DICK'S SPORTING GOODS, INC. FORWARD-LOOKING STATEMENTS
We caution that any forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) contained in this Quarterly Report on Form 10-Q or made by our management involve risks and uncertainties and are subject to change based on various important factors, many of which may be beyond our control. Accordingly, our future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. Investors should not place undue reliance on forward-looking statements as a prediction of actual results. These statements can be identified as those that may predict, forecast, indicate or imply future results, performance or advancements and by forward-looking words such as "believe", "anticipate", "expect", "estimate", "predict", "intend", "plan", "project", "goal", "will", "will be", "will continue", "will result", "could", "may", "might" or any variations of such words or other words with similar meanings. Forward-looking statements address, among other things, our belief that many consumers have made lasting lifestyle changes with an increased focus on health and fitness, sports, and outdoor activities, leading to structurally higher sales; current macroeconomic conditions, including the uncertain impact of inflation and the economic slowdown; supply chain disruptions and labor market challenges, which are resulting in rising container and transportation costs; the normalization of sales in certain categories, including fitness and outdoor equipment; the adequacy of our cash flow; our ability to control expenses; plans to leverage our real estate portfolio to capitalize on future opportunities in the near and intermediate term as our existing leases come up for renewal and our plans to add new retail concepts and experiential stores; our intention to repay the principal outstanding amounts of the Convertible Senior Notes using excess cash, free cash flow or borrowings on our unsecured$1.6 billion revolving credit facility (the "Credit Facility"); our belief that the Inflation Reduction Act will not impact our financial results, including our annual estimated effective tax rate and liquidity; projections of our future profitability; projected range of capital expenditures and our plans to make improvements within our existing stores and new store development and to continue investing in technology to enhance our store fulfillment and in-store pickup capabilities; anticipated store openings and relocations; plans to return capital to stockholders through dividends and in share repurchases; and our future results of operations and financial condition. The following factors, among others, in some cases have affected, and in the future, could affect our financial performance and actual results, and could cause actual results for fiscal 2022 and beyond to differ materially from those expressed or implied in any forward-looking statements included in this Quarterly Report on Form 10-Q or otherwise made by our management: ?Challenging macroeconomic conditions, including inflationary pressures, an economic slowdown, elevated fuel prices and supply chain constraints, due to COVID-19, the conflict inUkraine or otherwise; decreases in consumer demand for our products; and the effectiveness of measures to mitigate such impact on our business and consumer spending; ?The dependence of our business on consumer discretionary spending, the impact of a decrease in discretionary spending due to inflation or otherwise on our business, and our ability to predict or effectively react to changes in consumer demand or shopping patterns;
?Intense competition in the sporting goods industry and in retail, including competition for talent and the level of competitive promotional activity;
?Increasing product costs, which could be caused by numerous reasons including foreign trade issues, currency exchange rate fluctuations, increasing prices for materials due to inflation or other reasons, supply chain delays, associated costs and constraints, or foreign political instability;
?Disruptions to our eCommerce platform, including interruptions, delays or downtime caused by high volumes of users or transactions, deficiencies in design or implementation, or platform enhancements;
?Vendors continuing to sell or increasingly selling their products directly to customers or through broadened or alternative distribution channels;
?Negative reactions from our customers, shareholders or vendors regarding changes to our policies or positions related to social and political issues;
?That our strategic plans and initiatives may initially result in a negative impact on our financial results, or that such plans and initiatives may not achieve the desired results within the anticipated time frame or at all;
•The impact of an increase to corporate tax rates or imposition of an excise tax with respect to share repurchase activity;
•Our ability to optimize our store lease portfolio and our distribution and fulfillment network;
?Unauthorized disclosure of sensitive or confidential customer information;
?Risks associated with our vertical brand offerings, including product liability and product recalls, specialty concept stores, and GameChanger;
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Table of Contents?Disruptions or other problems with our information systems;
?Risks and costs relating to changing laws and regulations affecting our business, including consumer products; firearms and ammunition; tax, foreign trade; labor; data protection; privacy; and environmental, social, and governance issues;
?Litigation risks for which we may not have sufficient insurance or other coverage;
?Our ability to secure and protect our trademarks and other intellectual property and defend claims of intellectual property infringement;
?Our ability to protect the reputation of our Company and our brands;
?Our ability to attract, train, engage and retain qualified leaders and
associates due to current labor challenges or otherwise or the loss of
?The impact of wage increases on our financial results, including those related to supply chain disruptions and labor challenges;
