a 150 million in share repurchases in the first quarter. As a result of our performance in the first quarter and our expectations for the remainder of the year, we are raising the low-end of our full year guidance to 312 to 320 per diluted share and maintaining our 2015 guidance on our full year comp sales growth of 1% to 3%.
This guidance contemplates 150 million of share repurchases executed in the first quarter. Before concluding, I’d like to thank our associates for their many contributions to our progress and there is a driving force behind our success.
All of us are grateful to them for their exceptional loyalty and commitment. I’d now like to turn the call over to Andre.
Andre Hawaux
Thank you, Ed and good morning everyone. This morning I will cover our first quarter results, a balance sheet and capital allocation and our performance expectations for the remainder of 2015.
To begin with our first quarter financial results total sales increased 8.8% to approximately $1.6 billion, consolidated omni-channel same-store sales increased 1%, compared to our guidance of flat to 2% same-store sales growth and compared to comps of 1.5% in the first quarter of last year. Dick’s Sporting Goods omni-channel same-store sales increased 1.8% driven by a 1% increase in sales per transaction and increase in traffic of 0.8%.
In the first quarter of 2015, we continue to grow our omni-channel platform. We opened nine new Dick stores, one new field and stream store and we generated 95.4% new store productivity.
And as Ed mentioned, we grew our e-commerce business to 8.5% of sales compared to 7% in the first quarter of 2014. This translates into approximately 32% growth for our e-com business.
We also relocated one Dick store and one Golf Galaxy store during the quarter. Gross profit for the first quarter was $469 million or 29.96% of sales and was down 68 basis points from Q1 of 2014 driven by lower merchandize margin, occupancy deleverage and increase in shipping expenses as a percentage of total sales due to our continued growth in e-commerce.
As you will recall from our last earnings call, we anticipated a lower merchandize margin in the first quarter as a result of planned promotional activity earlier in the season. SG&A expenses in the first quarter was $361 million or 23.05% of sales and on a non-GAAP basis leverage 38 basis points from the first quarter of last year.
This was primarily due to lower administrative expenses as a percentage of sales. Now looking to our balance sheet, we ended the first quarter of 2015 with approximately $81 million of cash and cash equivalents and approximately $51 million in borrowings outstanding on our $500 million revolving credit facility, reflective of our share repurchase activity and capital expenditures during the quarter.
First quarter 2015 net capital expenditures were $25 million or $66 million on a gross basis. Total inventory increased 9.7% for the end of the first quarter of 2015 compared to the end of the first quarter 2014.
As Ed mentioned in the quarter, our inventory for the Dick’s business grew at a slower pace in sales and the balance of the inventory growth is to support our field and stream expansion. Turning now to our capital allocation strategy.
In the first quarter, we paid $17.4 million in dividends and completed share repurchases of $150 million. Since we started our $1 billion authorization at the beginning of 2013, we have repurchased approximate over $605 million of common stock and have approximately $395 million remaining under the authorization.
We believe that investing in our business share repurchases and dividends all remain key elements of our capital allocation strategy. Turning to our outlook for the remainder of fiscal 2015, we are raising the low end of our full year earnings guidance and now expect full year earnings per diluted share of $3.12 to $3.20.
We expect same-store sales increase to increase 1% to 3% consistent with our prior guidance. Gross margin is expected to increase primarily driven by merchandize margin expansion, SG&A is expected to deleverage as we invest in building our brand coupled with the expenses related to bringing e-commerce onto our own platform.
Year-over-year preopening expenses are expected to remain relatively flat as a percentage of sales. As a result of these dynamics, we expect operating margin to increase slightly year-over-year.
Net capital expenditures for the full year 2015 are expected to be approximately $245 million or about $365 million on a gross basis. In 2015, we expect to open approximately 45 new Dick stores, relocate seven new Dick stores – seven Dick stores and relocate one Golf Galaxy store.
We also remain focused on scaling our field and stream concept and expect to open nine new field and stream stores this year. For the second quarter of 2015, we anticipate earnings per diluted share of $0.73 to $0.76.
Consolidated omni-channel same-store sales are expected to be approximately flat to up 2% compared to a 3.2% increase in our comps in the second quarter 2014. Non-GAAP operating margin is expected to remain relatively flat due to the expansion in gross margin offset by SG&A expense deleverage primarily due to our investments we’re making in e-commerce.
Our guidance for the second quarter contemplates meaningful World Cup sales comparisons as well as higher levels of golf clearance in the same period last year. We also expect to open seven new Dick stores and one new field and stream store in the second quarter.
In summary, we continue to successfully grow our business, make the right investments and deliver shareholder value. We are focused on driving store productivity, adding stores a new and underpenetrated markets expanding and in-sourcing our e-commerce business and further developing our Field & Stream specialty concept.
