Retail

Why Dicks Sporting Goods Is Getting Killed by the Retail Trend

Chris Lange

Published: August 15, 2017 11:55 am

Last Updated: January 12, 2020 9:06 am

Shares of Dick’s Sporting Goods Inc. (NYSE: DKS) hit a multiyear low after the company reported its most recent quarterly results before the markets opened on Tuesday. Unfortunately, Dicks seems to be catching the worst of the retail trend, after a few major retail stocks last week crumbled in the face of earnings as well.

Like many other retailers, Dicks has had a lackluster 2017, with the stock down 34% year to date, excluding Tuesday’s move. This is truly an industry in peril, but it seems that sporting goods retailers may be facing larger obstacles than others in the space.

What makes this particular type of store vulnerable is the products that it sells. In a pinch, customers could go to Walmart for some of the goods needed or even order them online. On the other hand, if customers want a more personalized or boutique shopping experience, they can go to a specialty golf shop or something similar.

Also the companies that supply products to Dick’s, such as Nike or Adidas, supply to a laundry list of other stores as well.

In recent years, we saw Sports Authority go bankrupt. Will Dick’s face similar a similar situation in the future?

As for the second-quarter earnings, the sporting goods retailer said that it had $0.96 in earnings per share (EPS) and $2.16 billion in revenue, versus consensus estimates from Thomson Reuters that called for EPS of $1.01 and $2.16 billion in revenue. In the same period of last year, Dick’s posted $0.82 in EPS and revenue of $1.97 billion.

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Its eCommerce sales for the second quarter of 2017 increased roughly 19% and eCommerce penetration for the quarter was 9.2% of total net sales.

Edward W. Stack, board chair and chief executive, commented:

In this very competitive and dynamic marketplace, we were able to deliver a significant increase in our bottom line from last year. We continued to capture market share and generated strong results in eCommerce, footwear and golf, although sales were pressured by weakness in hunting, licensed and athletic apparel. By design, we will be more promotional and increase our marketing efforts for the remainder of the year, as we will aggressively protect our market share. We have updated our outlook to reflect these investments. We continue to believe retail disruption creates opportunities for us as we look long-term.

Shares of Dicks were last seen down about 20% at $27.93, with a consensus analyst price target of $49.08 and a new 52-week range of $27.85 to $62.88.