Here's Why DICK'S Sporting is a Solid Investment Pick Now
DICK’S Sporting Goods Inc. DKS displays solid momentum on its consistent efforts to build the best omni-channel platform by strengthening store network and e-commerce presence. The company’s robust omni-channel initiatives are enriching customer experience across all channels while also augmenting top and bottom lines. Its bottom-line strength is evident from positive earnings surprises reported in seven of the last eight quarters. Additionally, the company’s merchandising strategy, which aims at optimizing inventory to make shelves available for popular and private label brands, bodes well.
These factors have not only aided its quarterly outcome but also boosted the share price, with gains of 22.4% recorded year to date. This compares with the industry’s decline of 0.2% during the same period.
There are more growth potentials for the stock as reflected by its robust earnings view for fiscal 2019. Currently, its adjusted earnings are expected to be $3.30-$3.45 per share, up from the previously mentioned $3.20-$3.40.
Factors Favoring the Stock
DICK’S Sporting is making significant investments in e-commerce, technology, store payroll, Team Sports HQ and private brands to augment its market share. It remains on track to build the best omni-channel experience for athletes by strengthening store network and expanding e-commerce presence. Its investments throughout fiscal 2019 will be focused on enhancing in-store experiences for athletes, improving e-commerce fulfillment capabilities, and developing technology solutions to boost athlete experience and employee productivity. Keeping in these lines, the company opened two dedicated e-commerce fulfillment centers in New York and California. Additionally, it is trying to improve digital marketing efforts by strengthening partnerships with Google GOOG and Facebook FB.
Additionally, the company’s efforts to improve in-store experience include the space reallocation to regionally relevant and growing categories, the rollout of HitTrax technology and batting cages in several stores, expansion of strike point presentations, and investment in product development teams. It rolled out HitTrax technology and batting cages in 20 other stores in the second quarter, bringing it to roughly 170 stores through the first half of 2019.
The company is also focused on private brands and is on track to launch new brands as part of its $2-billion sales goal in private brands. These actions will not only improve customer satisfaction and inventory turnover but also boost merchandise margin rates. Apart from this, the company is on track with store-opening plans. In fiscal 2019, it plans to open eight namesake and two Golf Galaxy stores.
Further, DICK’S Sporting is poised to benefit from the removal of hunting and electronics categories from its stores, which have been hurting comparable store sales (comps) for the past several quarters. It completely exited the electronics business in the fourth quarter of fiscal 2017. It is also on track with the removal of the hunt category from its stores. In the second quarter, the company eliminated the hunting category from nearly 125 more stores (where the category is underperforming). The category was replaced with a more compelling assortment.
Backed by these efforts, the company generated positive consolidated comps growth in the fiscal second quarter. Comps were aided by rise in both average ticket and transactions. This has been marked as the company’s strongest quarterly comps since 2016. It now anticipates same-store sales to be up in a low-single digit in fiscal 2019, whereas it witnessed a 3.1% decline in fiscal 2018.
The above discussion clearly shows that DICK’S Sporting has more room to run. Further, the Zacks Rank #2 (Buy) company’s expected long-term earnings growth rate of 5.6% and a VGM Score of A speak well of its growth potential.
Investors may consider another top-ranked stock, Hibbett Sports Inc HIBB, which also carries a Zacks Rank #2 at present. It has a long-term earnings growth rate of 10.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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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.