?Disruptions at our supply chain facilities or customer support center;
?Poor performance of professional sports teams, professional team lockouts or strikes, retirement, serious injury or scandal involving key athletes, and disruptions to or cancellations of major sporting events or organized youth and adult sports programs; ?Weather-related disruptions, unusual seasonal weather patterns and the overall seasonality of our business, as well as the current geographic concentration ofDICK'S Sporting Goods stores;
?Our pursuit of strategic investments or acquisitions, including the timing and costs of such investments and acquisitions;
?We are controlled by our Executive Chairman and his relatives, whose interests may differ from those of our other stockholders;
?Risks related to our indebtedness, including the senior notes due 2032 (the "2032 Notes") and senior notes due 2052 (the "2052 Notes" and together with the 2032 Notes, the "Senior Notes"), the Convertible Senior Notes and the related bond hedge and warrant transactions;
?Our current anti-takeover provisions, which could prevent or delay a change in control of the Company; and
?The issuance of special or quarterly cash dividends and our repurchase activity, if any, pursuant to our share repurchase programs.
The foregoing and additional risk factors are described in more detail in Item 1A. "Risk Factors" of this Quarterly Report and other reports or filings filed or furnished by us with theSecurities and Exchange Commission , including our Annual Report on Form 10-K for the year endedJanuary 29, 2022 , filed onMarch 23, 2022 (our "2021 Annual Report"). In addition, we operate in a highly competitive and rapidly changing environment; therefore, new risk factors can arise, and it is not possible for management to predict all such risk factors, nor to assess the impact of all such risk factors on our business or the extent to which any individual risk factor, or combination of risk factors, may cause results to differ materially from those contained in any forward-looking statement. The forward-looking statements included in this Quarterly Report on Form 10-Q are made as of the date hereof. We do not assume any obligation and do not intend to update or revise any forward-looking statements whether as a result of new information, future developments or otherwise except as may be required by securities laws.
OVERVIEW
We are a leading omni-channel sporting goods retailer offering an extensive assortment of authentic, high-quality sports equipment, apparel, footwear and accessories. In addition toDICK'S Sporting Goods stores, we own and operate Golf Galaxy,Field & Stream , Public Lands and Going Going Gone! specialty concept stores and offer our products both online and through our mobile apps. We also own and operateDICK'S House of Sport andGolf Galaxy Performance Center , as well as GameChanger, a youth sports mobile app for scheduling, communications, live scorekeeping and video streaming. When used in this Quarterly Report on Form 10-Q, unless the context otherwise requires or specifies, any reference to "year" is to our fiscal year. 15 -------------------------------------------------------------------------------- Table of Contents Over the past five years, we have transformed our business to drive sustainable growth in sales and profitability. During this time, we meaningfully improved our merchandise assortment through our strong relationships with our key brand partners, which provided access to highly differentiated product, and from our vertical brands. We also enhanced our store selling culture and service model and incorporated additional experiential elements and technology into our stores to engage our athletes. Finally, we invested in technology and data science to improve our pricing strategy, digital marketing and personalization capabilities. Consumers have also made lasting lifestyle changes in recent years, increasing their focus on health and fitness, sports and outdoor activities. As a result of our core strategies, foundational improvements and favorable consumer trends, net sales increased 40.5% in fiscal 2021 compared to fiscal 2019, while merchandise margins increased 626 basis points as a percentage of net sales in the same period-to-period comparison. Our profitability is primarily influenced by growth in comparable store sales, the strength of merchandise margins derived from our omni-channel platform and our ability to manage operating expenses. With our structurally higher sales, expanded merchandise margins, and operating expense leverage, our pre-tax income as a percentage of net sales grew from 4.7% in fiscal 2019 to 16.2% in fiscal 2021. Macroeconomic Outlook The macroeconomic environment in which we operate remains uncertain as a result of numerous factors, including inflationary pressures and economic slowdown. In addition, the continued disruption of supply chains, including factory closures and port congestion, has resulted in apparel overages from late arriving inventory and elevated container and transportation costs which began moderating during the current quarter. Although we have successfully managed these issues thus far, the continued effect of these challenges may impact longer-term consumer discretionary spending behavior and the promotional landscape in which we operate, including the Company's actions to manage its apparel overage. Our current year outlook contemplates this uncertainty. OnAugust 16, 2022 , theU.S. government enacted the Inflation Reduction Act of 2022 that includes, among other provisions, changes to theU.S. corporate income tax system, including implementing a 15% minimum tax on adjusted financial statement income for certain large corporations, a 1% excise tax on net stock repurchases afterDecember 31, 2022 , and tax incentives to promote alternative sources of energy. We do not expect the Inflation Reduction Act to have a material impact on our financial results, including on our annual estimated effective tax rate or on our liquidity.
