No-Moat Dick’s Sporting Goods’ Solid Q1 Overshadowed by Cautious Outlook; Shares Fairly Valued

Dick’s Sporting Goods opened 2022 with first-quarter results above our expectations, but the firm offered mixed messages about the rest of the year. It now anticipates 2022 adjusted EPS of $9.15-$11.70, short of our $12.77 forecast, on a comparable sales decline of 2%-8%. However, it stressed that this outlook anticipates inflation-related demand weakness that has yet to occur. This cautious view caused a big swing in Dick’s shares—after initially dropping about 10%, they reversed to a nearly 10% gain. Although it now appears likely to fall short of initial 2022 expectations, we do not expect to make any significant change to our $75 fair value estimate and view Dick’s shares as fully valued. We have long anticipated declining operating margins and sales growth rates in our model as we view Dick’s as a no-moat retailer in a very tough space, though it has made nice progress with its merchandising and omnichannel efforts.