This will conclude our prepared remarks. Thank you for your interest and exporting Dick’s Sporting Goods.
Operator please open the line for questions.
Operator
We will now begin the question-and-answer session. [Operator Instructions] And our first question will come from Chris Horvers of JP Morgan.
Please go ahead.
Christopher Horvers
Thanks, and good morning, everybody. So I wanted to follow up on your comment.
And you said that Dick’s sales growth exceeded inventory growth at the end of the quarter, so inventory growth was up 9.7%. So are you suggesting that you’re comparing 2% to 3% at this point in May?
And then could you reflect that back against the guidance of zero to 2%? Does that suggest that you're just the compares get a lot tougher as the quarter progresses?
Ed Stack
That was the number we’ve talked about the sales grew faster than the inventory is at the end of the first quarter. And our inventory in the Dick’s store was lower than what the sales had gone up in a total basis.
And that the differential was really to support to Field & Stream stores.
Christopher Horvers
I got you. So that was in the end of the quarter?
Ed Stack
Yes, that was with the end of guidance, we exited the quarter.
Christopher Horvers
Okay, understood. And then can you talk about how you think about the golf business, the growth in the golf business longer term?
How you're thinking about what’s the sustainable growth rate is in the store? And how does that compare about how you think about the sustainable comp rate is in the Golf Galaxy long-term?
Ed Stack
Well, I think the Golf business as we said it gets sequentially better in the quarter. And but we hesitate to talk about what’s going on what’s going on in the particular quarter.
But based on the Golf business and the Golf Galaxy business such a small part of our total business, I do think it gives kind of more air time than it need to -- a little more than 3% of our total business on an annual basis. But as we take a look at our Golf business in total for this quarter, I’m not saying that this is how it’s going to play out, because we got very promotional towards the middle of the quarter around Father’s Day.
But our Golf business right now is significantly better relatively down a little bit but close to be in flat margin rates are up a 100 basis points, so this quarter is so far and that’s on a much lower cost structure and how we restructure the Golf business last year. So I think the Golf business is going to continue to be difficult, I don’t think there is a lot of growth in it.
Although, there is some good things happening in the business today and a lot of it’s coming from the PGA Tour some of these young guys that are out there plan, I think they are going to be very helpful for the game. We’ll have to wait and see longer term how it plays out, but some of the things happening out our tour are really, really good for the game.
Christopher Horvers
Understood. And then one last question for Andre.
Merchandise margins were down pretty significantly in the second quarter, I know you expect them to be up. Any directional commentary of how much we can recapture from last year?
Andre Hawaux
Certainly Chris, we’re not going to get into that level of granularity for what are our merchandise margins are going to increase in the second quarter but we do have that baked into our guidance and they will expand in the second quarter of 2015 versus 2014, largely driven by the comments that you made about being promotional last year.
Operator
The next question will come from Seth Sigman of Credit Suisse. Please go ahead.
Seth Sigman
Thanks, good morning, guys. Two questions on the outdoor category.
I guess first, are we deep enough now into the Field & Stream initiative to get a sense of how those stores are going to comp after that first year of opening? And then the second piece of that is just in general, just wondering how the hunting business has performed within the core business.
Has it stabilized, is it returning to growth? What’s the outlook for that category?
Ed Stack
Yes, so I think it’s still too early to talk about Field & Stream comp, we’ve only got two stores that have been opened for a year. Those two stores we are trying to determine what the right penetration in the market is significantly cannibalized, we’ve got the one store that we opened in Pittsburgh, gotten cannibalized by two other stores one about 30 miles south of Pittsburgh and another one about 60 miles to the east and these stores have a broad draw range if you will.
So it’s still early to say. We’re really continue to be excited about what we can do with field and stream and in particular we’re excited about these cannibal stores that we’re doing this year.
We will have a Dick’s and field and stream right next to each other and entry way about halfway through the store punched in, pretty big entry way about 30 some feet the customers who’ll be able to cross shop. We’ve got one store, we’ve got one of these concepts open today in Columbus, Ohio where there’s a Dick store right next to a Field & Stream store.
There’s also a Golf Galaxy store there, but right now today you can’t shop between the two chains. And if you take a look at the volume that we’re getting out of that Dick’s and Field and Stream store and combine these, we think this is going to be a really pretty compelling shopping experience.
We’ll have four of these opened up by the end of this year of which one includes the one in eastern in Ohio that we’re going to punch a hole between the Dick store and the Field & Stream store to allow customers to shop between those two stores which they can’t do today.
Seth Sigman
And the second piece of that was just how the hunting business is performing within the core Dick stores and whether it’s stabilized, it’s been a troubled category over the last year? Has it returned to growth and what’s your expectations?
Ed Stack
It’s gotten much better. It’s not going by leaps and bounce and there’s still a bit of a hangover from all of the product that was bought when it ran up so significantly, but we’re really – it’s stabilized and we’re very happy with that business right now.
