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Dick's Sporting Goods Inc DKS

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Morningstar’s Analysis

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PREMIUM

5-Star Price

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Economic Moat

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Capital Allocation

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No-Moat Dick’s Sporting Goods Continued Its Winning Streak in Q3; Shares Fully Valued

David Swartz Equity Analyst

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.

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Company Profile

Business Description

Dick’s Sporting Goods retails athletic apparel, footwear, and equipment for sports. Dick’s operates about 725 stores under its own name and another 125 specialty stores under Golf Galaxy and Field & Stream names. Dick’s also operates e-commerce sites including youth sports site Team Sports HQ. Dick’s carries private-label merchandise and national brands such as Nike, The North Face, Under Armour, Callaway Golf, and TaylorMade. Based in the Pittsburgh area, Dick’s was founded in 1948 by the father of current chairman, CEO, and controlling shareholder Edward Stack.

Contact
345 Court Street
Coraopolis, PA, 15108
T +1 724 273-3400
Sector Consumer Cyclical
Industry Specialty Retail
Most Recent Earnings Oct 31, 2020
Fiscal Year End Feb 1, 2021
Stock Type Cyclical
Employees 41,600

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