As the coronavirus pandemic kept its stores shuttered, Dick’s Sporting Goods Inc. saw its profits and sales plummet in the first quarter — but one analyst is confident that it could be the “sole surviving national sporting goods retailer in the United States” after the health crisis is over.
Yesterday, the Coraopolis, Penn.-based company posted a loss of $58.4 million, or 62 cents per diluted share, wider than the loss of 57 cents a share anticipated by Wall Street. Revenues for the three months ended May 2 also missed estimates, falling 30.6% to roughly $1.33 billion, compared with analysts’ bets of $1.45 billion.
However, according to Susquehanna Financial Group analyst Sam Poser, Dick’s continues to reap the benefits of its investments in e-commerce and omnichannel capabilities, including curbside pickup, over the past several years.
“Dick’s will emerge from the crisis as the winning U.S. sporting goods retailer in our view,” wrote Poser, who improved his price target on the company from $31 to $48. “Robust omnichannel capabilities, coupled with a strong balance sheet, are leading to market share gains during the crisis and provide the company with a structural advantage over competitors, which we believe will benefit Dick’s in the long term.”
Although temporary store closures led to a 29.5% decline in its comps, Dick’s noted a 110% gain in its online business during the quarter, and CEO Ed Stack touted the resilience of its balance sheet. What’s more, the retailer has already taking the lion’s share of the sporting goods market following the bankruptcies of Sports Authority, Eastern Mountain Sports and — most recently — Modell’s Sporting Goods, which filed for Chapter 11 protection in mid-March when the COVID-19 outbreak struck the U.S.
“Although the business environment of 2020 remains uncertain, Dick’s Sporting Goods is in a position of strength,” he said in a statement yesterday. “We believe coming out of the current crisis, health and fitness will become even more important to the consumer … We are in a great place to support this demand.”
Plus, through the first four weeks of the second quarter, Dick’s reported e-commerce sales that surged more than 250%. It also reported that comps for that same period decreased only 4%, which president Lauren Hobart said represented a “progressive recovery” as the retailer begins reopening stores.
In early April, the athletic company had about $973.5 million in cash and equivalents, including proceeds after it drew down $1.429 billion of its $1.855 billion revolving credit line. With its current cash and the remaining borrowing capacity, Dick’s said it had enough money to sustain operations for several months, even with stores remaining closed.
“Due to the actions taken when the pandemic first hit, we have enhanced liquidity to emerge from this crisis in an even stronger competitive position,” Stack added. “Now, with confidence in our liquidity position and our stores re-opening, we can turn our attention to gaining market share for the remainder of 2020 and positioning our business for profitable growth in 2021.”