DICK’S Sporting Goods Inc. DKS has seen its shares slide 3.7% in the past week, pushing it behind its industry peers and the broader S&P 500 index. The downside came after the company’s soft earnings performance for third-quarter fiscal 2024, released on Nov. 26. Although DKS reported top-line growth, earnings per share (EPS) declined year over year.
In third-quarter fiscal 2024, DICK'S reported a 0.5% year-over-year increase in sales, while EPS declined 4%. The modest sales rise was affected by a calendar shift due to the prior year's 53rd week, which largely offset the 4.2% comparable sales (comps) growth. The EPS decline was attributed to impacts of 35 cents per share from the calendar shift and lower earnings before tax (EBT) due to SG&A expense deleverage.
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While DICK'S reported strong comps and improved sales, the calendar shift posed significant challenges. Also, strategic investments in marketing, technology and talent, with higher incentive compensation, have raised SG&A expenses, which continue to pressure the bottom line.
Although DKS has provided an optimistic outlook for fiscal 2024, it anticipates a challenging macroeconomic environment and a shorter holiday season to offset some of its operational and strategic gains. For fiscal 2024, DICK'S projects SG&A expenses to rise year over year as it invests in positioning itself for growth in 2025 and beyond. The calendar shift is expected to have a modest negative impact of $30 million or 10 cents per share in fourth-quarter fiscal 2024.
After the recent drop, DICK’S has underperformed the industry’s growth of 5.5% in the past week. The company also lagged the broader Zacks Retail-Wholesale sector and the S&P 500's rise of 1% and 0.8%, respectively, in the same period.
DICK’S Stock Price Performance
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DICK’S shares have lagged its competitors Ulta Beauty ULTA, Five Below FIVE and Bath & Body Works, Inc.’s BBWI growth of 6.6%, 1.2% and 1.3%, respectively, in the past week.
DICK’S Long-Term Game Play
We anticipate the DKS stock to regain its growth trajectory, driven by ongoing investments in delivering a superior omni-channel experience — a cornerstone of its long-term strategy. The company is advancing its stores and digital platforms, emphasizing training, service and product expertise to deepen engagement with its athlete customers.
The Pittsburgh-based retailer has been successful with innovative store concepts, including Dick’s Sporting Goods, Golf Galaxy, Public Lands, House of Sport, and Going Going Gone. Notably, the House of Sport concept is uniquely designed to cater to both performance and lifestyle athletes. DICK'S plans to open 15 House of Sport locations in 2025 and targets 75-100 locations by 2027.
Building on the success of House of Sport, the company is transforming its traditional 50,000-square-foot DICK'S stores into the next-generation Field House format, which has been delivering strong sales and profitability. In 2025, 20 Field House locations are expected to open.
The company is bolstering its presence in Texas, a key growth market, with new House of Sport stores, marketing initiatives and infrastructure investments. In third-quarter fiscal 2024, DICK'S began the construction of a distribution center in Fort Worth, set to open in early 2026, enhancing its omni-channel capabilities.
Digital innovation is central to the company’s omni-channel success. Enhancements to DICKS.com and the DICK’S mobile app, along with the launch of the GameChanger live-streaming app for youth sports, position the company to tap into the rapidly increasing youth sports technology market for sustained growth.
DICK'S solidifies its position as the premier destination for sports in the United States by offering exclusive, on-trend products from leading brands and its well-received private labels. The company remains optimistic about its robust product pipeline and ability to meet customer demand.
DKS’s Outlook Reflects Strength
DICK’S demonstrated strong progress across its four strategic pillars — omni-channel athlete experience, differentiated product assortment, deep brand engagement and knowledgeable teammates — evidenced by robust comps growth in the fiscal third quarter. Results were further bolstered by a successful back-to-school season and continued market share gains.
Highlighting its operational strength and momentum, the company raised its fiscal 2024 outlook. DICK’S now expects net sales of $13.2-$13.3 billion, with comparable sales growth of 3.6-4.2%, suggesting improvements from fiscal 2023 sales of $12.98 billion and 2.5% comps growth.
The company maintained its projected EBT margins at 11.2% at the mid-point for fiscal 2024, indicating growth from 10.8% in the prior year. The adjusted EPS is forecast between $13.65 and $13.95, whereas it reported $12.91 in fiscal 2023.
Upward Estimate Trajectory of DICK’S Earnings
The Zacks Consensus Estimate for DKS’s fiscal 2024 earnings per share increased by a penny in the last 30 days. The upward revision in earnings estimates indicates analysts’ rising confidence in the stock.
For fiscal 2024, the Zacks Consensus Estimate for DKS’s sales and EPS implies 2.4% and 7.6% year-over-year growth, respectively. The consensus mark for fiscal 2025 sales and earnings indicates 4.3% and 6.1% year-over-year growth, respectively.
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Is DKS Discounted Stock Valuation Good?
The company is presently trading at a discount to its industry on a forward 12-month P/E basis, making the stock an attractive pick for investors. DICK’S is trading at a forward 12-month P/E ratio of 14.2X, which is below the industry average of 17.8X and the S&P 500’s average of 22.59X.
At the current price of $207.24, the stock trades at a 13.4% discount to its 52-week high of $239.30. This indicates that the stock has upside potential.
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DICK’S is currently trading above the 50 and 200-day moving averages, indicating robust upward momentum and price stability. This technical strength reflects positive market perception and confidence in DICK’S financial health and prospects.
DICK’S Stock Trades Above 50 & 200-Day Averages
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Is DKS Stock a Buy Opportunity?
DICK’S delivered a resilient performance in third-quarter fiscal 2024, navigating challenges such as elevated investment costs and broader economic pressures. The company’s long-term growth prospects are strong, driven by effective strategies in merchandising, store enhancements and digital expansion. The company’s niche in the sporting goods market is reinforced by its focus on trend-right merchandise, customer engagement through targeted marketing and disciplined expense management.
With a favorable valuation, the stock offers a compelling entry point for investors seeking exposure to a profitable sporting goods company. However, caution is advised due to anticipated higher investment costs. For existing shareholders, retaining this Zacks Rank #3 (Hold) stock in their portfolios could be advantageous in the long term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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