We think it will start to grow again relatively flat through the rest of this year and probably start to grow next year.
Seth Sigman
And just one final one, when you think about the store like trends outside of golf and hunting, can you talk about maybe some of the performance apparel categories, footwear, categories that have outperformed over the last year or so? How are those performing today relative to the 1.8% comp reported for the Dick stores?
Ed Stack
They’re performing better than those – than the 1.8 if you take a look at the athletic apparel business, the footwear business, the team support business, we are pretty pleased with what’s going out in those other areas.
Operator
Next question will come from Simeon Gutmann of Morgan Stanley. Please go ahead.
Simeon Gutmann
It's sort of a follow-up to the prior two questions, Ed. So there's a school of thought that if golf and outdoor collectively are less of a drag for -- in the second quarter, if not a zero drag.
And I think you implied that for golf and somewhat in outdoor. And that you have footwear and apparel that are still growing healthily, I don't want to put words in your mouth, but somewhere in the mid single-digits.
We could have seen comps a little bit higher than what you're guiding to in the second quarter. And granted, you mentioned the World Cup compare, maybe that was under appreciated.
But can you comment if any part of that framework is off? Whether the golf and outdoor, you've kind of suggested.
So footwear and apparel, if they're growing in that range, does that mean the World Cup compare is a couple hundred basis points? Why couldn't we see growth better than that zero to 2?
Ed Stack
Well so we’re starting to see that stabilization in golf. As I said I’m not sure that it’s going to – we’re not convincing you that’s going to continue as we got very promotional in the golf business last year in and around Father’s Day to try to drive that inventory out of the system which was pretty successful.
We got rid of a lot of inventory, so we’re going to be under some pressure there. And I think the World Cup was probably under appreciated.
It was a very meaningful part of our comp business with and the World Cup doesn’t happen this year, so we’re not far off from your thoughts on it on how that impacted our comps.
Simeon Gutmann
Okay and then my second question related to I guess the profit dynamics between retail and e-commerce, so the e-commerce business was strong as usual and we’re seeing what a lot of other companies they tend to struggle to maintain their margins or even growth with that type of growth because it implies what they’re doing in the store is not as great and the cost structure doesn’t seem to flex as well. So I’m just curious I mean you have shift from store and I think that’s helping mitigate some of that your SG&A for foot has been managed well.
Are there other things that you’re proactively doing to ensure that margins continue to grow even if the physical store comp is under pressure and as e-commerce continues to grow fast?
Ed Stack
Yes. So on the e-commerce side to be able to move to our own platform and that have GSI platform in the fees associated with GSI will be a significant improvement to our e-commerce business and that’s part of the significant investments we’re making from an e-commerce standpoint two years ago last year this year and we will move this the Dick’s Sporting Goods side to this new platform in 2017.
We were really enthusiastic the re-launch of the Golf Galaxy site is up and successful and we’re please how that’s going we’ll have Field & Stream up later this year and we’ll run the bucks out of this system before we turn on the Dick’s side.
Operator
The next question will come from Camilo Lyon of Canaccord Genuity. Please go ahead.
Camilo Lyon
Have you mentioned regarding the Dick’s inventory been below sales. Is on a function of being wide and you particular category it’s over some of the inventory shipment delays from the West Coast Sports or was that just better or inventory management that you saw there?
Ed Stack
So is really a bit above. So they were some shipments that we’re delayed.
We got almost cut off at the end of the first quarter, but they were still some shipments that we’re delayed. So there is a bit of that, but the vast majority of balance comes through much better inventory controls that we implement to this year versus last year.
Camilo Lyon
Would you be able to share what categories you thought you were underexposed?
Ed Stack
When you say underexposed?
Camilo Lyon
Under represented from the shipments?
Ed Stack
They were some shipments that got cut off from the team sports standpoint baseball, some footwear apparel that was primarily in those categories.
Camilo Lyon
Okay. And then just on CALIA, I thought it was interesting that you mentioned that you thought that this would be the third biggest brand by the end of the year in women's.
Can you just share a little bit as to why you believe that that will be the third brand? Is it because of the value proposition; is it the number of SKUs that you have in the line?
What's going to take a consumer to shop that brand versus some of the other brands that you have in the store?
Ed Stack
Well, we indicated with, it would be number two by the end of 2016, I mean number three by the end of 2016. And where that’s going to come from, it’s just in the performance that we see today.
So the team is done a wonderful job with this brand Carrie Underwood is going to terrific partner in promoting this brand. And the sales trend that we see that we’re on in this category we’ll pretty confident, it will be number three by the end of 2016.
Camilo Lyon
Is that coming at the expense of the lesser SKU brands that you have in the store or some of more premium brands?
