Company Reports

We believe no-moat Dick’s Sporting Goods lacks an edge as sporting goods are sold through many channels. Although its sales and profitability growth over the past three years has been very impressive, we believe a slowdown is likely, as sporting goods retail is vulnerable 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. While Dick’s recent sales growth has generally outpaced this level, some of its rivals have posted strong results of their own. The firm’s competitors include e-commerce operators (such as wide-moat Amazon), mass retailers, specialty stores (narrow-moat Lululemon, Foot Locker, Bass Pro Shops/Cabela’s), and branded stores and owned e-commerce from major vendors. As an example of the latter, wide-moat Nike’s direct-to-consumer sales constituted about 44% of its fiscal 2023 Nike brand revenue sales, up from less than 20% before 2015. While Dick’s has strong relationships with Nike and other vendors, we do not believe its market position is strong enough to prevent it from offering exclusive merchandise in alternate channels. We forecast its compound average yearly sales growth of 4% over the next decade.

Dick’s Sporting Goods’ shares jumped about 15% on March 14 after the no-moat firm reported fourth-quarter results that exceeded our expectations. While we think the firm is executing very well in a tough marketplace, we view the shares as very overvalued after roughly doubling over the past four months. We expect to lift our $98 fair value estimate by a high-single-digit percentage.

We believe no-moat Dick’s Sporting Goods lacks an edge as sporting goods are sold through many channels. Although its sales and profitability growth over the past three years has been very impressive, we believe a slowdown is likely, as sporting goods retail is vulnerable 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. While Dick’s recent sales growth has generally outpaced this level, some of its rivals have posted strong results of their own. The firm’s competitors include e-commerce operators (such as wide-moat Amazon), mass retailers, specialty stores (narrow-moat Lululemon, Foot Locker, Bass Pro Shops/Cabela’s), and branded stores and owned e-commerce from major vendors. As an example of the latter, wide-moat Nike’s direct-to-consumer sales constituted about 44% of its fiscal 2023 Nike brand revenue sales, up from less than 20% before 2015. While Dick’s has strong relationships with Nike and other vendors, we do not believe its market position is strong enough to prevent it from offering exclusive merchandise in alternate channels. We forecast its compound average yearly sales growth of 3% over the next decade.

No-moat Dick’s Sporting Goods overcame a tough market for activewear with unexpected sales growth in the third quarter. The firm guided to full-year comparable sales growth of 0.5%-2% and adjusted EPS in a range of $12.00-$12.60, numbers that look conservative to us given the results and momentum heading into the holiday period. As such, we expect to raise our respective 1.4% and $12.35 estimates to the high end of the provided ranges, which should lift our $92 fair value estimate by a mid-single-digit percentage (in line with the market’s reaction). However, we rate Dick’s shares as overvalued. Although we think it has made a lot of progress in its merchandising, technology, and store operations, the sporting goods retail market is very competitive, and we do not think Dick’s can maintain its recent double-digit operating margins in the long run.

We believe no-moat Dick’s Sporting Goods lacks an edge as sporting goods are sold through many channels. Although its sales and profitability growth over the past three years has been very impressive, we believe a slowdown is likely, as sporting goods retail is vulnerable 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. While Dick’s recent sales growth has generally outpaced this level, some of its rivals have posted strong results of their own. The firm’s competitors include e-commerce operators (such as wide-moat Amazon), mass retailers, specialty stores (narrow-moat Lululemon, Foot Locker, Bass Pro Shops/Cabela’s), and branded stores and owned e-commerce from major vendors. As an example of the latter, wide-moat Nike’s direct-to-consumer sales constituted about 44% of its fiscal 2023 Nike brand revenue sales, up from less than 20% before 2015. While Dick’s has a solid relationship with Nike and other vendors, we do not believe its market position is strong enough to prevent it from offering exclusive merchandise in alternate channels. We forecast its compound average yearly sales growth of 3% over the next decade.

No-moat Dick’s Sporting Goods suffered a second-quarter profit miss and cut its full-year non-GAAP EPS guidance to $11.50-$12.30 from $12.90-$13.80 previously. While the firm stressed that consumer demand for its products remains strong, investors viewed the report very negatively, sending its shares down about 24%. We think investors and analysts had overestimated Dick’s competitive position after three years of strong results, leading to overvaluation. Moreover, even after the sharp decline, Dick’s continues to trade above our $92 per share fair value estimate, which we do not expect to change materially. While shares may appear inexpensive by traditional valuation metrics, we cannot support a more aggressive valuation as we believe Dick’s operating margins will decline from the low double digits at present to around 7% over the next decade.

