Dick's Sporting Goods Sets Stage for Profitability
Our investment thesis for the no-moat retailer remains intact after its third-quarter update, as the company navigates several merchandise assortment changes.
Our investment thesis on no-moat
Barring a near-term recession, we expect comps to accelerate to the low single digits as Dick's replaces its hunt/firearm assortment with outerwear, baseball, and private label products. We also expect online sales (which grew 16% in the quarter) to remain in the low to midteens as Dick's expands 2-day shipping across the country. Our $40 fair value estimate remains unchanged as we remain confident in our outlook calling for average annual sales growth of 2.2% from fiscal 2018 to 2027 and average operating margins of 5.7% over the same period. While we see shares as modestly undervalued, we would not be surprised to see market optimism prop up Dick's stock as comps accelerate.
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