Baird has raised its rating on shares of Dick’s Sporting Goods, Inc. to “Outperform” from “Neutral” due in part to bullishness on a robust recovery of the recently acquired Foot Locker business.
The upgrade comes as the investment firm transitioned coverage of Dick’s SG to its Active Lifestyle team, led by Jonathan Komp. The analyst also raised Baird’s price target on DKS shares to $253 from $230.
Komp wrote, “We are impressed by Dick’s productivity gains vs. pre-COVID levels and bullish on the multi-year Foot Locker recovery (levered to NKE’s turn).”
Komp said he believes Dick’s has a “meaningful runway” to grow its leading U.S. sporting goods market share, which he estimates is at 14 percent in a $14 billion total addressable market in the U.S. Macro growth drivers in the sporting goods category include continued gains for youth organized sports, continued increases in women’s sport participation and adult recreational sports expansion. Komp wrote, “DKS has proven ability to drive effective merchandising, in-store and online experiences, strong service, and personalization.”
Komp said he has also been impressed by Dick’s management’s ability to maintain and build on strong post-COVID trends, with sales expanding over 50 percent from 2019 to 2024, alongside operating margin improvement of over 600 basis points, driven by higher gross margin (up 656 basis points), fixed-cost leverage and improving e-commerce profitability. The analyst wrote, “Looking forward, we expect management to continue to pursue effective vertical brand expansion (13 percent of sales in F2024) and technology investments to enhance the in-store experience. Further, Scorecard (>25M members) and Gamechanger (~9M active users) remain key drivers of customer loyalty and omni-channel engagement.”
Komp noted that Dick’s will be able to sustain “moderate core annual square footage growth,” or in the range of 2 percent to 3 percent, in its sporting goods concepts due to the expansion of its House of Sport and Field House concepts. Komp wrote in the note, “These store formats in our view drive stronger connection with athletes and local communities while providing an attractive ‘experiential’ retail experience which differentiates the occasion from that of peers. Accelerating the transformation requires a step-up in capex; however, the unit economics are compelling, and we envision a meaningful multi-year tailwind as these concepts scale.”
He further noted that Dick’s FY25 guidance contemplates “stable core Dick’s operating margins” of 11.1 percent to 11.2 percent at the midpoint and high end. He said the margin rate is more than double the 5.1 percent pre-pandemic level reached in FY19. Komp said he views the margin improvement as “sustainable considering differentiated assortment, more data-driven/personalized offerings (vs. site-wide/store-wide promotions), improved clearance strategies (now >50 Going Going Gone! locations), higher e-commerce margin (in line with company EBT margin), and emerging potential for the digital revenue stream (targeting $150M of highly profitable revenue in F2025).”
On Foot Locker, Komp said while the acquisition is placing pressure on comps and margins with inventory clean-up actions, he’s bullish on the transformation potential given Dick’s own success growing footwear as its invested in full-service decks and the appointments made, including Nike veteran Anne Freeman as FL North America president and Dick’s former SVP Hardlines Merchandising Steve Miller as FL COO, North America, to guide the turnaround. He also expects Foot Locker to benefit as Nike shows progress in its North American recovery, as well as from favorable macro tailwinds, highlighted by upcoming higher tax refunds.
“While the initial integration and cleanup of unproductive inventory and evaluation of potential store closures does create some short-term modeling uncertainty, (though DKS has guided to EPS accretion for F2026), we have warmed to the acquisition completed in September 2025 based on the ability to improve core Foot Locker operations, to increase the combined DKS/Foot Locker importance with key brand partners (including adding a global component), to drive merchandising improvements and meaningful synergies, and ultimately to engineer a major financial recovery,” wrote Komp. “More specifically, we believe the combined operating prowess of DKS paired with a possible multi-year turnaround for NKE (still was ~50-60 percent+ of Foot Locker’s sales), can engineer a major 2– to 3-year turnaround in Foot Locker’s financials, justifying the merits of DKS’ $2.4B acquisition.”
Komp introduced EPS estimates of $15.00 for FY26 and $18.00 for FY27, with the improvement driven by sustaining core Dick’s momentum, possible tax refund tailwinds, and delivering sequential Foot Locker improvement from recent lows.
Dick’s has projected earnings of $14.25 to $14.55 for FY25. Earnings are scheduled to come out on March 12.
Image courtesy Dick’s Sporting Goods, Inc.