How We Evaluate Our Operations
Senior management focuses on certain key indicators to monitor our performance, including:
?Comparable store sales performance - Our management considers comparable store
sales, which includes online sales, to be an important indicator of our current
performance. Comparable store sales results are important to leverage our costs,
which include occupancy costs, store payroll and other store expenses.
Comparable store sales also have a direct impact on our total net sales, net
income, cash and working capital. A store is included in the comparable store
sales calculation during the same fiscal period that it commences its 14th full
month of operations. Relocated stores are included in the comparable store sales
calculation from the open date of the original location. Stores that were
permanently closed during the applicable period have been excluded from
comparable store sales results. See further discussion of our comparable store
sales in the "Results of Operations and Other Selected Data" section herein.
?Earnings before taxes and the related operating margin - Our management views
operating margin and earnings before taxes as key indicators of our performance.
The key drivers of earnings before taxes are comparable store sales, gross
profit, and our ability to control selling, general and administrative expenses.
?Cash flows from operating activities - Cash flow generation supports our
general liquidity needs and funds capital expenditures for our omni-channel
platform, which include investments in new and existing stores and our eCommerce
channel, distribution and administrative facilities, continuous improvements to
information technology tools, potential strategic acquisitions or investments
that may arise from time-to-time and stockholder return initiatives, including
cash dividends and share repurchases. We typically experience lower operating
cash flows in our third fiscal quarter due to increased inventory purchases in
advance of the holiday selling season, which typically normalizes in our fourth
fiscal quarter. See further discussion of our cash flows in the "Liquidity and
Capital Resources" section herein.
?Quality of merchandise offerings - To measure effectiveness of our merchandise
offerings, we monitor sell-throughs, inventory turns, gross margins and markdown
rates at the department and style level. This analysis helps us manage inventory
levels to reduce working capital requirements and deliver optimal gross margins
by improving merchandise flow and establishing appropriate price points to
minimize markdowns.
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Table of Contents?Store productivity - To assess store-level performance, we monitor various indicators, including new store productivity, sales per square foot, store operating contribution margin and store cash flow.
CRITICAL ACCOUNTING POLICIES
As discussed in Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Company's 2021 Annual Report, we consider our policies on inventory valuation, business development allowances, goodwill and intangible assets, impairment of long-lived assets, self-insurance reserves and stock-based compensation to be the most critical in understanding the judgments that are involved in preparing our consolidated financial statements.
