Company Reports

We have upgraded our moat rating for Dick’s Sporting Goods to narrow from no moat. Although sporting goods are sold through many channels, we believe that Dick’s has earned a competitive edge based on a brand intangible asset. The retailer is a key destination for consumers and athletic apparel and equipment vendors, standing resilient while many peers have shuttered. We believe consumers are drawn to its vast, on-trend product assortment and differentiated in-store experience and service model, which fosters brand loyalty. Meanwhile, vendors see Dick’s as a reliable partner for reaching and engaging with consumers, leveraging the firm’s store-within-a-store model to showcase a wide range of products, including exclusives.

We are changing our moat rating for Dick’s Sporting Goods to narrow moat from our prior no moat rating based on a brand intangible asset. Although sporting goods are sold through many channels, we believe that the firm has built a competitive advantage. The retailer is a key destination for consumers and athletic apparel and equipment vendors, standing resilient while many peers have shuttered. We believe consumers are drawn to its vast, on-trend product assortment and differentiated in-store experience and service model, which fosters brand loyalty. Meanwhile, vendors see Dick’s as a reliable partner for reaching and engaging with consumers, leveraging the firm’s store-within-a-store model to showcase a wide range of products, including exclusives.

Dick’s Sporting Goods continues to shine in a tough sportswear market, posting second-quarter results above our expectations. The firm’s 4.5% same-store sales growth outperformed our 3.5% estimate and the results of most retail peers. Although we rate Dick’s as a no-moat company due to the competitiveness of the sporting goods retail market, we believe its core strategies, including merchandising upgrades, House of Sport, loyalty program, and store remodels, are succeeding.

We believe no-moat Dick’s Sporting Goods lacks an edge as sporting goods are sold through many channels. Although its sales and profitability growth over the past three years has been very high, we believe a slowdown is likely, as sporting goods retail is vulnerable to external competition. According to IBISWorld, sporting goods retail sales experienced average annual growth of just 1.3% in the five years before the pandemic. While Dick’s recent sales growth has generally outpaced this level, some of its rivals have posted strong results of their own. The firm’s competitors include e-commerce operators (such as wide-moat Amazon), mass retailers, specialty stores (narrow-moat Lululemon, Foot Locker, Bass Pro Shops/Cabela’s), and branded stores and owned e-commerce from major vendors. As an example of the latter, wide-moat Nike’s direct-to-consumer sales constituted about 44% of its fiscal 2023 Nike brand revenue sales, up from less than 20% before 2015. While Dick’s has strong relationships with Nike and other vendors, we do not believe its market position is strong enough to prevent it from offering exclusive merchandise in alternate channels. We forecast its compound average yearly sales growth at 4%-5% over the next decade.

Dick's Sporting Goods' 5.3% comparable sales growth beat our 2% estimate in 2024's first quarter. Its sales results were impressive given that many sportswear producers have reported subpar consumer demand lately, although relatively high operating costs suggest that it needed to spend more to drive sales. We expect to lift our $106 fair value by a high-single-digit percentage and believe that implied guidance for the rest of 2024 is overly cautious. However, we rate Dick's as a no-moat company given the competitiveness of sporting goods retail, and we believe its shares, up by a mid-teen percentage on the report, are overvalued.

We believe no-moat Dick’s Sporting Goods lacks an edge as sporting goods are sold through many channels. Although its sales and profitability growth over the past three years has been very impressive, we believe a slowdown is likely, as sporting goods retail is vulnerable to external competition. According to IBISWorld, sporting goods retail sales experienced average annual growth of just 1.3% in the five years before the pandemic. While Dick’s recent sales growth has generally outpaced this level, some of its rivals have posted strong results of their own. The firm’s competitors include e-commerce operators (such as wide-moat Amazon), mass retailers, specialty stores (narrow-moat Lululemon, Foot Locker, Bass Pro Shops/Cabela’s), and branded stores and owned e-commerce from major vendors. As an example of the latter, wide-moat Nike’s direct-to-consumer sales constituted about 44% of its fiscal 2023 Nike brand revenue sales, up from less than 20% before 2015. While Dick’s has strong relationships with Nike and other vendors, we do not believe its market position is strong enough to prevent it from offering exclusive merchandise in alternate channels. We forecast its compound average yearly sales growth of 4% over the next decade.

