Dick’s Sporting Good Shares Have Best Day Ever as Gun Sale Restriction Fears Appear Overblown
Dick’s Sporting Goods experienced its single best day since going public in October 2002 as shares rose +25.8% after the company reported fiscal Q1 ’18 sales and earnings growth (+3.2% YoY to $60.1 million). Dick’s also raised its full-year outlook despite having implemented restrictions on gun sales following the Stoneman Douglas school shooting. CEO Edward Stack in March predicted that the restrictions would hurt traffic and sales - and same store sales did decline -2.5% YoY – but the company managed to grow total sales +4.6% (to $1.91 billion) with the addition of new stores (including converted Sports Authority outlets) and an increase in full-price sales (i.e. fewer promotional deals). Dick’s hunting business suffered during the quarter, “an accelerated decline in an already challenged category”. The company is expecting those struggles to continue for the balance of 2018.
Howie Long-Short: Any concerns investors may have had that alienating the pro-gun crowd would be detrimental to DKS’ long-term bottom line have been alleviated. While Dick’s hunting business saw a decline in sales, a portion of those losses must be attributed to a cold spring that delayed the start of the outdoor season. Sure, some gun nuts are boycotting the company, but at the same time “there’s been a number of people who have started shopping us, or said they’re going to shop us more, because of the policy.” Sporting goods stores are in a tenuous spot right now as DTC sales momentum continues to increase, so DKS is wise to differentiate itself as a company that intends to remain on the right side of history. At the end of the day, it’s unlikely to save them from Amazon – but, it could help to outlast competitors like Bass Pro Shops and Cabela’s.
Looking for news that could prevent the company from becoming another Amazon victim? DKS increased e-commerce sales by 24% during the most recent quarter and online sales now make up 11% of the total business.
Fan Marino: Next time you’re in a Dick’s store, check out Wilson Sporting Goods’ (subsidiary of Amer Sports, AGPDY) Connected Football system. Designed to help quarterbacks throw more efficiently (though it could also be used for punters and kickers), the ball tracks release time, spin rate, spiral efficiency and speed; delivering the data to a smartphone app. Jets rookie QB Sam Darnold is a believer. Darnold, who has struggled with an elongated throwing motion (and has experienced fumbling issues as a result) says the insight received has helped him to “hone in on keeping my release compact.” Jets fans (like myself) sure hope so - he fumbled nine times last season on his way to 22 turnovers. Note: Version 2.0 is coming out later this year, which explains why the product is discounted on the DKS website.
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