By Thomas J. Ryan

<span style="color: #999999;">Speaking Wednesday at Goldman Sachs’ 26th Annual Global Retailing Conference, Ed Stack, CEO of Dick’s Sporting Goods, elaborated on how stronger partnerships with vendors are helping drive the retailer’s recent improved sales momentum. He further asserted that some on Wall Street don’t fully understand the extent to which vendors’ and Dick’s growth strategies are aligned.

“One of the things that the Street is misconceived about or has misinterpreted is what’s going on with the brands,” said Stack.

He agreed vendors are aggressively opening stores and expanding online, but also stressed that Dick’s remains one of the “few retailers in our industry” where vendors are going to invest because the brands believe being on Dick’s shelves helps their authenticity and cachet.

Said Stack, “If you talk to most of the brands, they will talk about the fact that if they want to be rooted in sports, they can’t do that in the U.S. if they don’t do it through us. And so that’s with all the brands. We hear that every day and we can see them continuing to make those investments and trying to push our business.”

The investments include supporting in-store shops, vendor-direct shipments with some partners, collaborative marketing efforts, and Dick’s receiving greater access to exclusive and statement product.

“So, there has not been any change,” said Stack in references to concerns over Dick’s being negatively impacted by vendors direct-to-consumer moves. “The relationship we have and the partnership we have with the brands is only getting better.”

At the store level, the most noticeable difference is an upgrade in product offerings through improved vendor allocations to reach the “enthusiast” athlete, Said Stack, “If you walk into our stores today and you take a snapshot of the assortment we have versus the assortment we had 18 months ago, it’s very different.”

Eighteen months ago, he noted, the best-selling lifestyle shoe for Dick’s was an $89 Nike Roshe and now it’s a $150 model from Nike. Said Stack, “You can see that there’s a very big difference in the assortment that we have from Nike, from Adidas and from some of the other brands out there like North Face that you wouldn’t have seen in the store 18 months ago. That’s one of the main reasons why we’re starting to bend this curve.”

<span style="color: #999999;">The Goldman Sachs’ presentation came after Dick’s, on August 22, reported its strongest quarterly comp gain since 2016 and raised its full-year outlook.

Consolidated same-store sales increased 3.2 percent, helped by a 1.1 percent increase in transactions. Average ticket increased 2.1 percent, helped by improved access to better product from vendors.

The comp gain was also helped by the retailer anniversarying a decision early last year following the Parkland, FL shooting to end the sale of military-style rifles and raise the minimum age to purchase a firearm to 21. The company also “significantly” benefited from increased inventory investments supporting apparel footwear and the baseball category, after finding stocks were too low last year.

Stack expects the sporting goods industry to continue to grow due to healthy trends in golf as well as strength from key brands such as Nike, Adidas and Brooks.

“We like the product cycle that we’re in and what we see going forward,” said Stack, “And with the access we have to this product, the changes that we’ve made in our store from an inventory assortment and service standpoint to go after that enthusiast athlete, we think we still have the ability to gain meaningful market share. And based on what happened in the past couple of quarters, we’re confident we’re gaining market share and will continue to do so.”

Dick’s officials also spent considerable time addressing both the participation and product challenges the retailer is facing addressing the opportunity to reach female athletes.

“There are some really interesting things going on in women’s sports,” said Stack. “Some of them great. Some of them not so great that we’re trying to address.”

<span style="color: #999999;">On Participation, Stack noted that the chain’s Sports Matter program has so far helped about million kids play sports and the company recently re-committed to helping another million over the next several years. However, girls drop out of sports at around the age of 14, twice the rate of boys.

With studies showing the benefits of playing sports when young include higher graduation rates, less absenteeism, higher grades, and overall higher self-esteem, Stack said Dick’s efforts, along with brand partners, to encourage overall youth sports participation will support girls’ sports.

A major hurdle, he noted, is that 24 percent of public high schools in the country today don’t have a sports program. Said Stack, “It’s something that we’re working with the brands on. We’re going to continue to invest dollars in this. The brands are going to invest dollars in this. And you’ll see a lot more from us over the next year.”

On Product, Lauren Hobart, president, said Dick’s has been “somewhat maniacal” with vendors about a lack of product for girls and women. The chain often hears complaints from either girls or parents of girls who don’t feel there’s enough product available for girls, particularly the better product for “enthusiasts.”

Said Hobart, “The truth is the product is not good enough and so we are working with [vendors]. They acknowledge it. I expect there will be more assortments for girls and young women going forward. And in the meantime, we’ve got our own private brands that we’re trying to address the issue with so that we can get to parity.”

Stack mentioned that basketball footwear has been a challenge with girls unable to find the styles seen on NBA or WNBA players in their size. He called out Nike as “very responsive” lately in extending size ranges to reach girls.