Ed Stack
Well, it’s coming across the Board. This is a bit more of premium brand product, it’s different in the marketplace when we’re looking for something different and we provided that with CALIA by Carrie Underwood and this is coming from a number of different places.
Camilo Lyon
Okay. And just my last question, just to clarify on the golf comment.
I think there was an overall expectation that profitability would be much better given that you've done a fair amount of work of managing the inventories last year but it sounds like there was an acceleration in the business from a demand perspective, I just wanted to drill down into that a little bit more. Is that a function of interest in the category would you say, or new products coming to market, or just easier comparisons?
Ed Stack
I think it’s easier comparisons, I think there is some really good things going on in golf right now. Like I said the match play was pretty exciting as was the Players Championship that they had Rory McIlroy this past weekend, I think there is some really good things happening in golf driven by the tour right now.
I think that there has been some pent up demand and its way too early to tell, we normally don’t give any look into a quarter, but we think this idea of what’s going on with golf is so -- seems to be so important to the shareholder base that we thought we give you a little peak into what’s happening right now. I don’t know that it’s going to continue, it’s still early on but we’ve been pleased in the month of April and then into May so far.
Camilo Lyon
And then just following up on that, the last thing on the margin on the comment you made was golf margin rate’s been up a 100 basis points thus far and that I would assume that that margin rate would improve, that would accelerate given that the incremental discounting that happened later in the quarter last year that fair assumptions 100 basis points will be something above that for the category if it stayed on this path?
Ed Stack
We’re not going to get to that level of granularity and guide to what our golf margins would be, but they’re at a – roughly a 100 basis points right now and that we do think that they will be better than they were last year because of less promotional activity this year versus last year.
Operator
The next question will come from Brian Nagel of Oppenheimer. Please go ahead.
Brian Nagel
I was hoping to dig maybe a little bit deeper into the weather impact. Clearly you're not by no means -- are you the only company talking about some of the weather disruptions here in the fiscal Q1.
So maybe a couple questions there. Could we get some color around the performance of stores or regions that were and were not weather impacted, and -- or maybe this, could you, is there a way to estimate what comps in the quarter would have been had the weather been, I don't know if this is even the right word anymore, but normal for the period?
Ed Stack
Nobody knows what normal is from that standpoint anymore. To kind of come on and say what they would have been if the weather had been normal, it’s tough to describe normal.
So I don’t really know how we would do that but where the stores – and we’re very much – we still have a big concentration in the Northeast in the upper Midwest and that’s where the weather was as we all know really the worst. So it was difficult.
Those were the areas that were impacted the most and with that being said, we were still pretty happy that we were able to generate a 1.8% consolidated comp and come into the high end of our guidance at $0.53 under some pretty difficult conditions. Now that being said, we’ve got to continue to go and try to make some of that up in the second quarter, but we’re trying to get realistic to conservative estimate of where we’re going here.
Brian Nagel
That’s fair. We have a – I guess let me ask this.
Is the comp guidance you laid out for the fiscal second quarter indicative of where the business is trending right now?
Ed Stack
We’re not going to get to that -- I thought we kind of got out of the box a little bit, gave you a little peak into golf through the second quarter. We’re not going to get too granular into how we’re going in the second quarter, but right now, we’re very pleased with what’s happening in the second quarter.
Brian Nagel
Okay. Fair enough.
Ed Stack
I know that doesn’t answer your question, Brian.
Brian Nagel
It doesn’t I mean I understand where you’re coming from, that’s fine. And then second shifting gears a bit, Andre you talked about merchandizing margins and the promotional cadence.
And someone asked a question before about margins, so I guess the question I have is, if we look at margins going through the balance of this year and recognize there’s maybe a bit of a choppy comparison in the second quarter given the outsized promotions last year, but how should we think overall about your stance towards promotional cadence now as we think over the [indiscernible]?
Andre Hawaux
As we commented both in our Q4 earnings release Brian and also in the first quarter here that we said we plan for ourselves – we plan to be much more promotional in Q1, we saw some opportunities to move inventory as I mentioned and we did say that on a full year basis we will see our margins expand and you can expect to see that happening in Q2 and our sense is that you’ll see that happening in Q3 and Q4 as well. So margin expansions from the balance of the year on a full year basis, we will make up what we get back in Q1, that’s pretty much what we talked about when we laid out our guidance.
Operator
Our next question will come from Robbie Ohmes of Bank of America Merrill Lynch. Please go ahead.
Ray Shatterstich
Hi, good morning this is Ray Shatterstich on for Robby, thanks for taking the questions. Can you just remind us which category there is promotional activity in 1Q and then sort of what’s the outlook for those categories towards the year-end and yes, that’s the first question.
Ed Stack
The promotional categories in Q1 we wanted to clean up the balance of our winner merchandise, the cold weather merchandise. We wanted to continue to clean up some of the issues in golf.
