The largest U.S. full-line sporting goods retailer with an estimated 8.5% market share from nearly $6 billion in FY12 revenues and a five-year CAGR of 8% on sales, has four clear goals—reaching a double-digit operating margin; tripling the size of its 2011 e-commerce business by 2015; growing its brick-and-mortar base to 1,100+ doors helped by a renewed focus on smaller markets; and growing its $719 million-private brand/label business to $1 billion in annual sales.
Speaking at the Citigroup conference, Dick’s continues to invest in its e-commerce business, which represented 5%, or approximately $292 million, of its FY12 revenues via upgrades to site functionality, expansion of content, new capabilities and new efforts to leverage the chain’s store base. The retailer has made a number of changes to its e-commerce strategy in recent years to improve the segment’s profitability, including a shift of the mix to more higher-margin categories. Additionally, when orders are fulfilled from in-store, instead of the GSI Commerce warehouse, picked up in-store, or shipped direct from the vendor, margins improve.
This fall, Dick’s intends to initiate a pilot pick-up-merchandise in store delivery option that it sees as driving store traffic, providing a competitive advantage and improving transaction profitability. Management’s goal is that in the next 2-3 years, it will be “ambivalent” as to where the customer’s purchase is made, at a brick-and-mortar location or online.
On the new store front, Dick’s execs says a re-purposing of boxes, pegged at 50% of its new store construction in recent FYs, will likely rise to about 60% in 2013 and stay at that level for a couple of years as re-purposing of mall boxes around Sears locations and Best Buy doors should provide retail development opportunities for other retailers. As for smaller doors, Dick’s has opened 10, ranging in size from 35,000-40,000 sq. ft. in markets with populations of 75,000 to 100,000, in the last couple of years and seen them generate solid results. In smaller, rural communities, DKS builds its focus around the hunt/fish/camp customer. In larger, more suburban markets, the smaller stores tend to mirror larger, 50,000-sq.-ft. counterparts in their category trends.
On the private brands front, DKS will rely on labels such as Field & Stream, adidas baseball, Umbro, and Reebok athletic apparel for men and women to spark sales growth along with private label golf brands in Top-Flite, Walter Hagen, Maxfli, Slazenger and Nickent to reach its ambitious 39% top line growth objective to $1 billion in annual sales by the end of FY17.
Turning to results objectives, Dick’s is currently forecasting Q2 EPS of $0.75-.77 ($95 mm) with comps up 2-3% on a shifted calendar basis. FY13 consolidated EPS is pegged at $2.84-2.86 ($356.2 mm) with annual comps rising 2-3%.
Written by Nicolas Yang
