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DICK'S Sporting Goods: Headed To New Highs

Jun. 03, 2020 6:45 AM ETDICK'S Sporting Goods, Inc. (DKS)10 Comments


  • Dick's Sporting Goods has survived the worst of the coronavirus outbreak.
  • The company saw May comp sales only decline 4% while 44% of stores were closed.
  • The stock is likely to get a boost from the retailer re-implementing the capital allocation plan, which includes a 3.4% dividend yield.
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DICK'S Sporting Goods (Dick's) (NYSE:DKS) reported some amazing stats along with FQ1 results. Athletic apparel demand has already surged back in part due to strong online initiatives. My investment thesis was bullish on the stock after the collapse to $31 back in March even before the coronavirus store closures pushed Dick's Sporting Goods down another 50%. The recent rebound is likely just the start as even the company is looking at repurchasing cheap stock here.

E-commerce Shift

The biggest risk to all of the brick-and-mortar retailers was the Amazon (AMZN) threat. The leading online retailer had a better online ordering and delivery process, but the one positive of the coronavirus was forcing these sometimes sleepy retailers to implement online solutions to service customers from existing stores.

Anybody wanting instant sporting goods items while trapped at home during the pandemic had the option of utilizing curbside contactless pickup at Dick's Sporting Goods stores. The retailer previously didn't have such an option and now the company has a better portfolio of solutions to address customer needs.

Dick's saw comp sales fall 29.5% during FQ1 due to store closures starting on March 18. The company quickly shifted to online sales boosting e-commerce sales 250%.

Even with stores open half the quarter that ended on May 2, the company saw e-commerce account for 39% of sales, up from 13% in the prior-year FQ1. The shift to online sales has vastly improved the guidance going forward.

More importantly, Dick's only saw comp sales for the first 4 weeks of this quarter dip 4% despite 44% of stores still closed in the period. The retailer still had 20% of stores closed on May 30. With so many stores closed during May, one has to assume the company has solid cash flows in the quarter due to reduced operating expenses while revenues remain

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Stone Fox Capital Advisors, LLC is a registered investment advisor founded in 2010. Mark Holder graduated from the University of Tulsa with a double major in accounting & finance. Mark has his Series 65 and is also a CPA.

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