So the areas that you had anticipated and going forward it will be in Q2, it will be primarily just natural, in the natural promotion. We don’t see anything, we actually see in Q2 being less promotional this year than we were last year.
Ray Shatterstich
Can you give some color around sort of trends in golf ASPs versus units? And then how you think about last year very promotional in the second quarter.
Did you see a traffic lift from all of the promotions you had in golf and then how you think about lapping that?
Ed Stack
The AURs are up as we indicated we thought that would be based on the promotional environment last year, so AURs are up. And last year, the units this year versus last year, when I going to guide to that level of granularity, but we think the AURs will be up and the margins rates will be up.
Ray Shatterstich
And then last question just within for work. Can you talk about trends by category and then are you seeing your allocations improve at all?
Ed Stack
We never talk about trends by categories specifically, but going from -- give you specific numbers, but the basketball business continues to be very good. We expect the cleat business to continue to be good and our allocations have improved, yes.
Operator
Our next question will come from Paul Swinand of Morningstar. Please go ahead.
Paul Swinand
Good morning and usually thank you for all the patience with the question, but I’m going to ask another golf one?
Ed Stack
What a surprise!
Paul Swinand
Everybody's trying to guess what the golf impact on the second quarter is but I get a lot of questions on the longer term and the question is really -- is there any analysis you've done by customer segment or product category. I know you mentioned some of the new players but what can we say or what analysis have you done on the longer term.
Is there a reason to think that this will be a strong category for you. I know in your prepared remarks, you said it was only 3% of the business, but it's still a big traffic driver in Dick's regular stores and e-comm as well.
I think it's a big opportunity. So again, comments on the longer term, and how you think the golf business will develop and still be strong
Ed Stack
So I indicated that the Golf Galaxy business is a little more than 3% of the business on a total standpoint. We think that the longer term golf is going to in okay business, we think that there is other areas that are going to grow at a faster rate than golf.
But we think golf an important part of our business and we’re going to stay in the golf business. We see certain categories of golf accelerating, the golf apparel business is really, is I think a fair amount of growth will come from.
I think the golf equipment business will be stabilized and that will kind of move up or down a little bit one year to the next, but we think that longer term will be a good solid profitable business for us.
Paul Swinand
Any comments by region or maybe by younger players?
Ed Stack
Not really, I mean the areas of the country once you can, once all the areas of the country are up and playing there is not a huge difference.
Paul Swinand
And then one ask a little bit of a similar question on soccer and I know usually in the past you’ve said Olympics or some of these events are not really a big mover and I remember last year, you did say that the World Cup was bigger than you expected. Is soccer is going to grow as a percentage of the business and do you think that’s going to be place where maybe customers shop at Dick’s and there aren’t as many competitive alternatives because you’re such a big team sports player?
Ed Stack
We think soccer is going to continue to grow, we had indicated that the Olympics are usually not a big driver of sales, but World Cup always has best. And this past year, the team did a great job with the World Cup and it exceeded our expectations.
We think soccer is going to continue to grow pretty significantly and we think that we’re positioned in a great place to take a big part of that growth in soccer that’s coming.
Paul Swinand
So just to be clear here, you think it’s outpacing the rest of the team sports business?
Ed Stack
In general overall probably on the long term, this year it’ll be a little bit more difficult because of the World Cup, but if you take it on balance throughout the next couple of years, yes I think it will outpace the majority of the team sports businesses.
Operator
Our next question will come from Stephen Tanal of Goldman Sachs. Please go ahead.
Stephen Tanal
I sort of have to do it, but I’m really curious if weather affected the golf business specifically or if you would say that was a factor in the results for Galaxy and for Dick’s core golf?
Ed Stack
We try not to hide too much behind the weather, but as I said, we’re really – we’re still a high concentration and important concentration of our business is in the Northeast and the upper Midwest. There’s a fair amount of Golf Galaxy stores out there and yes with 7.5 feet of snow sitting up in New England, it impacted the golf business.
The courses were late opening up and it had an impact and that might be one reason why some of the golf business is doing better than it is right now than it had been, because of the pent up demand early on.
Stephen Tanal
In terms of Field & Stream, you referenced cannibalization. And clearly some of the stores have opened near one another.
I'm sort of curious if you could fill us in terms of how you're thinking about the regional growth strategy for that business, and how you're planning really where you're going to open the stores. Like what enters the thought process, and is there any focus regionally, if you will?
Ed Stack
Well we take a look as you would expect, we take a look at where the hunters are and where the fishermen are. We take a look at the number of demographics, hunting licenses sold, hunting participation same with fishing.
We’ve got a lot of big stores. We know where the better hunt, fish categories are.
