Stock price up 14.3%
Sports goods retailer Dick’s Sporting Goods (DKS) has had a fine run on the bourses so far in 2018. As of April 13, 2018, the stock price had risen 14.3% to $32.86. The company benefited from a strong holiday season driven by improved consumer sentiment.
This year is expected to bode well for retailers, with economic revival, low unemployment rates, and tax cuts. According to Kiplinger, retail sales (excluding gasoline and automobiles) are likely to grow 4.7%, whereas they grew 4.1% in 2017.
As the proverb goes, “a rising tide lifts all boats”—other sporting goods retailer stocks are also doing well. Hibbett Sports (HIBB) has risen 30.4%, and Big 5 Sporting Goods (BGFV) has risen 2.6%. However, Foot Locker (FL) has fallen 3.6%, with the company’s strategic initiatives taking time to yield results.
Why are investors upbeat about Dick’s Sporting Goods?
Dick’s Sporting Goods has remained focused on driving digital sales. As consumer preferences are fast shifting to online shopping, the company has been developing its omnichannel and digital capabilities to fight off competition from Amazon (AMZN) and other online retailers. The company is improving its page layout and developing a faster checkout process. In fiscal 4Q17, the company’s digital sales grew 9%.
Dick’s Sporting Goods is focused on enhancing its private brands. It believes that amid stiff competition, product differentiation and exclusivity could boost sales of in-house brands such as Field & Stream, Walter Hagen, Top-Flite, and Calia. However, ongoing investments and rising logistics expenses due to higher digital sales could limit its margins.
It remains to be seen how Dick’s Sporting Goods’ decision to control the sale of guns will affect its top line. Dick’s Sporting Goods has discontinued selling guns to people under 21 years old. It has also discontinued selling assault-style rifles following the Florida school massacre. In the next article, we’ll study Dick’s Sporting Goods’ sales trends.