Dicks Sporting Goods wants to be primarily focused on the “core athlete” and “outdoor enthusiast”, and by the looks of the trend line for the stock the last few weeks, the latter seems appropriate as their chart begins to look more like the north face of the Matterhorn as they pull away from the competitors that looked more like a flat line EKG for the week.
DKS hit a new 52-week high last week, spiking at $38.83 Wednesday after presenting at the 23rd Annual William Blair Growth Stock Conference in Chicago the same day. Shares settled back to close at $37.30 on Friday, up 12.1% for the week.
Dicks CEO Ed Stack put the emphasis on limiting the volatility of their inventory and product mix, opting for less fashion and more basic items that turn at a higher rate. The Pittsburgh-based retailer sees 10% of their brand offering overlapping with the mass retail market, representing less than 10 of sales.
Stack said he saw turn rate as an industry-changing metric that enables them to put more capital to work to growing the business, escalate margin rates and mitigate markdown risk, and increase sales by staying in stock in key items.
The metrics that got the market so hot though centered around statements by DKS CFO Mike Hines, indicating a continued commitment to achieve a long-term earnings growth rate of approximately 20% while increasing operating margin by 30 basis points a year. Hines said the company can double in size within its current geographic territory “east of the Mississippi”.
Stack gave some hints on strategy, noting that the model for North Carolina may soon play out in Georgia as well. Dicks moved into North Carolina with one store in Raleigh and is now the largest sporting goods retailer in the state with 14 stores. He sees the same flow as they move south after establishing a beachhead with the Macon store.
The CEO also played up the fact that they have “access to all products” from all key brands, not just parts of those brands. He felt this gives them more credibility with the consumer. In stressing the point, stack said that they now have 26% of all Nike shops in the U.S. and are Nikes #1 golf customer. Dicks is also the largest retailer for Taylor Made-adidas Golf and is the #2 player for Callaway, but closing fast on the top spot.
Nike purchases are 13% of the total Dicks business.
>>> With the competition focused on merging and retro-fits so they can get the better product from the better brands, you have to wonder if this is even a fair fight anymore. Would love to know when they plan to enter Florida…
You have to like the discipline of a Hibbett wrapped in a big box, specialty store format…
