Dick's Sporting Goods: Post Mortem on Earnings

Last week, Dick's Sporting Goods (DKS) delivered disappointing results and guidance. Since I have been well connected to analysis on DKS since the company went public, I thought that I would pass on some thoughts about the earnings report and conference call. Management has been known to be conservative with its guidance but this time the guide down was too much to ignore.  

The stock was sold down sharply and traded down to a 52 week low. I have owned DKS since the company went public and have no plans to sell stock. In fact, I might add on weakness. The company has had only two off quarters – 2q06 and the one just reported – since going public in October 2002. Both times the earnings miss was quite small.

DKS is suffering a little from the slowing economy but even greater from a cyclical downturn in golfing. DKS has made big investments in golfing both at its flagship stores and through the recent Golf Galaxy purchase. Also, the shine is off of Under Armour (UA), which performed quite well in the year ago period.

However, I can accept some bumps along the road to what is one of the best long term specialty retail growth stories in the marketplace. With the acquisition of Chick’s Sporting Goods, DKS is now positioning itself in California and will be able to morph into the nation’s leading sporting goods retailer from coast to coast.

If you don’t have DKS, take a hard look because it is now priced at a markdown price and those don’t happen quite often for growth stocks.

At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of DKS --- although positions can change at any time.

Comments

[Lisa:]

Not knowing either of these stocks, can you explain more about the relationship between DKS and Under Armour?

2008 May 29 03:27 PM