We believe no-moat Dick’s Sporting Goods lacks an edge as sporting goods are sold through many channels. Although its sales and profitability growth over the past three years has been very impressive, we believe a slowdown is likely, as sporting goods retail is vulnerable 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. While Dick’s recent sales growth has generally outpaced this level, some of its rivals have posted strong results of their own. The firm’s competitors include e-commerce operators (such as wide-moat Amazon), mass retailers, specialty stores (narrow-moat Lululemon, Foot Locker, Bass Pro Shops/Cabela’s), and branded stores and owned e-commerce from major vendors. As an example of the latter, wide-moat Nike’s direct-to-consumer sales constituted about 44% of its fiscal 2023 Nike brand revenue sales, up from less than 20% before 2015. While Dick’s has a solid relationship with Nike and other vendors, we do not believe its market position is strong enough to prevent it from offering exclusive merchandise in alternate channels. We forecast its compound average yearly sales growth of 3% over the next decade.

Matching our estimate for 5% sales growth, Dick's Sporting Goods' first-quarter results generally aligned with our expectations. As the firm reiterated its full-year guidance for EPS of $12.90-$13.80 on flat to 2% comparable sales growth, we expect to make minimal revisions to our respective estimates of $13.54 and 1%. Overall, we believe Dick’s is executing well in an industry that has been struggling with elevated inventories and slowing consumer spending on athletic apparel and footwear. Thus, we expect to lift our $89 fair value estimate by a low-single-digit percentage. Although we believe its valuation is stretched and view it as a no-moat retailer due to the competitiveness of its space, we also think Dick’s has strengths, including its relationship with key vendors like wide-moat Nike, its loyalty program, and its prominence in youth sports.

We believe no-moat Dick’s Sporting Goods lacks an edge as sporting goods are sold through many channels. Although its sales and profitability growth over the past three years has been very impressive, we believe a slowdown is likely, as sporting goods retail is vulnerable 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. While Dick’s recent sales growth has generally outpaced this level, many of its rivals have posted strong results of their own, suggesting unusual industry momentum. The firm’s competitors include e-commerce operators (such as wide-moat Amazon), mass retailers, specialty stores (narrow-moat Lululemon, Foot Locker, Bass Pro Shops/Cabela’s), and branded stores and owned e-commerce from major vendors. As an example of the latter, wide-moat Nike’s direct-to-consumer sales constituted 42% of its fiscal 2022 Nike brand revenue sales, up from less than 20% before 2015. Further, we think the COVID-19 crisis has accelerated manufacturers’ direct-to-consumer efforts, as evidenced by Foot Locker’s acknowledgement that Nike has reduced shipments to the firm. We do not believe Dick’s market position is strong enough to prevent vendors from offering their merchandise in alternate channels. We forecast its compound average yearly sales growth of 3% over the next decade.

Dick’s Sporting Goods posted strong sales growth in 2022’s fourth quarter and offered positive 2023 guidance, sending its shares up about 10%. Given its momentum, we expect to lift our $82 fair value estimate by a high-single-digit percentage amount but still view its shares as overvalued. While we think Dick’s operating model is improved and believe its earnings will remain well above prepandemic levels, we also view it as a no-moat retailer in a highly competitive space.

We believe no-moat Dick’s Sporting Goods lacks an edge as sporting goods are sold through many channels. Although its sales have been very strong over the past two years, we believe a slowdown is likely, 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 (such as wide-moat Amazon), mass retailers (such as wide-moat Walmart), specialty stores (narrow-moat Lululemon, Foot Locker, Bass Pro Shops/Cabela’s), and branded stores and owned e-commerce from major vendors. As an example of the latter, wide-moat Nike’s direct-to-consumer sales constituted 42% of its fiscal 2022 Nike brand revenue sales, up from less than 20% before 2015. Further, we think the COVID-19 crisis has accelerated manufacturers’ direct-to-consumer efforts, as evidenced by Foot Locker’s acknowledgement that Nike will reduce shipments to the firm. We do not believe Dick’s market position is strong enough to prevent vendors from offering their merchandise in alternate channels. We forecast its compound average yearly sales growth of 3% over the next decade.

Shaking off the threat of slowing consumer spending due to inflation, Dick's Sporting Goods beat our negative 1.5% same-store sales estimate by recording a 6.5% increase in 2022's third quarter. As this result came on top of strong comparable sales growth in each of the previous three October-ending quarters, we view it as further affirmation that the firm's merchandising, pricing, and marketing efforts are scoring. Although we rate Dick's as a no-moat company due to the high competition in the sporting goods retail space, we view it as a strong operator with solid relationships with wide-moat Nike and other key vendors. Dick's shares moved up by a mid-single-digit percentage on the earnings report, and we expect to lift our $78 fair value estimate by a similar amount. However, we view shares as overvalued.

