Analyst Note| David Swartz |
Powered by the at-home fitness trend during the pandemic, no-moat Dick’s Sporting Goods smashed expectations in 2020’s third quarter. The firm achieved comparable sales growth of 23.2%, well above our 12.0% forecast and better than even the second quarter’s 20.7% mark. E-commerce skyrocketed 95% in the third quarter, but stores also performed well, recoding double-digit same-store sales growth and fulfilling 70% of digital sales. Yet, Dick’s share price dropped about 3% on the report, possibly because investors know that such high sales growth numbers are not sustainable. The firm cautioned that comparable sales had slowed to the high-teens over the past few weeks as unseasonably warm weather impacted sales of cold weather gear. Also, with more than 850 physical stores, the company is at risk of another round of virus-related store closures. We expect to increase our per share fair value estimate on Dick’s of $45.50 by a mid-single-digit percentage but view it as overvalued.