It has been a mixed year for Dick’s Sporting Goods, which posted declining profit in Q1 but bounced back in Q2 with double-digit profit gains and robust revenue growth.
According to analysts, e-commerce should continue to show strength for the retailer, while the golf business may have finally begun to stabilize in Q3.
“We expect sales up 10.7 percent on a 2 percent comp driven by strength in e-commerce and golf stabilization,” said Citi Research analyst Kate McShane, who predicted third-quarter diluted earnings per share of 47 cents. “We estimate 40 basis points of [gross processing margin] expansion to 30 percent and 30 basis points of SG&A deleverage on higher e-commerce spend.”
Sterne Agee CRT analyst Sam Poser is also more optimistic about the firm’s golf business.
“We are now in the third year of a declining golf business, due to lack of innovation, lower participation rates, and difficult weather. However, sell-through data has begun to show a turnaround in recent months,” Poser wrote.
Poser and Canaccord Genuity Inc. analyst Camilo Lyon also predict diluted EPS of 47 cents, in line with Wall Street’s consensus.
“We are projecting Q3 comp growth of 2 percent, with e-commerce growth of 27 percent as store traffic likely remained tepid,” Lyon wrote. “By category, continued momentum in athletic/outdoor apparel and footwear driven by the key brands (i.e. Under Armour and Nike) likely drove much of the comp growth.”
Lyon noted, however, that he expects the late start to fall to have dampened outerwear and footwear sales. The analyst also predicts that the firm’s women’s and kids business may have decelerated in the quarter.
Regarding competition, Poser sees Dick’s continuing to dominate the retail space.
“Dick’s is taking market share from Hibbett due to its lack of an e-commerce business, and from The Sports Authority due to better execution,” Poser said. “New shop in shops, growth in private label, the increased focused on softlines, and addition of sought-after brands will help drive gross margin and in-store traffic.”
The sporting-goods retailer reports Q3 on Nov. 17.