3 Reasons Market Watchers Are Bullish on Dick’s

Dick’s Sporting Goods is on a mission to be everywhere, accelerating store openings and unveiling multiple campaigns and documentaries.

And analysts say the company’s odds of meeting its ramped up goals are steadily improving.

In just the past week alone, Dick’s hosted grand-opening events for five new stores and just a few days before that it announced the opening of its women’s-fitness specialty stores, Chelsea Collective.

In May, Dick’s and Tribeca Digital Studios Foundation announced that they were teaming up for another youth-sports-focused documentary with director Judd Ehrlich. The latest documentary would tell the story of the Salmon River High School girls’ lacrosse team as they fight their way back from a losing season. It would be the second documentary produced by the trio.

And the opportunities for growth continue to roll in.

Here, we outline three reasons analysts are bullish on Dick’s.

Under Armour Arsenal

Does the name Stephen Curry ring a bell?

The NBA league MVP and guard for the 2015 NBA champions Golden State Warriors helped Under Armour Inc. pull off a top-notch Q2 with 29 percent revenue gains, driven by a 40 percent year-over-year jump in shoe sales.

Market watchers say Dick’s—which is said to be the largest retailer of Armour goods—is primed to tap into Under Armour and Curry’s momentum.

“[Dick’s] stands to benefit the most from Under Armour’s success,” said Sterne Agee CRT analyst Sam Poser in an Aug. 9 note. “[Under Armour] told us that they are looking to expand their footwear business by more than 100 percent at Dick’s.”

Market Share Momentum

“Dick’s is gaining share from its competitors, including Hibbett, which does not have an e-commerce platform,” Poser wrote. “And Dick’s largest competitor, the Sports Authority, may be facing a default or distressed debt exchange.”

This could be critical for Dick’s, Poser said, because the Sports Authority may need to shutter some stores and may have a tough time getting inventory from vendors into 2016 and 2017.

Citi Research analyst Kate McShane also noted that Dick’s had fewer promotions during a recent store check versus highly promotional retailers such as Finish Line Inc. McShane said she expects the firm and other athletic specialty/sporting goods retailers to see a solid uptick in traffic in the coming weeks as back-to-school shopping picks up.

Ecommerce Edge

“[Dick’s e-commerce] growth continues to outpace the industry.… The longer the channel continues to outperform, the greater the annual savings the company will see,” wrote Susquehanna Financial Group LLLP analyst Christopher Svezia in a note on the company’s Q1 earnings release in May.

CEO Edward Stack unveiled plans to launch its e-commerce business, which is currently run by eBay, on its own exclusive e-platform by January 2017.

“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,” wrote Poser.

The company’s Field & Stream as well as its Golf Galaxy e-commerce businesses are already both owned by Dick’s, which Poser said “provides a good test ahead of when the mother ship’s e-commerce is brought in house.”

And speaking of golf, although the sport is now in its third consecutive year of decline, Poser highlighted data that shows a golf turnaround in recent months that bodes well for Dick’s. Golf sales have increased 5.5 percent and 2.9 percent in May and June, respectively, Poser noted.

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