Dick’s Sporting Goods (DKS, $138.59): “Let’s play ball!”
By: Ryan
Kreie, AIM Student at Marquette University
Summary:
• Dick’s Sporting Goods, Inc.
(NYSE:DKS) is the leading omni-channel sporting goods retailer offering an extensive
assortment of authentic, high-quality sporting equipment, apparel, footwear,
and accessories. They primarily retail goods from major athletic brands like
Nike, Adidas, Reebok, Under Armour, etc.
• ECommerce sales have continued
to grow with the launch of their mobile app and new pick-up and delivery
options.
• Youth sporting events are back
in person which has driven people to acquire the necessary goods for their
events after an extended offseason.
• Dicks has increased their sales
per store dramatically (about 19%) due to decreases in costs due to moving
business online. Gross profit has seen an increase of 5% each of the last two
years for Q2.
• Their stock price is up roughly
150% YTD primarily due to their adaptation to the pandemic and their transition
to a larger focus on eCommerce.
• Dicks continues to surpass
previous year’s numbers in eCommerce despite all business being online last
year.
Key points: Dick’s
sporting goods has come out of the pandemic extremely well. They have the
potential to end the year with outstanding performance due to the holiday
season. During the second quarter, they generated revenues of 3.27 billion and
expect to exceed this number in Q3 when they release their earnings on
11/23/2021. Their EPS also grew to 4.66 in Q2 which is a 33% increase compared
to the previous quarter.
Their current strategy has been
focused on increasing their eCommerce presence and sales while reducing the
rate of opening new physical stores. They recently released a new mobile app that
helps facilitate the integration between their brick-and-mortar stores and
their online platforms. This includes ship-from-store, buy-online, pick-up in
store, curbside pick-up, and marketing campaigns. 70% of online orders were
fulfilled by their physical stores in FY 2021. Also, 90% of all sales were
facilitated through their stores by either online fulfillment or in-person
sales. ECommerce sales now account for 19% of net sales compared to 12% in
2019.
Dicks is a unique business seen
more as a one-stop shop for all your sporting good needs. Few competitors offer
what they do on a large scale, which gives them a significant competitive
advantage. With high barriers for entry into the industry their growth can be
sustained as many competitors have gone out of business because they did not
adapt.
What has the stock done lately?
In the past 3 months alone the
stock price is up 31.58%. This is a continuation of constant growth since the
onset of the pandemic. This constant upward trajectory is promising to
investors as Dicks continues to innovate new ways to reach their customers in
the most efficient ways. They also released that they would repurchase $400
million in shares during FY 2021 to distribute capital back to investors.
Past Year Performance: Since a
significant dip in stock price due to the pandemic in spring 2020 Dick’s sporting
goods has skyrocketed. Dicks has increased 147.42% in the past year and there
is still some value to be had. Their 52-week range in stock price has been
$51.51 to $147.39. This range is large but was caused by the pandemic. They are
still on their way out of the pandemic as they adjust to a larger focus on
eCommerce and have some upside left to gain.
My Takeaway
Dicks has shown no sign of
slowing down since the onset of the pandemic. They have continued to distance themselves
from competitors with their increasing eCommerce presence and larger margins. I
think Dicks has set themselves up nicely the crush the holiday season and end
the year with a stock price of over $150 per share. I believe there is still
plenty of upside in them and I recommend that we hold DKS for the foreseeable
future as they have shown no signs of slowing down. Their constant growth is
something we can count on for months to come.