RESULTS OF OPERATIONS AND OTHER SELECTED DATA
Executive Summary
•Net sales increased 7.7% to$2.96 billion in the current quarter from$2.75 billion during the third quarter of 2021, which included an increase in comparable store sales of 6.5% following a 12.8% increase in the same period last year. When compared to the third quarter of 2019, net sales increased 50.8%. •In the current quarter, we reported net income of$228.5 million , or$2.45 per diluted share, compared to$316.5 million , or$2.78 per diluted share, during the third quarter of 2021. •Earnings per diluted share for the current quarter excluded$8.5 million of interest expense, net of tax, and included 8.8 million diluted shares related to the Convertible Senior Notes, which together, decreased earnings per diluted share by$0.15 . In fiscal 2022, earnings per diluted share reflects the adoption of ASU 2020-06, which requires the assumption that our Convertible Senior Notes will be settled in shares of our common stock. Due to our intent to settle the principal of the Convertible Senior Notes in cash and the shares we expect to receive from our convertible bond hedge, which is designed to offset dilution, we do not expect the Convertible Senior Notes will have a dilutive effect upon conversion. •Net income in the third quarter of 2021 included$5.7 million of non-cash interest expense, net of tax, and earnings per diluted share included 12.8 million shares related to the Convertible Senior Notes that are designed to be offset at conversion by our bond hedge, which together decreased earnings per diluted share by$0.41 in the prior year quarter.
•During the third quarter of 2022, we:
•Exchanged$220.6 million aggregate principal amount of our 3.25% Convertible Senior Notes and unwound the corresponding portion of the convertible bond hedge and warrants for$220.6 million of cash and 4.3 million shares of our common stock; and
•Declared and paid a quarterly cash dividend in the amount of
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•The following table summarizes store openings and permanent store closures for
the periods indicated:
Fiscal 2022 Fiscal 2021
DICK'S Sporting Specialty Concept Specialty Concept
Goods (1) Stores (2) Total (3) DICK'S Sporting Goods Stores (2) Total (3)
Beginning stores 730 131 861 728 126 854
Q1 New stores - 1 1 2 - 2
Q2 New stores 1 1 2 1 1 2
Q3 New stores 3 6 9 3 6 9
Closed stores 2 3 5 - 1 1
Ending stores 732 136 868 734 132 866
Relocated stores 3 1 4 9 - 9
(1)As of
(2)Includes our Golf Galaxy,Field & Stream , Public Lands and Going Going Gone! stores. In some markets, we operateDICK'S Sporting Goods stores adjacent to our specialty concept stores on the same property with a pass-through for our athletes. We refer to this format as a "combo store" and include combo store openings within both theDICK'S Sporting Goods and specialty concept store reconciliations, as applicable. As ofOctober 29, 2022 , the Company operated 25 combo stores.
(3)Excludes temporary Warehouse Sale store locations, of which the Company
operated 42 and 17 as of
The following tables present selected information from the unaudited
Consolidated Statements of Income as a percentage of net sales and the changes
in the percentage of net sales from the comparable 2021 period, and other data,
and are provided to facilitate a further understanding of our business. These
tables should be read in conjunction with Item 2. "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the accompanying
unaudited Consolidated Financial Statements and related notes thereto.
Basis Point Change
in Percentage of
13 Weeks Ended Net Sales from
October 29, 2022 Prior Year
(A) October 30, 2021 2021-2022 (A)
Net sales (1) 100.00 % 100.00 % N/A
Cost of goods sold, including occupancy and distribution costs (2)
65.78 61.55 423
Gross profit 34.22 38.45 (423)
Selling, general and administrative expenses (3) 22.97 23.00 (3)
Pre-opening expenses (4) 0.24 0.17 7
Income from operations 11.00 15.28 (428)
Interest expense 0.88 0.50 38
Other income (0.16) (0.06) (10)
Income before income taxes 10.28 14.84 (456)
Provision for income taxes 2.56 3.32 (76)
Net income 7.72 % 11.52 % (380)
Other Data:
Comparable store sales increase (5) 6.5 % 12.8 %
Number of stores at end of period (6) 868 866
Total square feet at end of period (6) 42,741,036 42,672,070
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Basis Point Change
in Percentage of
39 Weeks Ended Net Sales from
October 29, 2022 Prior Year
(A) October 30, 2021 2021-2022 (A)
Net sales (1) 100.00 % 100.00 % N/A
Cost of goods sold, including occupancy and distribution costs (2)
64.45 61.39 306
Gross profit 35.55 38.61 (306)
Selling, general and administrative expenses (3) 22.26 21.03 123
Pre-opening expenses (4) 0.16 0.14 2
Income from operations 13.14 17.44 (430)
Interest expense 0.88 0.46 42
Other expense (income) 0.13 (0.18) 31
Income before income taxes 12.12 17.16 (504)
Provision for income taxes 2.92 4.03 (111)
Net income 9.21 % 13.13 % (392)
Other Data:
Comparable store sales (decrease) increase (5) (2.6 %) 37.5 %
Number of stores at end of period (6) 868 866
Total square feet at end of period (6) 42,741,036 42,672,070
(A) Column does not add due to rounding.