Dick’s Sporting Goods’ shares jumped about 15% on March 14 after the no-moat firm reported fourth-quarter results that exceeded our expectations. While we think the firm is executing very well in a tough marketplace, we view the shares as very overvalued after roughly doubling over the past four months. We expect to lift our $98 fair value estimate by a high-single-digit percentage.

We believe no-moat Dick’s Sporting Goods lacks an edge as sporting goods are sold through many channels. Although its sales and profitability growth over the past three years has been very impressive, we believe a slowdown is likely, as sporting goods retail is vulnerable to external competition. According to IBISWorld, sporting goods retail sales experienced average annual growth of just 1.3% in the five years before the pandemic. While Dick’s recent sales growth has generally outpaced this level, some of its rivals have posted strong results of their own. The firm’s competitors include e-commerce operators (such as wide-moat Amazon), mass retailers, specialty stores (narrow-moat Lululemon, Foot Locker, Bass Pro Shops/Cabela’s), and branded stores and owned e-commerce from major vendors. As an example of the latter, wide-moat Nike’s direct-to-consumer sales constituted about 44% of its fiscal 2023 Nike brand revenue sales, up from less than 20% before 2015. While Dick’s has strong relationships with Nike and other vendors, we do not believe its market position is strong enough to prevent it from offering exclusive merchandise in alternate channels. We forecast its compound average yearly sales growth of 3% over the next decade.

No-moat Dick’s Sporting Goods overcame a tough market for activewear with unexpected sales growth in the third quarter. The firm guided to full-year comparable sales growth of 0.5%-2% and adjusted EPS in a range of $12.00-$12.60, numbers that look conservative to us given the results and momentum heading into the holiday period. As such, we expect to raise our respective 1.4% and $12.35 estimates to the high end of the provided ranges, which should lift our $92 fair value estimate by a mid-single-digit percentage (in line with the market’s reaction). However, we rate Dick’s shares as overvalued. Although we think it has made a lot of progress in its merchandising, technology, and store operations, the sporting goods retail market is very competitive, and we do not think Dick’s can maintain its recent double-digit operating margins in the long run.

We believe no-moat Dick’s Sporting Goods lacks an edge as sporting goods are sold through many channels. Although its sales and profitability growth over the past three years has been very impressive, we believe a slowdown is likely, as sporting goods retail is vulnerable to external competition. According to IBISWorld, sporting goods retail sales experienced average annual growth of just 1.3% in the five years before the pandemic. While Dick’s recent sales growth has generally outpaced this level, some of its rivals have posted strong results of their own. The firm’s competitors include e-commerce operators (such as wide-moat Amazon), mass retailers, specialty stores (narrow-moat Lululemon, Foot Locker, Bass Pro Shops/Cabela’s), and branded stores and owned e-commerce from major vendors. As an example of the latter, wide-moat Nike’s direct-to-consumer sales constituted about 44% of its fiscal 2023 Nike brand revenue sales, up from less than 20% before 2015. While Dick’s has a solid relationship with Nike and other vendors, we do not believe its market position is strong enough to prevent it from offering exclusive merchandise in alternate channels. We forecast its compound average yearly sales growth of 3% over the next decade.

No-moat Dick’s Sporting Goods suffered a second-quarter profit miss and cut its full-year non-GAAP EPS guidance to $11.50-$12.30 from $12.90-$13.80 previously. While the firm stressed that consumer demand for its products remains strong, investors viewed the report very negatively, sending its shares down about 24%. We think investors and analysts had overestimated Dick’s competitive position after three years of strong results, leading to overvaluation. Moreover, even after the sharp decline, Dick’s continues to trade above our $92 per share fair value estimate, which we do not expect to change materially. While shares may appear inexpensive by traditional valuation metrics, we cannot support a more aggressive valuation as we believe Dick’s operating margins will decline from the low double digits at present to around 7% over the next decade.

