Dick’s Sporting Goods Already Grabbing TSA Share

By Thomas J. Ryan

Speaking September 7 at Goldman Sachs’ 23rd Annual Global Retailing Conference, Ed Stack, chairman and CEO of Dick’s Sporting Goods (pictured above), said that the retailer is already gaining market share due to the exit of Sports Authority.

“If you take a look at the businesses where Sports Authority was strong, we’re having very good results,” Stack said.

Referring to comments made on the company’s second-quarter conference call, Stack noted that Sports Authority was a “better tennis store” than Dick’s and “might have been more invested” in fitness. Added Stack, “We’re seeing some great increases there.” Stack also attributed the retailer’s gains to his allocation team doing a “great job anticipating” which categories would represent the biggest opportunities after Sports Authority left.

Still, he implied the main reason Dick’s is gaining share is because Sports Authority locations have all closed. He noted that he used to regularly walk into Sports Authority locations, identify himself to customers inside as the Dick’s CEO and ask why they were shopping at Sports Authority. The primary reason he heard back then was because Sports Authority was “closer to my work” or “a more convenient store to shop” and “very rarely” heard any performance issues, such as the local Dick’s didn’t have their size.

“There were 200 Sports Authority stores within five miles of a Dick’s store, so that’s a lot of market share that can come directly to us,” added Stack.

Stack also indicated his team did an internal analysis of why both Sports Authority and Sport Chalet failed to make sure the company wasn’t “just looking at our own future.” While taking into account issues like their heavy debt loads and relationships with vendors, the Dick’s team believes one of the biggest factors is that both didn’t invest in e-commerce and “the digital age that’s upon us.” For example, Sports Authority’s online sales were about $200 million while Dick’s will be “just shy of a billion” this year, he said.

Stack believes that his company’s digital investment, including omni-channel areas such as ship to store, provide a strong advantage from a competitive standpoint, and “it’s an important part of our strategy and tactic going forward.”

Stack also spent time discussing the growth potential of the company’s brick & mortar stores. He noted that all store openings are in “white spaces.” This includes the San Francisco Bay area and Pacific Northwest overall where Dick’s has “very few stores.” In October, Dick’s will enter Houston, TX, the country’s fourth largest city, for the first time, with six Dick’s Sporting Goods locations as well as two Golf Galaxy and two Field & Stream retail sites. 18 of the 31 leases of Sports Authority acquired by Dick’s are in Florida and California, where Dick’s is likewise under-penetrated.

At the same time, Stack believes Wall Street doesn’t fully value the retailer’s “very flexible” lease arrangements should digital experience greater expansion in the future at the expense of physical stores. 25 percent of the leases at Dick’s Sporting Goods chains come due in three years.

The Dick’s team finally has strict parameters around expected returns for any potential site. Although the company has a few stores in the outer boroughs, a primary reason it doesn’t have a store in Manhattan is because the rents make Dick’s officials “a little uncomfortable.” The company also acquired “designation rights” to the leases acquired in the Sports Authority bankruptcy, giving them the right to reject any lease without penalty if the terms don’t work. The company hasn’t made a decision on the former Sports Authority lease it picked up at 3^rd Avenue and 52^nd Street in Manhattan.

Asked about macro conditions, Stack believes the consumer overall is “not in bad shape” following some spending on pent-up demand purchases such as cars, homes and renovations coming out of the recession.

He also believes Dick’s is in “a terrific industry.” Sports remain “a significant part of American psyche,” with NFL and MLB regularly drawing strong audiences on TV as well as the many weekend soccer matches at local fields across communities. Much of the business is tied to kids outgrowing their footwear or equipment and coming back to the store for the next size up, he noted.

“I don’t want to say we’re impervious to [macro challenges], and we’ve had our ups and downs. But we’re going to travel a narrower band than a lot of others with the economy, and we’re clearly the winners in the space,” said Stack. “We have to continue to do what we’re doing and my friend, Kevin Plank, has got a great saying, ‘Stay humble and stay hungry.’ And even though we may be viewed as the winners in this industry, we’re still pretty hungry about how much better we can do, how much more business we can do, and how much more of that market share we can get.”

Photo courtesy Dick’s Sporting Goods