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Can Dicks Sporting Goods, Inc Build Confidence Through Near-Term Execution?

|Includes: Dick's Sporting Goods, Inc. (DKS)

Dick's Sporting Goods, Inc. (NYSE:DKS) will host its first ever analyst day meeting on Sept. 18. beginning at 8:00 am Eastern Time and ending at approximately 12:30 pm Eastern Time

Dick's Sporting Goods, Inc. is an authentic full-line sports and fitness specialty omni-channel retailer offering brand name sporting goods equipment, apparel and footwear in a specialty store environment. The company also owns and operates Golf Galaxy, LLC, a golf specialty retailer. As of Aug.3, 2013, the company operated 527 stores in 44 states and 81 Golf Galaxy stores in 30 states.

DKS stock has underperformed this year as the company has missed its sales projections three quarters in a row and missed EPS last quarter for the first time in at least six years.

Dick's is expected to unveil a five year earnings growth plan at a high level, likely including an average EPS growth trajectory and building blocks to get there.

"Our long term plan includes an average EPS growth rate of 15 percent, (using 2012 as the base and going out to 2016)," Deutsche Bank analyst Mike Baker wrote in a note to clients.

The company's potential long term plan may include continued investments in these areas, impacting both capital expenditures and SG&A.

Dick's may highlight new concepts. It ended last quarter with 1 Field & Stream store and 2 True Runner stores. Although very early, the company could give some initial results from these new concepts and continue to endorse opening a handful of additional stores later in 2013 and into 2014.

"While the newer concepts would be additive to our long-term square footage and sales model, we think some investors would prefer DKS to focus on their struggling core concept for now and return excess cash to shareholders through more aggressive buybacks," Baker said.

Over the long-term, Dick's is still targeting 1,100 Dicks Sporting Goods stores, but there is more downside than upside potential to that target, in part due to higher-than-expected cannibalization.

Also, the success of e-commerce initiatives should make the company settle for fewer stores in the coming years. E-commerce currently accounts for about 5.5 percent of sales and has been growing at greater than 50 percent a year and could support 1.5 percent comps.

Dick's could discuss tripling the size of e-commerce to close to $1 billion over the next 2.5 years, from about $300 million at the end of 2012.

"While we don't expect DKS to change that target (1,100 stores), which was first set just two quarters ago, we can envision them starting to quietly walk back a bit from 1,100; a scenario that we think would be viewed positively," Baker noted.

Besides the top line impact, Dick's would focus on improving functionality like buying online, pick up in store, and ship from the store, which improved profitability of e-commerce.

Meanwhile, the company is reducing space in underperforming categories like fitness and adding to its assortment of youth and women's apparel. It should also reemphasize its store-within-a-store program, primarily the build out of its Under Armour and Nike sets, as well as North Face.

The market may focus on trends in the footwear business, any improvements in basketball mix and expansion opportunities in under-levered to markets like California, Florida and Texas.

Investors should also look for key gross margin drivers ahead, including private label, mix, and improving systems amid focusing on any change in 2013 outlook. For fiscal year 2013, the company currently expects adjusted earnings per share to be in the range of about $2.60 to 2.65. Street expects earnings of $2.64 a share, according to analysts polled by Thomson Reuters.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: This article was written by Mani a contributor at iStockAnalyst.

Additional disclosure: This article was posted at