We believe no-moat Dick’s Sporting Goods lacks an edge as sporting goods are sold through many channels. Although its sales and profitability growth over the past three years has been very impressive, we believe a slowdown is likely, as sporting goods retail is vulnerable to external competition. According to IBISWorld, sporting goods retail sales experienced average annual growth of just 1.3% in the five years before the pandemic. While Dick’s recent sales growth has generally outpaced this level, some of its rivals have posted strong results of their own. The firm’s competitors include e-commerce operators (such as wide-moat Amazon), mass retailers, specialty stores (narrow-moat Lululemon, Foot Locker, Bass Pro Shops/Cabela’s), and branded stores and owned e-commerce from major vendors. As an example of the latter, wide-moat Nike’s direct-to-consumer sales constituted about 44% of its fiscal 2023 Nike brand revenue sales, up from less than 20% before 2015. While Dick’s has a solid relationship with Nike and other vendors, we do not believe its market position is strong enough to prevent it from offering exclusive merchandise in alternate channels. We forecast its compound average yearly sales growth of 3% over the next decade.

Matching our estimate for 5% sales growth, Dick's Sporting Goods' first-quarter results generally aligned with our expectations. As the firm reiterated its full-year guidance for EPS of $12.90-$13.80 on flat to 2% comparable sales growth, we expect to make minimal revisions to our respective estimates of $13.54 and 1%. Overall, we believe Dick’s is executing well in an industry that has been struggling with elevated inventories and slowing consumer spending on athletic apparel and footwear. Thus, we expect to lift our $89 fair value estimate by a low-single-digit percentage. Although we believe its valuation is stretched and view it as a no-moat retailer due to the competitiveness of its space, we also think Dick’s has strengths, including its relationship with key vendors like wide-moat Nike, its loyalty program, and its prominence in youth sports.

We believe no-moat Dick’s Sporting Goods lacks an edge as sporting goods are sold through many channels. Although its sales and profitability growth over the past three years has been very impressive, we believe a slowdown is likely, as sporting goods retail is vulnerable to external competition. According to IBISWorld, sporting goods retail sales experienced average annual growth of just 1.3% in the five years before the pandemic. While Dick’s recent sales growth has generally outpaced this level, many of its rivals have posted strong results of their own, suggesting unusual industry momentum. The firm’s competitors include e-commerce operators (such as wide-moat Amazon), mass retailers, specialty stores (narrow-moat Lululemon, Foot Locker, Bass Pro Shops/Cabela’s), and branded stores and owned e-commerce from major vendors. As an example of the latter, wide-moat Nike’s direct-to-consumer sales constituted 42% of its fiscal 2022 Nike brand revenue sales, up from less than 20% before 2015. Further, we think the COVID-19 crisis has accelerated manufacturers’ direct-to-consumer efforts, as evidenced by Foot Locker’s acknowledgement that Nike has reduced shipments to the firm. We do not believe Dick’s market position is strong enough to prevent vendors from offering their merchandise in alternate channels. We forecast its compound average yearly sales growth of 3% over the next decade.

Dick’s Sporting Goods posted strong sales growth in 2022’s fourth quarter and offered positive 2023 guidance, sending its shares up about 10%. Given its momentum, we expect to lift our $82 fair value estimate by a high-single-digit percentage amount but still view its shares as overvalued. While we think Dick’s operating model is improved and believe its earnings will remain well above prepandemic levels, we also view it as a no-moat retailer in a highly competitive space.

We believe no-moat Dick’s Sporting Goods lacks an edge as sporting goods are sold through many channels. Although its sales have been very strong over the past two years, we believe a slowdown is likely, as growth in sporting goods retail has generally been minimal due to external competition. According to IBISWorld, sporting goods retail sales experienced average annual growth of just 1.3% in the five years before the pandemic. Dick’s competitors include e-commerce operators (such as wide-moat Amazon), mass retailers (such as wide-moat Walmart), specialty stores (narrow-moat Lululemon, Foot Locker, Bass Pro Shops/Cabela’s), and branded stores and owned e-commerce from major vendors. As an example of the latter, wide-moat Nike’s direct-to-consumer sales constituted 42% of its fiscal 2022 Nike brand revenue sales, up from less than 20% before 2015. Further, we think the COVID-19 crisis has accelerated manufacturers’ direct-to-consumer efforts, as evidenced by Foot Locker’s acknowledgement that Nike will reduce shipments to the firm. We do not believe Dick’s market position is strong enough to prevent vendors from offering their merchandise in alternate channels. We forecast its compound average yearly sales growth of 3% over the next decade.