So that’s how we’re taking a look at this. The majority of them will be in the Eastern part of United States to begin with and then Eastern and a bit more in the kind of Carolinas in North and as I said we’re really excited about these combo stores where we can put a Dick’s and the Field & Stream right next to each other and reformat the Dick’s store to have some of the higher margin, high returning items expanded in there that we would like to be able to do and have all the hunt, fish camp product in Field & Stream still allow people to cross shop, we think it’s going to be a pretty compelling experience.
Some of the customers that we have talked with and the research that we’ve done on this they love the idea and we’ll get a sense in the next few months on how this combo store does.
Stephen Tanal
And then lastly for Andre, in terms of the gross margin drivers, are you able to quantify that for us in the quarter, Merch margin would be helpful specifically.
Andre Hawaux
Yes, merch in Q1 – I’ll give you the merch margin piece and I won’t go into a lot of our details on all the other elements I did mentioned that we deleveraged occupancy and also the increase in our e-commerce sales drove some of those fees there shipping expense, but the merch margin was down 56 basis points.
Operator
And our next question will come from Eric Tracy of Janney Capital Markets. Please go ahead.
Eric Tracy
Actually, Andre, real quick if I could follow up on that gross margin. Specifically to the occupancy deleverage and the expenses going towards the e-comm in housing.
How should we just think about that order of magnitude going forward and then the timing of when potentially could inflect on that, and sort of what is the omni-channel comp needed to ultimately leverage that?
Andre Hawaux
So let me take a step back, there were a couple of elements in that question. One is if you take a look at when we think about what goes the total sales need to be to leverage occupancy, talk to our investors about that number being approximately on a full year basis right around that 10% range, so that’s kind of what we look for in terms of total sales to leverage occupancy.
In terms of the e-commerce discussion, we have really we’ve really kind of never have that specific discussion other than to say that with the golf we have and profitability that business is significantly better for us as we in-source the business. So we have talked about the investments we were making in our Analyst Meeting this year, which is about $8.5 million in that in-sourcing project.
So those are the details that so we’ve led to our investors.
Eric Tracy
And then add a little bit bigger picture strategically under the e-comm doing extremely well in terms of building out. Could you speak to how you feel like you’re working with the brands to differentiate the products, sort of across channels are there some exclusives that you’re getting ultimately this question kind of speaks to potential of cannibalization of the brick-and-mortar and it certainly seems like very comfortable continuing to grow the door base.
But any comments on what the ultimate mix of e-comm should be relative to brick-and-mortar?
Ed Stack
No, I think everybody still trying to figure out what that appropriate mix is. Our e-commerce business continues to grow at a pretty rapid rate.
We’ve talked about they were opening stores and markets where we have a little penetration or no penetration. We’ve talked about before and San Francisco we’ve got roughly two stores in the bay area, there is a lot of places in San Francisco in Houston and some other places with customers can shop Dick’s Sporting Goods store we don’t have one.
So those are the places that we are going to open up Dick’s stores. From an e-comp standpoint, we continue to work very closely with our vendors, they’re trying to help us also drive our e-commerce business whether that’s from broadening the assortment online in the shipping directly to the consumer on a direct ship basis from the vendor or working with us on some short run opportunity, short run close out, short run promotions that there is not enough product to fill all of the Dick’s stores, but we can put it online and beyond of it in three, four days or a week or so.
So we continue to work with the brands, we continue to invest heavily from an e-commerce standpoint and it continues to pay off as you could see sales want up to 8.5% in the first quarter and last year, our e-commerce business grew a double the rate of the industry. And we’ve got relatively, in our category we’ve got a pretty robust e-commerce business.
Andre Hawaux
And I just want to add what add mentioned is I think one of the metrics we’ve ask our investors to hold us to a very high standards for opening up new brick-and-mortar and our -- that 95.4% was pretty indicative of the fact that we are holding ourselves to a high standard when we open up new stores, new brick-and-mortar because of the e-commerce items that we see in the marketplace.
Eric Tracy
Fair enough and I am going to switch gears lastly back to the women’s business, CALIA clearly believing there is a lot of momentum behind that. Is that in any way also speak to -- you're got the year plus of building out the shop in shops, going after the women's category with some of the more premium brands.
Is that in any way a statement on feeling like that the product that these brands have in the marketplace maybe isn't resonating with women, or is there something else on the marketing side that needs to take place? Just a little bit more color as to what the learnings are on that front.
Ed Stack
I wouldn’t take that the thing that with the brands, I think the brands have got terrific product to the marketplace, the brands are doing extremely well. I think this is just additive that something new in the marketplace and this marketplace continues to grow.
So I would not read anything into the brands performance, our performance with the brands has been terrific in this category. And we expect it to continue that way.
Operator
Our next question will come from Sam Poser of Sterne Agee CRT. Please go ahead.
Sam Poser
Thank you for taking my question, most of that have been answered. I guess just more of a general thought question here.
