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Dick's Sporting Goods (DKS)Stock (Sporting Goods Stores Industry, Apparel Stores Industry, Retail Industry, Sporting Goods Industry)
 While the majority of Dick's products are brand names manufacturers like Nike, adidas, and Under Armour (UA), one important trend affecting Dick's is the growth of its own private label product lines, which accounted for approximately 14.1% of sales in 2006 (up from 6% in 2002) and typically contribute 5-6 percentage points to their bottom line. In addition, as one of the largest specialty retailers in the U.S., Dick's is particularly prone to downturns in the economy that can constrain consumer spending on non-essential goods like sporting goods equipment.
[edit] Business FinancialsAs a sporting goods retailer, Dick's generates revenue through sales of sporting equipment and apparel in its physical Dick's Sporting Goods retail stores and DicksSportingGoods.com (Dick's e-commerce site fully outsourced to GSI Commerce (GSIC)). The company also owns the Golf Galaxy retail chain which sells golf equipment and apparel and provides club repair and other services. Dick's generated total revenue of $3.8 billion in 2007, with 92% of sales coming from Dick's Sporting Goods stores and the remainder from Golf Galaxy stores. In 2007, sales at Dick's Sporting Goods stores were split between three major product categories:
Dick's total sales has grown considerably in conjunction with store growth, from $1.2 billion in 2002 with 141 stores to $3.8 billion in 2007 from 340 Dick's stores and 79 Golf Galaxy locations. Dick's profit margins are comparable to other retailers, with gross profit margin and operating margins registering at 29.8% and 6.9% respectively in 2007, up from 28.8% and 6.3% in 2006[4]  [edit] Trends and Forces[edit] Expanding Store Base to Warmer ClimatesAt the end of 2006, Dick's operated 294 stores in 34 states, concentrated the Mid-Atlantic/Northeast regions. The company has initiated plans to open stores in regions with year-round warm climate such as Florida, Texas and California where outdoor sports like golf, baseball and football are played all year. In 2007, the company added 46 and 16 new Dick's and Golf Galaxy stores, respectively.[6] New store expansion fueled the 25% net sales increase during the year, as comparable store sales increased only 2.4%. Dick's made a big move into California in late November of 2007, acquiring Chick's Sporting Goods. Chick's is a sporting goods specialty retailer much like Dick's, with 15 stores located throughout Southern California, carrying a full line of team sports gear as well as equipment for alternative sports like surfing and snowboarding. Dick's Q3 2008 revenue grew about 10% from a year earlier, following the company's acquisition of Chick's and new store openings.[7] [edit] Private-Label Helping MarginsIn order to boost margins, Dick's carries its own private-label brands (including Ativa) alongside its brand name merchandise from companies like Nike (NKE), Under Armour (UA) and brands like The North Face from V.F. (VFC). Its private-label products sell at margins approximately 5-6 percentage points higher than typical branded goods. Dick's has put an increased emphasis on these private-label brands as they have grown as a percentage of total sales from 5.8% in 2002 to 14.1% in 2006.[8] As Dick's moves private-label products into Golf Galaxy stores and increases the presence of these brands in Dick's stores it should help the company continue to increase their gross profits.  [edit] SeasonalitySeasonality affects Dick's sporting goods in two distinct manners:
[edit] Macroeconomic Downturns: Squeezing Consumer's WalletsAs a retailer of non-necessary goods Dick's is one of the first companies to lose sales when poor economic conditions dampen consumer spending. Since Dick's product lines are not diversified with non-athletic offerings (e.g., groceries or basic clothing) it is more exposed to economic downturns than other retailers such as Wal-Mart Stores (WMT) and Target (TGT). Dick's struggled with the economy's downturn in 2008 as sales on net increased 11%, but comparable store sales decreased 3.8% and 7.4% at Dick's stores and Golf Galaxy stores, respectively during Q1 2008. Additionally, in Q3 2008, Dick's comparable store sales decreased 2.8% although its revenue increased 10% following the 2007 acquisition of Chick's.[7] [edit] CompetitionDick's is one of the largest specialty retailers in the U.S., selling $3.8 billion of sporting goods in 2007. Dick's competes in fragmented industry, with the top six sporting goods retailers holding only 19% of the estimated $52 billion market. The Sports Authority (bought by a private equity firm in 2006) holds second place with $2.7 billion of sales in 2006. Other companies that Dick's compete with in the sporting goods retail market include the following firms:
Dick's also faces considerable competition from footwear retailers like Foot Locker ($5.4 billion in 2007 sales)[10] and Finish Line (FINL) ($1.27 billion)[11] as footwear accounted for 17% of Dick's total revenue in 2006. Dick's is also facing increasing competition from big box retailers like Wal-Mart, Target and Amazon.com who sell a selection of sporting equipment and apparel in their stores as well.
 Dick's Sporting Goods2004 Data 2005 Data 2006 Data 2007 Data 2008 Data Most Recent Data Available [edit] Sporting Goods Market ShareOn a head-to-head basis it is hard to compare Dick's with its main rival, The Sports Authority because of a lack of public information on TSA's business. However, The Sports Authority generated an estimated $2.7 billion of sales from 419 stores in 2006, compared with Dick's $3.1 billion from 294 stores.
Note: Market shares calculated with estimated $52.1 billion sporting goods retail market size. [edit] References
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