Said Stack, “Young women don’t view themselves as female basketball players or female soccer players. They just view themselves as ‘I’m a soccer player.’ ‘I’m a basketball player.’ And the brands are finally getting that, and we’re going to have what I think will be the primary outlet for those distribution points for those products.”

Other topics addressed at the session included:

Tariffs
The tariff impact – including the 25 percent increase that hit some hardline categories on May 1 and the 15 percent increase effective at the beginning of September that impacted some apparel and footwear categories – was included in the Dick’s’ increased guidance when releasing second-quarter results. Lee Belitsky, CFO, said the tariffs have been offset in part by about 5 percent by favorable changes in exchange rates. Overall, however, he said the company is seeing only a “relatively small percentage” of products facing price increases in discussions with vendors. Vendors have been able to negotiate better deals on their end or have been “absorbing some of it.” The bigger impact will arrive in 2020 but Dick’s officials aren’t expecting a major hit. Said Stack, “I don’t think it’s going to be as great as people fear that it is. For a lot of our brands, we’ve seen product into the second quarter for next year and we’ve seen much more modest increases than I thought we would.”

Baseball’s Resurgence
Recent investments in the baseball category have been “wildly successful” in driving strong comp gains in the category, Stack said. Those investments include deeper assortments, improved integration of the retailer’s GameChanger app, and the expansion of HitTrax, a batting-cage simulation experience, to 170 of its 727 locations. HitTrax may provide the user with the experience of virtually hitting a home run over the Green Monster wall at Boston’s Fenway Park but it also measures bat speed and angle to support the sale of bats that can run from $200 to $400. Said Stack, “We’re taking a look at what the next category is that we’re going to attack the same way as we did baseball. And although we haven’t made a final decision yet, we expect it’s going to be soccer.”

Hunt Review
The hunt business, including its Field & Stream, continues to undergo a “strategic review” to determine whether to continue or exit the category. The hunt category has already become “significantly less” of the retailer’s revenues over the last 18 months due to the change in its firearms policy. The hunt category was removed from 10 stores late in the third quarter last year and replaced with product targeted to those markets. Those stores have “outperformed the balance of the chain by a pretty wide margin,” said Stack. The hunt category was removed from another 125 stores in the second quarter. Said Stack, “The whole business is under strategic review, and we expect it to continue to be less and less a part of our business. The good part of that is that the business is a lower-margin business than the balance of the chain, and this will definitely help us from a margin rate standpoint, as we go forward with the stores that we’ve taken it out of.”

The Outdoor Opportunity
Stack said there are two types of outdoor consumers: the “hook and bullet customer” and the “up-the-mountain, hiking, camping, customer.” The two are “very different customers” and while Dick’s is reducing exposure to the hunt category, it’s increasing investments toward the hiking and camp customer. Said Stack, “That outdoor, up-the-mountain. camping customer is a growth area. And it’s also a higher-margin category.” “

Openness To New Brands
Stack said Dick’s remains committed to finding “new and emerging brands that we can partner with and drive our business and hopefully drive their business.” He cited Under Armour as one example of a brand Dick’s partnered with early on as well as Yeti, which has emerged as one of Dick’s top-10 vendors after first reaching Dick’s stores about five or six years ago. Said Stack, “I can’t tell you what that next brand is, but we’re out there looking for it.”

In-store training
The increased investments in training associates have focused on two aspects, according to Hobart. The first is to have a foremost focus on the “athlete” – Dick’s name of customers – and look to help or provide advice “as the first priority above anything else that they’re doing.” The second is a heightened effort around recognition across the company. Said Hobart, “When people have great service moments, the teams are rewarding each other. They’re giving out high-five awards in this very virtuous circle of people striving for what we call that “Extra 1 Percent’ more.”

The Promotional Climate
Stack agrees that the promotional level has become “pretty rational” after the exit of Sports Authority played a major role in driving excess inventory across the sporting goods sector and the need for widespread discounts to clear inventories. Another factor in the elevated promotional climate in past years was Under Armour’s decision to start selling to Kohl’s. Stack said the move caused the Under Armour brand to become more promotional and led to a “contagion” that impacted other brands. He suspects there’s still some further consolidation ahead for the industry but noted that the “meaningful players” have already consolidated to reduce the risks of more sizeable store closings. Inventories are better aligned with demand and better segmentation efforts are also helping reduce overall promotions. Said Stack, “I think the brands have done a very good job of keeping the inventory tight. We’ve done a very good job, along with the brands, of gaining access to product that is not as broadly distributed in the marketplace with some more statement-level product. So we don’t really feel a big promotional challenge going forward, which will stabilize and maintain our merchandising margin.”

Expansion
Dick’s number of stores are expected to remain “about the same” in two years, according to Stack.

Photos courtesy Dick’s Sporting Goods