(1)Revenue from retail sales is recognized at the point of sale, net of sales tax. Revenue from eCommerce sales, including vendor-direct sales arrangements, is recognized upon shipment of merchandise. A provision for anticipated merchandise returns is provided through a reduction of sales and cost of goods sold in the period that the related sales are recorded. Revenue from gift cards and returned merchandise credits (collectively the "cards") is deferred and recognized upon the redemption of the cards. The cards have no expiration date. (2)Cost of goods sold includes: the cost of merchandise (inclusive of vendor allowances, inventory shrinkage and inventory write-downs for the lower of cost or net realizable value); freight; distribution; shipping; and store occupancy costs. We define merchandise margin as net sales less the cost of merchandise sold. Store occupancy costs include rent, common area maintenance charges, real estate and other asset-based taxes, general maintenance, utilities, depreciation and certain insurance expenses. (3)Selling, general and administrative expenses include store and field support payroll and fringe benefits, advertising, bank card charges, operating costs associated with our internal eCommerce platform, information systems, marketing, legal, accounting, other store expenses and all expenses associated with operating our customer support center. (4)Pre-opening expenses, which consist primarily of rent, marketing, payroll and recruiting costs, are expensed as incurred. Rent is recognized within pre-opening expense from the date we take possession of a site through the date the store opens. (5)Beginning in fiscal 2022, we revised our method for determining comparable store sales calculations to include relocated store locations. Prior year information is revised to reflect this change for comparability purposes. See additional details as furnished in Exhibit 99.2 of the Current Report on Form 8-K, filed with theSecurities and Exchange Commission onMarch 8, 2022 .
(6)Includes our
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13 Weeks Ended
Net Sales Net sales increased approximately 7.7% to$2,958.9 million in the current quarter from$2,747.6 million in the quarter endedOctober 30, 2021 , due primarily to a$173.1 million , or 6.5%, increase in comparable store sales. The remaining$38.2 million increase in net sales was primarily attributable to new temporary Warehouse Sale stores. The increase in comparable store sales included a 3.7% increase in transactions and a 2.8% increase in sales per transaction, and reflects growth in footwear, apparel, and team sports, offset by anticipated sales normalization in certain categories, including fitness and outdoor equipment.
Income from Operations
Income from operations decreased to
Gross profit decreased to$1,012.4 million in the current quarter from$1,056.6 million for the quarter endedOctober 30, 2021 and decreased as a percentage of net sales by 423 basis points. Merchandise margins decreased 438 basis points, as a result of our actions to reduce targeted apparel inventory overages, and higher inventory shrink due to increased theft. Our occupancy costs leveraged by 25 basis points while increasing$12.5 million compared to the prior year quarter. Occupancy costs, which after the cost of merchandise represents the largest item within our cost of goods sold, are generally fixed on a per store basis and fluctuate based on the number of stores that we operate. Selling, general and administrative expenses increased to$679.7 million in the current quarter from$631.9 million during the third quarter of 2021, primarily due to investments in hourly wage rates, talent and technology to support our growth strategies, but decreased as a percentage of net sales by 3 basis points due to the increase in net sales.
