Dick’s Sporting Goods (DKS) reported third quarter results that handily exceeded consensus expectations driven by low expectations and strong online growth. Sales increased 7.4% y/y to $1.94 billion driven by an increase in online sales of 16% y/y offset by a soft same-store sales decline of 0.9%. Earnings per share declined significantly, falling from $0.48 per share in the prior year quarter to $0.30 per share in Q3’17. I think Dick’s is copying Best Buy’s (BBY) playbook, and 2018 looks like it will be the company’s bottoming out year. I am becoming constructive on shares, but I would wait for a slightly more attractive entry point because I do not love everything Dick’s is trying to do.
Strategically (Mostly) Strong Decision Making, but Secularly Challenged
From a strategy standpoint, I think Dick’s is making some great changes. For one, the company led a nationally televised advertising campaign to introduce its price matching guarantee program, which is exactly what Best Buy did in reaction to Amazon (AMZN). This playbook, though it can make price one of the most important buying factors, should stabilize the business from a traffic perspective. Price parity can make buying in-store or online at Dick’s Sporting Goods much more palatable.
