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Where Dick’s Sporting Goods Stock Is Headed in 2018

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Stock up 7.9% in 2018

As of May 18, Dick’s Sporting Goods (DKS) stock has risen 7.9% YTD (year-to-date). Other sporting goods retailer stocks are also doing well. Hibbett Sports (HIBB) has risen 36.5%, and Big 5 Sporting Goods (BGFV) has risen 3.9%. However, Foot Locker (FL) has fallen 7.3%, with the company’s strategic efforts taking time to yield results.

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Opportunities for Dick’s Sporting Goods

Dick’s Sporting Goods is focused on driving its omnichannel and digital capabilities. It’s improving its page layout and working on a faster checkout process. In the fourth quarter, its digital sales rose 9%.

The company is also slowing down store expansion, only opening new stores on favorable terms at favorable locations. The company is targeting new and underpenetrated markets for its new store openings in locations where many retailers, including Golfsmith, Sports Authority, and Sports Chalet, have closed their stores. Dick’s projects 19 new store openings this fiscal year.

The company also believes that amid stiff competition, product differentiation and exclusivity could boost sales of in-house brands such as Top Flite, Field & Stream, Walter Hagen, and Calia. It says it will also be launching some new brands in 2018 and is allocating more store space to its private brands.

The company expects an innovative product pipeline from Nike, Callaway, Adidas, and other sporting goods manufacturers to benefit its top line this year.

As the nation’s economy revives, this year is projected to bode well for retail. Also, low unemployment rates and tax cuts are likely to give retail sales a boost. According to Kiplinger, retail sales (excluding gasoline and automobiles) are likely to grow 4.4%, compared to a 4.1% growth in 2017.

Challenges ahead

Ongoing investments and rising shipping expenses due to increases in digital sales could limit Dick’s Sporting Goods’ margins. For fiscal 2018, the company has guided to higher SG&A (selling, general, and administrative) expenses, which will weigh on its operating margin. Its operating margin is expected to decline compared to 5.6% in fiscal 2017.

It remains to be seen how Dick’s Sporting Goods’ decision to limit the sale of guns will affect its sales numbers.

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