Interest Expense
Interest expense increased to$26.1 million in the current quarter from$13.8 million in the prior year quarter. The increase was primarily due to$13.8 million of interest expense related to the aggregate$1.5 billion Senior Notes issued during the fourth quarter of 2021. Current quarter interest expense also included$8.8 million of inducement charges related to the exchange of$220.6 million aggregate principal amount of the Convertible Senior Notes, which were primarily offset by a reduction in interest expense related to our Convertible Senior Notes, due to exchange transactions and our adoption of ASU 2020-06; see Part I. Item 1. Financial Statements, Note 1 - Description of Business and Basis of Presentation for additional details.
Other Income
Other income totaled$4.8 million in the current quarter compared to$1.7 million in the prior year quarter. The increase in other income was primarily driven by an$8.6 million increase in interest income as a result of higher average interest rates on cash and cash equivalents, partially offset by$5.4 million in changes related to our deferred compensation plan investment values, which we account for by recognizing investment income or expense and recording an offsetting charge or reduction to selling, general and administrative costs.
Income Taxes
Our effective tax rate increased to 24.9% in the current quarter from 22.4% in the quarter endedOctober 30, 2021 . The current quarter effective tax rate was unfavorably impacted by eliminated tax deductions from our bond hedge following our Convertible Senior Notes exchange transactions, which impacted our income tax expense by$9.4 million , partially offset by the favorable rate impact of the vesting of employee equity awards on lower pre-tax income.
39 Weeks Ended
Net sales were$8,771.5 million in the current period, a 1.9% decrease from net sales of$8,941.2 million reported for the prior year period, due primarily to a$230.1 million , or 2.6%, decrease in comparable store sales, partially offset by a$60.4 million increase in net sales primarily attributable to new temporary Warehouse Sale stores. The decrease in comparable store sales included a 3.7% decrease in transactions offset by a 1.1% increase in sales per transaction, and reflects an anticipated sales normalization in certain categories, including fitness and outdoor equipment, along with last year's favorable sales impact following government stimulus payments, partially offset by growth in footwear and team sports. 20 --------------------------------------------------------------------------------
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Income from Operations
Income from operations decreased to
Gross profit decreased to$3,118.5 million for the current period from$3,452.3 million for the prior year period and decreased as a percentage of net sales by 306 basis points. Merchandise margins decreased 167 basis points as a result of our actions to reduce targeted apparel inventory overages, and higher inventory shrink due to increased theft. The remaining decrease in gross profit as a percentage of net sales was primarily driven by a 60 basis point increase in supply chain related costs, primarily due to continuing global disruptions, and occupancy deleverage of 48 basis points, as occupancy costs increased$28.0 million compared to the prior year period. Selling, general and administrative expenses increased to$1,952.4 million in the current period from$1,880.5 million for the prior year period, and increased as a percentage of net sales by 123 basis points. The$71.9 million increase was driven by investments in hourly wage rates, talent and technology to support our growth strategies and higher brand-building marketing expenses, offset by lower incentive compensation expense and a$40.2 million net cost reduction compared to the prior year period related to changes in the investment values of our deferred compensation plans, for which the corresponding investment change was recognized in Other Expense. In addition, selling, general and administrative expense included approximately$15.0 million of COVID-related costs in the prior year period.
Interest Expense
Interest expense increased to$77.3 million in the current period from$41.0 million in the prior year period. The increase was primarily due to$41.4 million of interest expense related to the aggregate$1.5 billion Senior Notes issued during the fourth quarter of 2021. Current period interest expense also included$21.1 million of inducement charges related to the exchange of$420.6 million aggregate principal amount of the Convertible Senior Notes, which were primarily offset by a reduction in interest expense related to our Convertible Senior Notes, due to exchange transactions and our adoption of ASU 2020-06; see Part I. Item 1. Financial Statements, Note 1 - Description of Business and Basis of Presentation for additional details.
Other Expense
Other expense totaled$11.6 million in the current period compared to other income of$15.9 million for the period endedOctober 30, 2021 . Approximately$40.2 million of the change was due to changes in our deferred compensation plan investment values, which we account for by recognizing investment income or expense and recording an offsetting charge or reduction to selling, general and administrative costs. These changes were offset by a$12.9 million increase in interest income as a result of higher average interest rates on cash and cash equivalents during the current period.
