Lance Armstrong Ruins Dicks Sporting Goods Inc (DKS)’s Fourth Quarter: NIKE, Inc. (NKE)

However, the treadmills aren’t co-branded like other products, and appear to be associated only with LiveStrong, which we at Valuentum think caused the product sales to suffer so much. Nevertheless, this isn’t likely to persist long at Dicks Sporting Goods Inc. (NYSE:DKS), nor do we think it will have any impact on NIKE, Inc. (NYSE:NKE)’s top or bottom lines.

Nevertheless, we saw some nice gross margin expansion, with margins increasing 80 basis points year-over-year to 32.6%. This was partially offset by some SG&A growth, which increased 60 basis points to 20.8% of sales. Gross margin expansion could continue in 2013, but investment in the firm’s technology infrastructure will likely weigh on overall operating margins, which totaled 11.7% during the fourth quarter and 8.9% for the full-year.

Free cash flow was solid again in 2012, but up only marginally from the year prior at $220 million. We haven’t seen much free cash flow growth at the company over the last few years, but the company has been very generous in returning cash to shareholders via dividends, special dividends, and share repurchases.

Looking ahead, the firm is looking for same-store sales to increase 2%-3% in fiscal year 2013, driving earnings per share of $2.84-$2.86. Management suggested that $0.12 per share of earnings will be lost to the company’s focus on “growth initiatives,” though we do not see a reason the company would include such a figure into guidance. The capital investments for 2013, expected to be $299 million on a gross basis, may be elevated for only one year, but we have no real way of knowing such for sure, especially periodic increases in capital expenditures are simply a side effect of a fast growing retailer. Free cash flow is among the most important metrics driving Valuentum’s valuation, and we think it will improve over time.

Regardless, we do not believe a huge sell-off in shares of the sporting goods giant was necessarily justified, but we also believe shares continue to look fairly valued at this time. Therefore, we won’t be looking to add the name to any of Valuentum’s actively managed portfolios.

The article Lance Armstrong Ruins Dick’s Sporting Goods’ Fourth Quarter originally appeared on Fool.com and is written by RJ Towner.

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