Shaking off the threat of slowing consumer spending due to inflation, Dick's Sporting Goods beat our negative 1.5% same-store sales estimate by recording a 6.5% increase in 2022's third quarter. As this result came on top of strong comparable sales growth in each of the previous three October-ending quarters, we view it as further affirmation that the firm's merchandising, pricing, and marketing efforts are scoring. Although we rate Dick's as a no-moat company due to the high competition in the sporting goods retail space, we view it as a strong operator with solid relationships with wide-moat Nike and other key vendors. Dick's shares moved up by a mid-single-digit percentage on the earnings report, and we expect to lift our $78 fair value estimate by a similar amount. However, we view shares as overvalued.

We believe no-moat Dick’s Sporting Goods lacks an edge as sporting goods are sold through many channels. Although its sales have been very strong over the past two years, we believe a slowdown is likely, as growth in sporting goods retail has generally been minimal due to external competition. According to IBISWorld, sporting goods retail sales experienced average annual growth of just 1.3% in the five years before the pandemic. Dick’s competitors include e-commerce operators (such as wide-moat Amazon), mass retailers (such as wide-moat Walmart), specialty stores (narrow-moat Lululemon, Foot Locker, Bass Pro Shops/Cabela’s), and branded stores and owned e-commerce from major vendors. As an example of the latter, narrow-moat Adidas’ direct-to-consumer business constituted 39% of its 2021 sales, up from 25% in 2015. Further, we think the COVID-19 crisis has accelerated manufacturers’ direct-to-consumer efforts, as evidenced by Foot Locker’s acknowledgement that wide-moat Nike will reduce shipments to the firm. We do not believe Dick’s market position is strong enough to prevent vendors from offering their merchandise in alternate channels. We forecast its compound average yearly sales growth of 3% over the next decade.

Dick’s Sporting Goods shook off concerns over inflation and changing consumer habits to post 2022 second-quarter results above our expectations. Moreover, after offering a mixed outlook three months ago, it slightly lifted its guidance for the year. We expect to raise our $76 fair value estimate by a low-single-digit percentage but view Dick’s shares, up more than 40% over the past three months, as overvalued. Although we believe the firm has made progress in merchandising and e-commerce, we rate it as a no-moat company in the competitive sporting goods space with comparable sales growth of 2% and minimal earnings growth in the long run.

We believe no-moat Dick’s Sporting Goods lacks an edge as sporting goods are sold through an increasing number of channels. Although its sales have soared during the pandemic, we believe the impact is temporary, as growth in sporting goods retail has generally been minimal due to external competition. According to IBISWorld, sporting goods retail sales experienced average annual growth of just 1.3% in the five years before the pandemic. Dick’s competitors include e-commerce operators (such as wide-moat Amazon), mass retailers (such as wide-moat Walmart), specialty stores (narrow-moat Lululemon, Foot Locker, Bass Pro Shops/Cabela’s), and branded stores and owned e-commerce from major vendors. As an example of the latter, narrow-moat Adidas’ direct-to-consumer business constituted 39% of its 2021 sales, up from 25% in 2015. Further, we think the COVID-19 crisis has accelerated manufacturers’ direct-to-consumer efforts, as evidenced by Foot Locker’s acknowledgement that wide-moat Nike will reduce shipments to the firm. We do not believe Dick’s market position is strong enough to prevent vendors from offering their merchandise in alternate channels. We forecast its compound average yearly sales growth of 3% over the next decade, at the lower end of projected U.S. activewear growth of 3%-5%.