DICK's Sporting Maintained at Neutral - Analyst Blog

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On Jul 17, 2013, we reiterated our long-term recommendation on DICK's Sporting Goods Inc. ( DKS ) at Neutral with a target price of $53.00. This was based on the company's consistently strong quarterly results, robust outlook and strategic growth initiatives. However, the stock remains vulnerable to a sluggish economic recovery and a weak consumer-spending environment.

Why the Reiteration?

DICK's Sporting's unique strategy of offering distinguished merchandise, sourced from leading manufacturers, provides it with a platform to better compete with other players.

Furthermore, the company leverages its strong vendor relationships to source overstock and closeout merchandise at a substantial discount, in order to boost gross margin and offer an attractive value to customers.

We remain impressed by the company's growth initiatives, which include expanding its store base and incorporating technological advancements to serve its patrons better. The company leverages an extensive network of stores to effectively penetrate into its target markets, which in turn, enable it to generate healthy sales and gain market share. Further, DICK's Sporting remains focused on enriching the shopping experience for its customers.

DICK's Sporting is witnessing steady top- and bottom-line growth as evident from its strong first-quarter fiscal 2013 results. The company reported first quarter results with earnings and net sales surging 6.7% and 4.1% to $0.48 per share and $1,333.7 million, respectively, primarily driven by new store openings, enhanced e-Commerce capabilities and improved margins. Moreover, the company has a history of beating the Zacks Consensus Estimate. In the last 20 quarters, DICK's Sporting surpassed the estimate 17 times with an average beat of 16.8%.

Looking ahead, DICK's Sporting reaffirmed fiscal 2013 earnings in the range of $2.84-$2.86 per share. Moreover, the company anticipates positive comps in the range of 2%-3% in fiscal 2013.

On the flip side, this Zacks Rank #3 (Hold) company is subject to the sluggish economic recovery and limited consumer spending. Moreover, the risk of sourcing merchandise from overseas markets may hamper DICK's Sporting's performance.

Other Stocks to Consider

Apart from DICK's Sporting, other stocks worth a look in the specialty retail sector include Five Below, Inc. ( FIVE ), Big 5 Sporting Goods Corp. ( BGFV ) and Build-A-Bear Workshop Inc. ( BBW ). All of them carry a Zacks Rank #2 (Buy).

BUILD-A-BEAR WK (BBW): Free Stock Analysis Report

BIG 5 SPORTING (BGFV): Free Stock Analysis Report

DICKS SPRTG GDS (DKS): Free Stock Analysis Report

FIVE BELOW INC (FIVE): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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