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Dick’s Sporting Goods Keeps on Winning

The retailer has done a surprisingly good job of turning its business around.

August 30, 2021

Dick’s Sporting Goods (NYSE: DKS) does not get talked about often as a retail leader but the company’s management has done a very good job turning around the once-struggling retailer. The sporting goods chain has been innovative and has steadily delivered strong results over the past few years while, in the past year, it has benefitted greatly from pandemic-driven trends.

The company recently reported its second-quarter results and the numbers were strong:

  • Dick’s Sporting Goods’ sales rose 21% versus a year ago and 45% versus two years ago in the fiscal second quarter.
    • Customers are buying workout clothes, sneakers, golf clubs, and other outdoor equipment.
  • Net sales rose to $3.27 billion from $2.71 billion a year earlier, outpacing estimates of $2.85 billion.
  • Same-store sales were up 19.2% in the second quarter.
  • Excluding items, it earned $5.08 per share, far higher than the $1.85 per share expected by analysts.
  • Dick’s is clearly benefitting from pandemic-related trends and in a post-pandemic world, people may not camp as much or maybe even play as much golf. Investors should note, however, that the company has made steady investments in new concepts, owned and operated brands, and share repurchase programs.

Numbers this stellar may not be possible year-over-year but good management that has an eye on the future tends to win. Dan Kline kicked off the August 25 edition of 7investing Now talking about Dick’s Q2 results with an assist from producer/director JT Street.

A full transcript follows the video.

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Dan Kline: But we’re going to talk about Walmart and last-mile shipping. But before we do that, I asked JT to join me, because I’m going to talk a little bit about Dick’s Sporting Goods (NYSE: DKS). Dick’s reported this morning. I didn’t plan to do this when I did the show last night. But let me ask you JT, you’re a fit guy, you’re outside, you exercise. When was the last time you thought about Dick’s Sporting Goods.

JT Street  1:15  It had to have been before the pandemic, Dan, I’ve actually been in a Dick’s Sporting Goods zero times as a consumer. It just didn’t quite resonate with me. But that’s also because I didn’t own a home with a backyard when Dick’s rose to prominence. So now that I have a place in the backyard, I’m like, maybe I should buy a bow and arrow or something, esoteric from there. So, I’m thinking about it more now.

Dan Kline  1:42  So I’m a big fan of Dick’s as a consumer, not that I buy a lot, but I like to walk around and like look at kayaks and be like, Hey, I should buy a new football. Like I don’t usually. But it’s a store I like. But they reported. And why am I bringing this up? I think this is really important. I’m bringing this up, because we spend a lot of time talking about Amazon (NASDAQ: AMZN), Target (NYSE: TGT), and Walmart (NYSE: WMT). And we spend a lot of time talking about failing retailers. So we’ve devoted way more time on this program, talking about, say, Sears and JC Penney than we’ve ever talked about Dick’s Sporting Goods or another company that just reported great earnings, and that’s Best Buy (NYSE: BBY).

So I just wanted to do a quick little monologue and JT is sitting in just so it’s not this poorly lit shot of me gigantic and I and we could play off each other a little bit. I appreciate him doing that. But Dick’s sales rose 21% versus a year ago. Now the year-ago comparison is a pandemic-to-pandemic comparison. But they were up 45% versus two years ago. What does this show us JT? It shows that the Dick’s strategy is working. We’ve had a lot of these companies that we’ve brought up, and I kind of say, like, throw out the numbers because of the pandemic. And there’s a bit of that here, because obviously, I’m not so sure we’re all going to camp quite as much when the pandemic is over.

But if you look at the two-year sales, even if they were only up over sort of the last nonpandemic, year, 5%, or 6%, you would say it’s a pretty successful company. So 45%, that number is astounding. Customers are buying workout clothes, that makes sense, sneakers, golf clubs, and other outdoor equipment. And some of those things, like I don’t know, do you golf JT?

JT Street  3:15  I had a set of golf clubs, and now someone else has them. So I could golf in the future. But when I had a kid, I was like, I’m not going to be golfing for the next three years. So yeah.

Dan Kline  3:28  And of course, I should remind the audience, we’re going to take your questions and comments live, we’ll probably do that at the end of the show. If you want to say hello, if you want to wave a JT whatever you like, feel free to do that. Net sales are up, rose to $3.27 billion. That’s from $2.71 billion a year ago, same-store sales were up year over year 19.2%. Again, some of these numbers are pandemic inflated. But what do I like about this company, I like that it’s making a lot of money, and it knows the pandemic is going to end. So it’s aware that if you take up golf, you’re probably gonna keep golfing, but you might not buy as much stuff, you might not camp as much.

So they’re testing a number of different concepts. Imagine JT if you went to a Dick’s and it had a running track, or it had an archery bay where you could try out that bow and arrow. As someone who once owned a bow and arrow for many years. It’s not always easy to find a place to shoot your bow and arrow. Dick’s is trying closeout stores. Dick’s is trying all sorts of owned and operated brands. So this is a company that’s being run very much like Target, a company we talk about really positively. So I’m not going to spend a ton of time on this. I’m not going to go through all the details. But I wanted to bring this up just because sometimes we forget about some of the success stories in this space.

This is a stock that’s up 104% over the past couple of years. So again, this is not a tech company that’s going to be up 5,000% but it’s also not a company that’s going to be all that volatile. You’re not going to see Dick’s has a bad month and shares go down 60%. So with that, I will leave it there. I appreciate you sitting in JT.

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