Dick’s Analyst Day Meeting: Key Takeaways & Analyst Reactions

Analysts and Dick’s Sporting Goods executives convened in New York City yesterday for the company’s 2015 Analyst Day to address key investor concerns, including store growth, specialty concepts and e-commerce.

Here are the key takeaways:

2017 Targets Adjusted 

CEO Edward Stack announced that the company has adjusted its guidance down from 2013’s Analyst Day guidance due primarily to a reduction in store openings.

“We had originally planned to have 815 Dick’s stores, 55 Field & Stream stores and 86 Golf Galaxy stores by the end of 2017. We now plan to have between 735 and 750 Dick’s stores, 30 to 35 Field & Stream stores, and 78 Golf Galaxy stores at the end of 2017,” said Stack at the meeting. “We feel, based on the evolving dynamics of retail sales, we should be more prudent in our approach to brick-and-mortar expansion as we move forward.”

The company’s revenue target for 2017 is now $8.7 billion to $9 billion (down from $10 billion), target operating margins are 9 percent to 9.5 percent, and earnings are expected to grow 12 percent to 16 percent.

“Dick’s continues to be leader in the $64 billion U.S. sporting goods market, with further runway against a weakened competitive set,” said Susquehanna Financial analyst Christopher Svezia in a note today. “At the same time, issues that were previously an overhang continue to be addressed, such as the box size, growth and ecommerce profits, among others, which support improved earnings growth ahead.”

Svezia concluded that “strong operating margin targets and a greater focus on bottom-line returns make shares attractive at current levels.”

E-Commerce Goals

The company plans to have the Dick’s e-commerce site on its own platform by January 2017; in March 2015, GolfGalaxy.com site launched on its new e-commerce platform; and a transactional Field & Stream site is planned to go live in fall 2015.

Under the company’s current system with eBay, Dick’s controls merchandising, marketing, inventory, and in-store fulfillment while eBay controls technology, customer service, payment processing, and web-store maintenance, explained Sterne Agee analyst Sam Poser.

“Owning the business outright will allow Dick’s to move more toward a fixed processing cost, thus enabling the company to capture more of the economics,” said Poser.

 Plans for Field & Stream Business

Management said it will open its new Field & Stream stores at a slower pace.

“Today, we have 11 Field & Stream stores and an additional eight planned for this year,” said Stack. “These stores will open it a bit slower rate than originally planned, not due to performance but due to the fact they were testing for combo stores of Dick’s Field & Stream combo this year.”

Analysts have expressed concerns about Dick’s plans for its Field & Stream stores. Following the company’s announcement of its latest plans for them, analysts have been both positive and cautious.

“While we continue to believe management has additional work to do on Field & Stream, we think there could be upside to the core Dick’s based on stronger potential growth in e-commerce and reformatted stores driving higher productivity,” said Citi Research analyst Kate McShane in a note.

Poser, in a note yesterday, posed questions.

“We believe that management may have slowed the growth of [Field & Stream] in order to see if the combination test will be successful,” said Poser. “The question is, if the combo test does not prove a success, will management continue to invest in the Field & Stream concept or shut it down?”

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