When you look you’re the build out of Field & Stream, the increased in the e-commerce business. Is there a natural moment from hard bonds to soft bonds in the Dick’s Sporting Goods store and that’s really going to be the longer term story of the margins from a particular perspective there?
Ed Stack
Well Sam, yes. So we talked about this combo stores, we’re taking out hunt fish camp part of the combo store side of Dick’s and having that exclusively in Field & Stream making room for the higher margin categories, high returning categories such as women’s, kids and the team sports areas so and we’ve always talked about that one of the components of our margin rate expansion would come from a change in mix more to the soft line side of the business.
Sam Poser
And I mean and where are – excluding the combo stores, where are we in that evolution?
Ed Stack
Well we’ve – as we did last year, we took some space out of the fitness area and the golf area and devoted that to these areas we talked about and had great results. So we still continue to do that, we are looking to where we can modify space and move more of the higher margin products in there, so we’re still early on in this and as Field & Stream develops we will continue to kind of make this move and try to drive more of that outdoor hunt fish camp business to Field & Stream and make some more space for these higher margin, high returning items in Dick.
Sam Poser
One last thing, for instance, if you are in a city where you don’t have a joint store but one nearby, would you consider pulling hunt camp fish out of Dick’s even though it’s not in an adjacent store?
Ed Stack
That’s a conversation we’re having. We’ve come to no conclusion on that yet.
Operator
The next question will come from Sean McGowan of Needham & Company. Please go ahead.
Sean McGowan
Couple of questions about timing. Ed, can you give some sense on whether or not that you expect the timing of store openings in the second half of this year to be comparable to last year with vast majority being in the third quarter?
And Andre in terms of share repurchase a lot more done in the first quarter this year than last year, should you expect – should we expect the full year total share repurchases to be comparable to last year do you think?
Andre Hawaux
So a couple of things there. You can expect the store openings to be skewed towards that third quarter, so we’re going to be about the same roughly about the same in the second quarter and the bulk of our store openings on the Dick’s side those 45 Dick stores would be in the third quarter and that’s pretty much the way we’ve traditionally done that.
With respect to what we told our investors today is the guidance that we have right now contemplates the $150 million of share buyback that we’ve done that’s what is incorporated in our guidance and we may do a little bit more this year we may not right now the guidance that we provided you includes that 150 and no more.
Operator
The next question will come from Scott Ciccarelli of RBC Capital Markets. Please go ahead.
Scott Ciccarelli
So the e-commerce business continued to grow pretty quickly. We've kind of established that but as it matures, can you update us today in terms of how the product mix is different in the e-commerce channel versus the mix at the store level and specifically, how would the profitability trends up if you didn't have those extra expenses related to the GSI relationship.
Ed Stack
Well the mix is a little bit different online than it is in the stores because we don’t sell firearms, we don’t sell ammunition, we don’t sell some of those categories online. And it would be – we are not going to give exactly what the difference would be, but it would be meaningfully more profitable without the GSI fees and that’s why we’re moving in 2017 to move everything onto our own platform and the accretion is pretty meaningful going forward.
Scott Ciccarelli
I guess my question is if we – even without the GSI relationship, I think Ed mentioned before you expect the e-commerce business or channel to be more profitable than the retail level. And can you just help us understand how that’s going to be possible with the extra shipping cost that are involved there?
Ed Stack
Well I didn’t say that it would be more profitable even with the GSI, so we have gotten to a point where it was relatively the same. So the profitability was the same but as we move forward through the year if we exceed our sales budget the profitability flow through from brick and mortar standpoint is better than the profitability flow through from an e-commerce standpoint because the GSI fees are linear there as a percent of sales so it’s difficult to leverage those costs.
Basically we pay a fee, a percentage fee on a $50 pair of shoes we pay the same percent fee at a $100 per share, so you can’t leverage those costs. But this is getting to be much more profitable, we think as we eliminate those fees from GSI to more business scale and for leverage some of our fixed costs and turn some of our variable costs into fixed costs which we can then leverage, we feel that it’s going to continue to become, it will be more profitable than the stores and all few years down the road.
Operator
Our next question will come from Michael Lasser of UBS. Please go ahead.
Michael Lasser
And last quarter you were helping us understand could go right in the first quarter and what could wrong I think it help to frame the whole year in maybe at the start in the quarter and how much things got better. Can you help provides the more perspective for the second quarter especially relative to the margin, given the widespread expectation is that a lot of the 100 basis points margin degradation that you saw in the second quarter of last year would come back as the bulk of that was related to the clearance activity associated with golf?
Ed Stack
We’re not going to give you the guidance exactly how many work margins rates going to be, but we expected to be meaningfully higher than it was last year, because it will be a lot less promotional activity. One of the headwinds from a margin rate standpoint that we have the anniversary is the World Cup.
