Dick's Sporting Retained at Neutral - Analyst Blog

We have retained our Neutral stance on full-line sporting goods retailer, Dick’s Sporting Goods Inc. (DKS), based on the company’s strong quarterly performance, robust outlook and strategic growth initiatives. However, the company remains vulnerable to the sluggish economic recovery and weak consumer spending environment.

Why Neutral?

Dick’s Sporting’s unique strategy of offering exclusive branded merchandise, sourced from leading manufacturers, provides it with an edge over cut-throat competition in the specialty retailing industry.

Furthermore, the company leverages its strong vendor relationships to source overstock and closeout merchandise at substantial discounts, in order to achieve dual objectives of boosting gross margin while offering compelling value to customers.

We remain impressed by the company’s growth initiatives, which include expanding its store base and bringing in technological advancements to better serve its patrons. The company leverages an extensive network of stores to effectively penetrate into its target markets, which in turn, enables it to generate healthy sales and gain market share. Further, Dick’s Sporting remains focused on enriching the shopping experience of its customers.

Dick’s Sporting reported strong fourth-quarter fiscal 2012 results with earnings and net sales surging 17% and 12% to $1.03 per share and $1,805.3 million, respectively. The company’s quarterly results primarily benefited from new store openings along with enhanced e-Commerce capabilities and improved margins.

Looking ahead, Dick’s Sporting currently expects fiscal 2013 earnings in the range of $2.84 – $2.86 per share, up 12.3% – 13.0% from $2.53 earned in fiscal 2012. Moreover, the company anticipates positive comps in the range of 2% – 3% in fiscal 2013.

On the flip side, this Zacks Rank #3 (Hold) company remains vulnerable to the sluggish economic recovery and cautious consumer spending. Moreover, risk of sourcing merchandise from overseas markets may hamper Dick’s Sporting’s performance.

Other Stocks to Consider

Besides Dick’s Sporting, other stocks to consider in the specialty retail sector are Cabela’s Inc. (CAB), Big 5 Sporting Goods Inc. (BGFV) and Hot Topic Inc. (HOTT). Of these stocks, Cabela’s and Big 5 carry a Zacks Rank #1 (Strong Buy), while Hot Topic has a Zacks Rank #2 (Buy).

BIG 5 SPORTING (BGFV): Free Stock Analysis Report

CABELAS INC (CAB): Free Stock Analysis Report

DICKS SPRTG GDS (DKS): Free Stock Analysis Report

HOT TOPIC INC (HOTT): Free Stock Analysis Report

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