DICK'S Sporting Goods, Inc. DKS stock seems to be in the limelight since the past year, with shares rising above 52%, comfortably outperforming the broader Retail-Wholesale sector’s return of 32.1% and the Zacks Retail - Miscellaneous industry, which grew 9.2% in the same period. DKS’ shares have also surpassed the S&P 500 index’s appreciation of 26.4% in a year.

This sporting goods retailer is benefiting from its strategic efforts including merchandising initiatives and store-related endeavors. The company has been making smart moves to enrich the customer experience.

DKS' Price Performance

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DICK'S Sporting’s Robust Efforts

DICK’S Sporting is benefiting from brand strength and continued market share gains. Management remains committed to digital innovation. DKS is emphasizing the omnichannel experience to drive solid athlete engagement. Its GameChanger app has been performing extremely well. 

GameChanger allows the company to connect to athletes beyond the traditional shopping experience, thus strengthening leadership in sports. In the third quarter of fiscal 2024, more than 5.5 million unique users engaged with GameChanger, reflecting a rise of 21% from the prior year. It had nearly 2 million average daily active users during the reported quarter, offering unique on-trend products.

DICK’S Sporting’s store-related endeavors appear quite encouraging. The company has revolutionized its most typical format, the 50,000 square-foot store, into the Field House concept. The Field House concept is inspired by House of Sport, having interactive experiences with unique presentation and service. 

In addition, the company is enhancing service levels at all its digital and store experiences to cater well to the athletes wherever they are. Such efforts are likely to generate huge sales and profitability.

DKS’ Earnings Estimate Revisions

Analysts look optimistic about the stock. The Zacks Consensus Estimate for fiscal 2024 sales and earnings per share (EPS) is currently pegged at $13.3 billion and $13.88, respectively. These estimates indicate corresponding growth of 2.4% and 7.5% year over year. The consensus mark for next fiscal year’s sales and EPS is pegged at $13.87 billion and $14.76, respectively, indicating a year-over-year increase of 4.3% and 6.3%.

Hurdles in DKS’ Growth Path

DICK’S Sporting has been grappling with an uncertain macroeconomic backdrop. In addition, higher wage rates and increased investments in talent and technology, as well as investments in marketing, have been leading to elevated costs. In the third quarter of fiscal 2024, adjusted selling, general and administrative (SG&A) expenses increased 7.2% and deleveraged 162 basis points as a percentage of sales.

In its last earnings call, management had anticipated modest deleveraged adjusted SG&A expenses year over year for the current fiscal year, thanks to strategic investments to drive growth. DKS had envisioned pre-opening expenses for the final quarter of fiscal 2024 to be moderately higher than the last year, led by the timing and mix of its store openings. Such expenses are likely to have marred its profitability. DKS had expected a modestly adverse impact in the fiscal fourth quarter of nearly $30 million or 10 cents per share.

DKS Stock’s Valuation

DICK’S Sporting stock is trading at an attractive valuation relative to the industry. Going by the price/earnings ratio, the stock is currently trading at 15.48 on a forward 12-month basis, lower than 17.81 for the industry. Also, the stock is trading lower than its five-year high of 24.78.

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Conclusion

DICK’S Sporting has been making initiatives to tackle cost issues. The company remains on track with business optimization to streamline the overall cost structure. Robust omnichannel athlete experience and unique product assortment also look encouraging. DKS currently carries a Zacks Rank #3 (Hold).

Key Picks in Retail

We have highlighted three better-ranked stocks, namely Deckers DECK, Abercombie ANF and Boot Barn BOOT.

Deckers, a footwear and accessories dealer, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. 

The Zacks Consensus Estimate for Deckers’ current financial-year sales indicates growth of 13.6% from the year-ago figure. DECK delivered an average earnings surprise of 41.1% in the trailing four quarters.

Abercrombie, a leading casual apparel retailer, currently sports a Zacks Rank of 1. ANF delivered an earnings surprise of 16.8% in the last reported quarter. 

The consensus estimate for Abercrombie’s current financial-year sales indicates growth of 13% from the year-ago figure. 

Boot Barn, a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories, currently carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 6.8%, on average. 

The Zacks Consensus Estimate for Boot Barn’s current financial-year sales indicates growth of 13.4% from the year-ago figure.

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Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report

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