We believe no-moat Dick’s Sporting Goods lacks an edge as sporting goods are sold through many channels. Although its sales have been very strong over the past two years, we believe a slowdown is likely, 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 (such as wide-moat Amazon), mass retailers (such as wide-moat Walmart), specialty stores (narrow-moat Lululemon, Foot Locker, Bass Pro Shops/Cabela’s), and branded stores and owned e-commerce from major vendors. As an example of the latter, narrow-moat Adidas’ direct-to-consumer business constituted 39% of its 2021 sales, up from 25% in 2015. Further, we think the COVID-19 crisis has accelerated manufacturers’ direct-to-consumer efforts, as evidenced by Foot Locker’s acknowledgement that wide-moat Nike will reduce shipments to the firm. We do not believe Dick’s market position is strong enough to prevent vendors from offering their merchandise in alternate channels. We forecast its compound average yearly sales growth of 3% over the next decade.

Dick’s Sporting Goods shook off concerns over inflation and changing consumer habits to post 2022 second-quarter results above our expectations. Moreover, after offering a mixed outlook three months ago, it slightly lifted its guidance for the year. We expect to raise our $76 fair value estimate by a low-single-digit percentage but view Dick’s shares, up more than 40% over the past three months, as overvalued. Although we believe the firm has made progress in merchandising and e-commerce, we rate it as a no-moat company in the competitive sporting goods space with comparable sales growth of 2% and minimal earnings growth in the long run.

We believe no-moat Dick’s Sporting Goods lacks an edge 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 (such as wide-moat Amazon), mass retailers (such as wide-moat Walmart), specialty stores (narrow-moat Lululemon, Foot Locker, Bass Pro Shops/Cabela’s), and branded stores and owned e-commerce from major vendors. As an example of the latter, narrow-moat Adidas’ direct-to-consumer business constituted 39% of its 2021 sales, up from 25% in 2015. Further, we think the COVID-19 crisis has accelerated manufacturers’ direct-to-consumer efforts, as evidenced by Foot Locker’s acknowledgement that wide-moat Nike will reduce shipments to the firm. We do not believe Dick’s market position is strong enough to prevent vendors from offering their merchandise in alternate channels. We forecast its compound average yearly sales growth of 3% over the next decade, at the lower end of projected U.S. activewear growth of 3%-5%.

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.

We believe no-moat Dick’s Sporting Goods lacks an edge 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 (such as wide-moat Amazon), mass retailers (such as wide-moat Walmart), specialty stores (narrow-moat Lululemon, Foot Locker, Bass Pro Shops/Cabela’s), and branded stores and owned e-commerce from major vendors. As an example of the latter, narrow-moat Adidas’ direct-to-consumer business constituted 39% of its 2021 sales, up from 25% in 2015. Further, we think the COVID-19 crisis has accelerated manufacturers’ direct-to-consumer efforts, as evidenced by Foot Locker’s acknowledgement that wide-moat Nike will reduce shipments to the firm. We do not believe Dick’s market position is strong enough to prevent vendors from offering their merchandise in alternate channels. We forecast its compound average yearly sales growth of 3% over the next decade, at the lower end of projected U.S. activewear growth of 3%-5%.

Dick’s Sporting Goods wrapped up a terrific 2021 with fourth-quarter results that exceeded our estimates and its holiday sales pre-announcement of Jan. 6, 2022 (see our note of that date). Moreover, its 2022 adjusted EPS guidance of $11.70-$13.10 suggests a decline of only about 20% from 2021’s sky-high $15.70, smaller than the 40% drop we had anticipated. Thus, given this momentum and the rescission of our prior view of a hike in the U.S. corporate tax rate, we expect to lift our fair value estimate of $69 per share by nearly 10%. However, we view Dick’s shares, up a mid-single-digit percentage amount on the report, as overvalued. Although the firm has capitalized on favorable market conditions, we rate Dick’s as a no-moat firm due competition from many others, including its own vendors. For example, wide-moat Nike (17% of Dick’s 2021 sales) recently notified Foot Locker that it will pull back on shipments to focus on its own direct-to-consumer efforts. While we believe Dick’s has a strong relationship with Nike, the same has often been said of Foot Locker.

Continuing its amazing momentum, Dick’s Sporting Goods revealed an updated 2021 fourth-quarter and full-year sales and EPS outlook that exceeds our expectations. For the quarter, management now anticipates same-store sales growth, EPS, and adjusted EPS of 3.7%-4.7%, $3.00-$3.09, and $3.45-$3.55, respectively, versus our estimates of 3.0%, $2.37, and $2.75. For the year, it anticipates same-store sales growth, EPS, and adjusted EPS of 25.8%-26.1%, $13.70-$13.79, and $15.50-$15.60 versus our estimates of 25.0%, $13.05, and $14.80. Expected adjusted EPS for 2021’s fourth quarter is only slightly below Dick’s full-year 2019 mark of $3.69.

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.