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Dick's Sporting Goods Is a Good Investment Due to Its Impressive Strategies

August 28, 2014 | About:
amal.singh70

amal.singh70

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Dick’s Sporting Goods (DKS) posted second-quarter results that came in at the high end of the company’s expectations. The company had a good quarter and the commendable growth in sales across its segments is the main reason behind Dick’s Sporting Good’s robust performance. The company did suffer due to weak sales in the hunting and golf segments, which also impacted its profit margin.

With a good growth momentum, management of the company is thinking that it has many opportunities for growth in the future. To be more profitable, Dick’s Sporting Goods has shifted its focus from the golf segment. Let us take a look at how Dick’s Sporting Goods will manage to hold a lucrative position.

A look at the performance

In the recently reported second quarter, Dick’s Sporting Good’s revenue rose by 10% to $1.69 billion from $1.53 billion as compared to the same quarter in last fiscal year. The revenue figures topped analysts’ estimates of $1.65 billion. The earnings posted by the company were also ahead of the consensus estimates. Dick’s Sporting Goods posted EPS of $0.67 per share while the analysts had been modeling $0.65 per share.

Dick’s Sporting Goods had a good second quarter. It saw commendable results from its segments. The company, however, suffered weakness in golf and hunting businesses. But now, it is not much bothered about the weak segments as its other sections such as women’s and youth’s athletic apparels are showing positive signs that can offset the loss Dick’s Sporting Goods suffered in these segments. The sports retailer has plans to focus mainly on the outdoor category. With this, Dick’s Sporting Goods is confident for the future.

Moving ahead, Dick’s Sporting Goods is anticipating weakness in the hunting category to continue in the future as well. While it is expecting positive response from other outdoor categories such as fishing, camping, boots, boats, etc. also, the golf category is expected to be under pressure due to a decline in the demands for golf equipment.

Smart moves

Besides these weak segments, Dick’s Sporting Goods is focusing on various other segments to improve its profitability. It has many strategies which are focused to reallocate the best selling segments including Women’s and youth athletic apparels. The company is also enriching its product portfolio with the addition of new products, expanding beyond golf and fitness category. Dicks Sporting Goods is relying on its merchandising strategies, which have helped the company to improve its comp sales during the World Cup.

Moreover, Dick’s Sporting Goods expects the e-commerce segment to prove a key growth driver for the company in the coming days. The company expects good traction in women’s and youth initiative footwear and Field & Stream. Though Dick’s Sporting Goods is optimistic about its future, it is worried about the changing consumer behavior and sluggish promotional activities. This might hurt its profit margins.

The company plans to expand its omni-channel platform, which will include growth in its store base as well as e-commerce operations. Dick’s Sporting Goods thinks that it will drive productivity to its stores. Further, in the course of expansion, it has opened eight new DICK stores and relocated three stores that were at the end of their leases. The main motive behind the relocation of the stores is to increase its offerings in women’s and youth apparel.

Further, its new DICK stores are doing well, and its existing and new DICK stores are helping the company to develop its e-commerce channel by allowing it to connect with online customers with in-store inventory. To enhance the experience, Dick’s Sporting Goods has launched a completely redesigned mobile app.

Conclusion

Looking at the fundamentals, Dick’s Sporting Goods is a good bet with a reasonable valuation. The forward P/E of 14.17 indicates slight improvement in earnings in the future. There are multiple areas of strength for the company, such as revenue growth, growth in earnings per share, increase in net income. So, investors should invest in Dick’s Sporting Goods despite weak profit margins.


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