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Dick’s Sporting Goods Heading in Right Direction

The retailer's execution and investment spending is properly directed as it faces continued headwinds.

While we don’t anticipate these headwinds to subside, we see a few levers to support its traffic/transactions, margin profile, and better utilize its stores over the next decade. For one, Dick’s continues to build out its own ecommerce platform, which appeals to consumers’ desire to shop online and 2) diversifies it’s business beyond the promotional North American wholesale market (source of the promotional headwinds that we expect to rationalize in the second half of 2018). In this vein, e-commerce sales were up 9% (14% excluding a holiday integration issue) and now account for 13% of total sales. We expect this channel will grow at a double-digit clip (toward 30% of sales) through fiscal 2027 and should support the firm’s transactions (which were flat this quarter but lapped a strong 2.5% increase last year). As such, we believe the firm’s execution and investment spending is properly directed, and view management’s decision to allocate savings from U.S. tax reform to support this channel favorably.

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About the Author

John Brick

Equity Analyst

John Brick, CFA, is an equity analyst for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers retail defensive names, including large general merchandise retailers, sporting good manufactures, and grocery/distribution names.

Before joining Morningstar in 2017, Brick worked at Arkansas-based Stephens Inc. where he covered various consumer companies. Prior to that, he worked at Chicago-based Vilas Capital, where he was a generalist on a long-short hedge fund. Brick began his career at Northern Trust as a private equity analyst.

Brick earned a bachelor’s degree in finance, with minors in economics and decision sciences, from Miami University’s Farmer School of Business. He holds the Chartered Financial Analyst® designation.

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