Dick's Sporting Goods Inc.DKS

Morningstar Rating

Stock Research and Analysis

by R.J. Hottovy, CFA

In a relatively short time, Dick's Sporting Goods has established itself as the best-in-breed sporting goods retailer. We believe this achievement is the result of a differentiated merchandising strategy that prioritizes performance goods geared toward Read more

Bulls Say

By focusing on higher-priced performance sporting goods, Dick's limits competition with specialty retailers and mass merchants. Management estimates that only 10% of its products overlap with mass merchants.

Dick's has had success selling high-performance brands such as Nike NKE, North Face, Columbia COLM, adidas, TaylorMade, Callaway ELY, and Under Armour UA. We expect these products to bolster comps through higher price points and by driving additional traffic to stores.

A shift away from print-based catalog circulation toward national television campaigns should create higher brand awareness. This strategy should also be an important tool when entering new markets.

Dick's has established a dominant presence in the golf category. With the acquisition of Golf Galaxy, the firm is now about 3 times bigger than the next-closest competitor in the golf category.

Operating margins should improve as Dick's introduces new private-label products. Private-label products typically carry margin rates that are 5%-6% higher than the branded products they replace. Read more

Bears Say

By nature, sporting goods are highly discretionary purchases. Periods of macroeconomic turmoil could continue to have an adverse impact on Dick's top- and bottom-line results.

The sporting goods industry is mature, with annual growth in the 2%-3% range the past decade. There is fierce competition among industry participants for market share gains.

A decline in sports participation among children could restrain growth prospects to an extent.

Although Dick's aggressive expansion plans fuel growth, sporting-good products are regionally sensitive. As the firm opens stores in new locations nationwide, a merchandising misstep could have adverse consequences.

The ability to try products before buying increases the likelihood of disorganized in-store presentations, which could weigh on customer experience and brand perception. Read more

Strategy

Dick's plans to expand its store base during the next several years, though it will take a more measured approach while consumer headwinds persist. Strategic acquisitions may also play a part in Dick's Read more

Management

Edward Stack, whose father founded Dick's in 1948, has served as chairman and CEO since 1984. Stack has been with the company since Dick's was a two-store chain in 1977, serving in various capacities such as merchandising manager, store manager, and Read more

Profile

Founded in 1948, Dick's Sporting Goods operates 420 namesake stores in 40 states, primarily in the Eastern United States. The firm also owns and operates 90 Golf Galaxy Read more

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