The bets are in that sporting good stores will be big winners
this holiday season as they lure shoppers with hot brands in
athletic apparel, footwear and equipment.
The recreation segment, which includes sporting goods
retailers, should outpace the industry during the Christmas
period with an estimated 43% jump in the group's fourth-quarter
earnings, says Ken Perkins, president of Retail Metrics. That
compares with an 11.1% rise forecast for the industry in the
fourth quarter, which runs from November to January for most
Sporting goods retailers are also among the segments likely to
see higher same-store sales growth than the industry, says
Michael Niemira, chief economist at the International Council of
Shopping Centers. He expects the group to see fourth-quarter
same-store sales rise 4.5% vs. a year earlier, compared with a
2.5% rise for the entire retail industry.
The sporting goods retail sector, says Perkins, is in a "sweet
spot in a "sports-crazed" nation.
And specialty retailers in the segment, such asDick's Sporting
) have done a good job of marketing apparel and related
logo-branded merchandise, which range from mugs and sweat shirts
to pillow coverings, he says.
Dick's is the largest specialty sporting goods retailer in the
U.S. with 511 stores, as of Oct. 27. It's been on a long-running
winning streak with at least double-digit earnings growth in all
but two of the last 13 quarters. Analysts polled by Thomson
Reuters expect it to keep up the pace in the fourth quarter with
profits up 39% to $1.06 a share.
Dick's entices shoppers with features that should continue to
work to its advantage during the Christmas period, say watchers.
It features a wide variety of hot brands likeNike (
) andUnder Armour (
), and offers merchandise that's well differentiated from what
you find at other stores, says Brian Sozzi, chief equities
analyst at NBG Productions. That helps lure customers and enables
Dick's to command higher prices, he says.
Another big draw, says Sozzi, are specialty shops within
Dick's stores, such as its Nike Fieldhouse and Under Armour
All-American shops. These shops create an "experience" for the
consumer with the best products from the retailer's key vendor
partners and unique products not sold elsewhere, Sozzi says. He
says the products are very high margin, high-priced and are
rarely marked down. They also make the Dick's store look a lot
different than, say, the apparel section of a department
Dick's is ramping up expansion of these shops. At the end of
the third quarter, it had 159 Nike Fieldhouse and 88 Under Armour
All-American shops. It expects to increase that to 171 Nike
Fieldhouse shops and 97 Under Armour All-American shops by the
end of the end of the year.
Also working to Dick's advantage is its push to increase its
gross margins by selling more of its own exclusive brands, such
as Walter Hagen, Maxfli and Nickent, says Piper Jaffray analyst
It's also increasing its margins by changing the product mix
to include more apparel and footwear, which inherently fetch
higher margins than the hard goods in the stores, he adds.
Dick's has benefited from a "multiple tail wind" in sporting
goods, driven in part by increased awareness of heath and
wellness, says SunTrust Robinson Humphrey analyst David
A recent upgrade to its e-commerce operation has helped boost
its business online. Dick's is testing shipping from stores,
where products ordered online are shipped directly from stores, a
feature that gives Dick's a competitive edge, says Magee.
The company has made a lot of progress on this front, with 115
stores operating under this program at the end of the third
"Ship from store is an incredibly powerful tool as it reduces
delivery time to the customer, while improving productivity and
transaction profitability," said Chief Executive Edward Stack on
the third quarter conference call, noting it will add more stores
to the test in 2013.
He says since the ship from store effort lets Dick's utilize
inventory located in its stores which was previously unavailable
online to customers, it's been seeing a meaningful increase in
its online sales. In the third quarter, it saw a 46.7% increase
in its e-commerce business.
Dick's rang up a solid third quarter overall. Earnings rose
25% to 40 cents a share. Sales increased 11% to $1.3 billion.
Consolidated same-store sales grew 5.1% vs. a year earlier.
For the fourth quarter, which will have 14 weeks vs. 13 weeks
last year, Dick's sees same-store sales rising 4% vs. a year
Naughton says because of abnormally warm winter weather,
during last year's fourth quarter Dick's was forced to take
markdowns on high-priced seasonal products such as snowboards and
"If we have normal winter weather, it should lead to pretty
significant upside for sales and margin expectations in the
fourth quarter," he said. "We remain favorable on the stock given
current valuation, but we need to see cooler weather trends
across the U.S. soon so outerwear starts to sell better."
Another issue is the National Hockey League lockout this
season, which could impact the sales and demand for licensed
hockey apparel, adds Magee.
But Dick's is expected to enjoy a strong showing for the year.
The company forecasts full-year same store sales to increase
Analysts polled by Thomson Reuters see full-year earnings
rising 27% to $2.56 a share. They see a 14% gain in 2013.
Dick's suspended sales of modern sporting rifles nationwide in
the wake of the school shooting in Newtown, Conn. It stopped
sales of all guns at stores closest to the shooting.
Naughton says the move probably won't have a "material impact"
on the company's sales.