So the World Cup as we have said was a meaningful part of our business and the margin rates on the World Cup were well above the company average.
Michael Lasser
Well with that being said, that would suggest that the golf activity clearance was probably well in excess of a 100 basis point drag. And so is that something that's going to be permanently in the business now?
Ed Stack
No, the drag from a golf standpoint margin rates?
Michael Lasser
Yes.
Ed Stack
No, the golf margin rates will be higher this year than they were last year.
Michael Lasser
Okay. And then I guess longer term on the margin, we’ve seen a gross margin in overall gross margin down for almost two years in a row now.
Is this just kind of a cost for doing business as you shift more volume online and move some traffic out of your store? So occupancy is going to be this consistent drag or is there something it’s from quarter-to-quarter in the merch margin that can help stabilize that line item?
Andre Hawaux
Well, I do think that you’ve point on occupancy deleverage, I mean that does in fact we have to see our overall as I mentioned our overall sales increased which up around that 10%. So that’s going to move around quarter-to-quarter, there have been some quarter over the last several years what we have actually positively leverage occupancy, but we haven’t been consistent with that and that’s one of the things that we talked about at our Analyst Meeting as we’ve got to get that brick-and-mortar comps a little bit more consistent as we move forward to be able to leverage that.
But you are seeing some of the dynamics with our outsize growth and e-commerce where some of those e-commerce costs right are negatively, they are not being leveraged as we continue to grow that business.
Ed Stack
But on the margin rates guidance, on the flip side of that, we feel that there is a margin rate expansion, merch margin rate expansion due to the mix of products that we’re selling and also better inventory control. We had some inventory issues that we took some markdown that we needed to due to get rate of inventory last year and we feel that the inventory is in much better shape this year than it was last year.
Our clearance inventory is down at the end of the first quarter again versus the end of the first quarter last year. So the inventories in really very good shape and part of the margin rate expansion will come from mitigating markdown pressure in the backend.
Michael Lasser
Okay. And then one last one, just broadly speaking, last year, your comps were above 1% for each quarter throughout the year.
And I think it was widely viewed that last year was characterized as just a tough year for golf and hunting. And yet this year the comp was below what you saw in any given quarter last year.
So would you attribute that to just overall continued softness in golf, was the environment, the consumer spending environment, more difficult this year than it was at any given point last year? Maybe you could reflect on it from that perspective?
Ed Stack
You’re talking about the…
Michael Lasser
Yes the overall comp in the first quarter compared to the overall comp of the last four quarters.
Ed Stack
Don’t underestimate the effect that as I said seven feet of snow up in New England and New York and the weather in the upper Midwest had especially in the month of February and into March. We had a lot of stores that were just closed for days during that timeframe and it got sequentially much better and it’s kind of hard to take one quarter and say that that’s an issue.
We saw 1.8 on a consolidated comp basis on the Dick side was pretty good under the conditions that we operated in the first quarter.
Operator
And our final question will come from Mike Baker of Deutsche Bank. Please go ahead.
Mike Baker
So a year ago on this call you told us that golf and the hunt business was 30% of sales, can you tell us where you are now as you’ve got downsized and if you could break it out between golf and hunt that would be helpful? Thanks.
Ed Stack
Yes, so we’re not going to get to that level of granularity but I would tell you that the golf and hunt business is less than 30% of the business today just based on the trend that those categories have and the growth trends we’ve got in other areas of business, so they are less meaningful this year than they were last year, but to kind of combine those and lay those out we’re not going to do that.
Mike Baker
Okay. And also in the past, you've told us what the drag is from golf and hunt, or more I guess actually the growth in apparel and footwear, are you going to give us those numbers going forward?
Andre Hawaux
Yes Michael let me give you that right now, if you take a look at our store last year we didn’t want to but we got into this habit of telling you what the business was going to – was growing ex the hunt business and ex the golf business because of the tremendous headwinds in those businesses, so I’m going to use the same that same factor for this year. If you exclude those two businesses for both the golf business and the hunt business, our comps that 1.8 comp at Dick’s would’ve been at 3.8 comp at Dick’s.
Mike Baker
And then I’ll squeeze in one more just clarification, Andre. You said you expect second, third and fourth quarter gross margin or you said margins to be up to make up what you lost in the first quarter.
I assume you mean gross margin, not operating margin. Is that right?
Andre Hawaux
I meant yes I meant merchandize margin the question that was asked was around the comparison on the merch margin.
Operator
And ladies and gentlemen, this will conclude our question and answer session. I would like to hand the conference back over to Ed Stack for his closing remarks.
Ed Stack
I’d like to thank everyone for joining us for our quarterly call and we look forward to talking to everyone at the next call. Thank you.
Operator
Ladies and gentlemen, this concludes today’s conference call. We thank you for attending.
You may now disconnect your lines.