Activewear Demand Has Boosted No-Moat Dick’s Sporting Goods, but Competitive Threats Remain

We believe no-moat Dick’s Sporting Goods is struggling to stay relevant as sporting goods are sold through an increasing number of channels. Although its sales have soared during the pandemic, we believe the impact is temporary, as growth in sporting goods retail has generally been minimal due to external competition. According to IBISWorld, sporting goods retail sales experienced average annual growth of just 1.3% in the five years before the pandemic. Dick’s competitors include e-commerce operators like wide-moat Amazon, mass retailers like wide-moat Walmart, specialty stores like narrow-moat Lululemon and Bass Pro Shops/Cabela’s, and branded stores and owned e-commerce from major vendors. For example, narrow-moat Adidas’ direct-to-consumer business constituted 41% of its 2020 sales, up from 25% in 2015. Further, we think the COVID-19 crisis has accelerated manufacturers’ direct-to-consumer efforts. We do not believe Dick’s market position is strong enough to prevent vendors from offering their merchandise in alternate channels.