Income Taxes
Our effective tax rate increased to 24.1% for the current period from 23.5% for the same period last year. The current year effective tax rate was unfavorably impacted by eliminated tax deductions from our bond hedge following our Convertible Senior Notes exchange transactions, which impacted our income tax expense by$12.6 million , partially offset by the favorable rate impact of the vesting of employee equity awards on lower pre-tax income.
LIQUIDITY AND CAPITAL RESOURCES
Our cash on hand atOctober 29, 2022 was$1.44 billion . We believe that we have sufficient cash flows from operations and cash on hand to operate our business for at least the next twelve months, supplemented by funds available under our unsecured$1.6 billion Credit Facility, if necessary. We may require additional funding should we pursue strategic acquisitions, settle all or a portion of the Convertible Senior Notes, undertake share repurchases, pursue other investments or engage in store expansion rates in excess of historical levels.
The following sections describe the potential short and long-term impacts to our liquidity and capital requirements.
Leases
We lease substantially all of our stores, three of our distribution centers and certain equipment under non-cancellable operating leases that expire at various dates through 2034. Approximately three-quarters of ourDICK'S Sporting Goods stores will be up for lease renewal at our option over the next five years, and we plan to leverage the significant flexibility within our existing real estate portfolio to capitalize on future real estate opportunities. 21 --------------------------------------------------------------------------------
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Revolving Credit Facility
We have available to us a $1.6 billion Credit Facility, which includes a maximum
amount of $75 million to be issued in the form of letters of credit. Loans under
the Credit Facility bear interest at an alternate base rate or an adjusted
secured overnight financing rate plus, in each case, an applicable margin
percentage. As of October 29, 2022 , there were no borrowings outstanding under
the Credit Facility, and we have total remaining borrowing capacity, after
adjusting for $16.1 million of standby letters of credit, of $1.58 billion . We
were in compliance with all covenants under the Credit Facility agreement at
October 29, 2022 .
Senior Notes
As of October 29, 2022 , we have $750 million principal amount of 2032 Notes and
$750 million of 2052 Notes. Cash interest accrues at a rate of 3.15% per year on
the 2032 Notes and 4.10% per year on the 2052 Notes, each of which are payable
semi-annually in arrears on January 15 and July 15 .
As of
Convertible Senior Notes
Following our exchanges totaling$420.6 million principal amount in cash during the 39 weeks endedOctober 29, 2022 , we have an aggregate remaining principal amount of$154.4 million of Convertible Senior Notes outstanding. Cash interest accrues at a rate of 3.25% per annum, payable semi-annually in arrears onApril 15 andOctober 15 . We currently anticipate that we will repay the remaining principal amount of the Convertible Senior Notes in cash, whether in connection with an early conversion of such notes or repayment at maturity, using excess cash, free cash flow or borrowings on our Credit Facility to minimize share dilution. However, we may need to pursue additional sources of liquidity to repay the Convertible Senior Notes in cash at their maturity date inApril 2025 or upon early conversion, as applicable. As ofOctober 29, 2022 , the stock price conditions under which the Convertible Senior Notes could be convertible at the holders' option were met. However, we have not received any material conversion requests through the filing date of this Form 10-Q. There can be no assurance that any capital required to repay our Convertible Senior Notes will be available on terms that are favorable to us, or at all. Capital Expenditures Our capital expenditures are primarily allocated toward the development of our omni-channel platform, including investments in new and existing stores and eCommerce technology, while we have also invested in our supply chain and corporate technology capabilities. Capital expenditures for the 39 weeks endedOctober 29, 2022 totaled$274.3 million on a gross basis and$238.2 million on a net basis, which includes tenant allowances provided by landlords. We anticipate that fiscal 2022 gross capital expenditures will be in a range of$400 to$425 million , and$340 to$365 million on a net basis, which includes tenant allowances provided by landlords. We expect our capital expenditures to be concentrated on improvements within our existing stores and new store development, as well as continued investments in technology to enhance our store fulfillment, in-store pickup and other foundational capabilities.
