DICK'S Sporting's Omnichannel Efforts Bode Well: Apt to Hold the Stock

DICK'S Sporting Goods, Inc. DKS is benefiting from its strategic efforts including merchandising initiatives and store-related endeavors. The company has been making smart moves to enrich the customer experience. DKS is putting emphasis on the omnichannel experience to drive solid athlete engagement.

DICK'S Sporting’s Strategic Efforts Aid 

DICK’S Sporting’s store-related endeavors appear quite encouraging. The company has revolutionized its most typical format, the 50,000 square-foot DICK’S store, into the Field House concept. The Field House concept is inspired by House of Sport, having interactive experiences with unique presentation and service. 

Field House stores have been performing exceptionally well, proving to be a highly effective evolution of the company’s core store model. In fiscal 2024, it opened 15 additional Field House locations, ending the year with 26 stores, and plans to add about 18 more Field House locations in the current fiscal year, for a total of 44 locations by the year’s end. It looks forward to expanding the footprint of its Golf Galaxy business and plans to introduce approximately 14 Golf Galaxy performance center locations.

DKS’ GameChanger app has been performing extremely well. GameChanger allows the company to connect to athletes beyond the traditional shopping experience, thus strengthening leadership in sport. In fiscal 2024, approximately 9 million unique users engaged with GameChanger. It had nearly 1.8 million average daily active users in the GameChanger app in the fiscal fourth quarter, offering unique on-trend products.

Additionally, Dick’s Media Network is a new retail media platform that uses the company’s growing Scorecard loyalty program and database. Although still in its early stages, it has received strong initial interest, and management expects it to drive long-term sales growth and higher margins as the new platform expands.  

DICK’S Sporting Goods is benefiting from brand strength and continued market share gains. Management remains committed to digital innovation. All the aforesaid endeavors are likely to capture extra sales and bolster overall profits.

Bumps in DKS’ Growth Path

An uncertain macroeconomic environment has been concerning. In addition, higher wage rates and increased investments in talent and technology to create a better athlete experience, along with investments in marketing, have been leading to elevated costs. In the fourth quarter of fiscal 2024, adjusted selling, general and administrative (SG&A) expenses increased 7.8% and deleveraged 101 bps as a percentage of sales.
 
Management expects greater deleverage in adjusted SG&A expenses in the first half of fiscal 2025, with moderation in the second half, thanks to strategic investments to aid growth. DKS envisions pre-opening expenses to be in the range of $65-$75 million, with approximately one-third incurred in the first half of fiscal 2025 and the remaining two-thirds in the second half.  Our model expects adjusted SG&A expenses to increase 5.9% in the first quarter of 2025.  This may affect the company’s overall profitability ahead.

Conclusion

Nevertheless, DICK’S Sporting has been taking initiatives to tackle cost issues. The company is on track with business optimization to streamline the overall cost structure. Robust omnichannel athlete experience and unique product assortment are acting as catalysts.

Although shares of this sporting goods dealer have lost 6.1%, they have fared better than the industry’s 10.2% decline in the past six months.

The Zacks Consensus Estimate for fiscal 2025 sales and earnings per share (EPS) is currently pegged at $13.85 billion and $14.32, respectively. These estimates indicate corresponding growth of 3.1% and 1.9% year over year. The consensus mark for next fiscal year’s sales and EPS is pegged at $14.43 billion and $15.45, respectively, indicating a year-over-year increase of 4.2% and 7.9%. DKS currently displays a Zacks Rank #3 (Hold).

Eye These Solid Picks 

We have highlighted three better-ranked stocks, namely Gap GAP, Nordstrom JWN and Urban Outfitters URBN. 
 
Gap, clothing and accessories retailer, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. 
 
The consensus estimate for Gap’s current financial-year sales indicates growth of 1.5% from the year-ago figure. GAP delivered an average earnings surprise of 77.5% in the trailing four quarters. 
 
Nordstrom, a fashion specialty retailer, currently has a Zacks Rank #2 (Buy). 
 
The Zacks Consensus Estimate for JWN’s current financial-year sales indicates growth of 2.2% from the year-ago figure. The company delivered an earnings surprise of 22.2% in the last reported quarter.
 
Urban Outfitters, a fashion lifestyle specialty retailer, currently carries a Zacks Rank of 2. URBN delivered an average earnings surprise of 28.4% in the trailing four quarters. 
 
The consensus estimate for Urban Outfitters’ current financial-year sales indicates growth of 6.6% from the year-ago figure. 

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This article originally published on Zacks Investment Research (zacks.com).

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