Share Repurchases
From time-to-time, we may opportunistically repurchase shares of our common stock. During the 39 weeks endedOctober 29, 2022 , we repurchased approximately 4.4 million shares of our common stock at a cost of$361.1 million . The Company also paid$31.7 million during fiscal 2022 for shares repurchased during fiscal 2021. We currently operate under a$2.0 billion share repurchase program that was authorized by the Board of Directors onDecember 16, 2021 . As ofOctober 29, 2022 , the available amount remaining under theDecember 2021 authorization was$1.5 billion . Any future share repurchase programs are subject to authorization by our Board of Directors and will be dependent upon future earnings, cash flows, financial requirements and other factors. 22 --------------------------------------------------------------------------------
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Dividends
During the 39 weeks ended October 29, 2022 , we have paid $123.8 million of
dividends to our stockholders. On November 21, 2022 , our Board of Directors
authorized and declared a quarterly cash dividend in the amount of $0.4875 per
share of common stock and Class B common stock, payable on December 30, 2022 to
stockholders of record as of the close of business on December 9, 2022 . During
the prior year period, we declared and paid $567.2 million in dividends, which
included quarterly dividends and a special dividend in the amount of $5.50 per
share, on our common stock and Class B common stock.
The declaration of future dividends and the establishment of the per share
amount, record dates and payment dates for any such future dividends are subject
to authorization by our Board of Directors and are dependent upon multiple
factors including future earnings, cash flows, financial requirements and other
considerations.
Supply Chain Financing
We have entered into supply chain financing arrangements with several financial
institutions, whereby suppliers have the opportunity to settle outstanding
payment obligations early at a discount. In turn, we settle invoices with the
financial institutions in accordance with the original supplier payment terms.
Our rights and obligations to our suppliers, including amounts due and scheduled
payment terms, are not impacted. Our liability associated with the funded
participation in the arrangements, which is presented within accounts payable on
the Consolidated Balance Sheet, was $56.1 million and $76.0 million as of
October 29, 2022 and January 29, 2022 , respectively.
Cash Flows
Changes in cash and cash equivalents are as follows:
39 Weeks Ended
October 29, October 30,
(in millions) 2022 2021
Net cash provided by operating activities $ 35.6 $ 1,006.6
Net cash used in investing activities (292.9) (240.5)
Net cash used in financing activities (947.6) (1,051.3)
Effect of exchange rate changes on cash and cash equivalents (0.3) -
Net decrease in cash and cash equivalents $ (1,205.2) $ (285.2)
Operating Activities
Cash from operating activities decreased $971.0 million for the 39 weeks ended
October 29, 2022 compared to the same period in the prior year. The decrease was
primarily due to a $542.0 million increase in cash payments for inventory and
accounts payable to replenish inventory levels after a 28.3% sales increase in
fiscal 2021 and supply chain disruptions following the start of COVID-19, which
resulted in inventory growth relatively in line with sales growth compared to
fiscal 2019. The remaining decrease in cash from operating activities was
primarily driven by a $366.3 million decrease in earnings during the current
period as compared to the same period last year, and an $80.3 million decrease
in accrued expenses as a result of year-over-year changes in incentive
compensation accruals and corresponding payments, and the timing of marketing
and deferred compensation plan payments.
Investing Activities
Cash used in investing activities increased$52.4 million for the 39 weeks endedOctober 29, 2022 compared to the same period last year. Gross capital expenditures for the current period include investments in our stores and technology, offset by last year's investments in merchandise presentation, space optimization and investments to enhance the fitting and lesson experience in our golf business. Financing Activities Financing activities have historically consisted of capital return initiatives, including share repurchases and cash dividend payments, cash flows generated from stock option exercises and cash activity associated with our Credit Facility, or other financing sources. Cash used in financing activities decreased$103.7 million for the 39 weeks endedOctober 29, 2022 compared to the prior year period, primarily driven by the payment of last year's special dividend and higher share repurchases during the prior year period, offset by the exchange of$420.6 million aggregate principal amount of our Convertible Senior Notes during the current year period. 23 -------------------------------------------------------------------------------- Table of Contents
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