Should Dick's Sporting Goods Be Shaking in Its Sneakers?

Back in May, at Dick's Sporting Goods' (NYSE: DKS  ) first-quarter conference call, president and COO Joseph Schmidt downplayed rumors about Amazon.com (Nasdaq: AMZN  ) moving into sports apparel and equipment, saying:

From a premium standpoint, which is a bit more where we play... [Amazon doesn't] have access to a lot of that product. Nike doesn't sell them on a direct basis. Under Armour doesn't sell them on a direct basis. So some of that premium product, they don't have access to.

It's true that Nike (NYSE: NKE  ) and Under Armour (NYSE: UA  ) don't sell to Amazon or its subsidiary footwear e-tailer Zappos.com. But if Amazon uses its mighty force to pave the way for consumer demand within its channels -- particularly to another of its subsidiaries, Quidsi.com, which can create a more niche site to appease the premium brands -- would those companies resist? It's doubtful.

But Dick's (and many Wall Street analysts) are holding strong to the conviction that the company's current access to premium brands will protect its business from being obliterated by Amazon. The company has also been beefing up its online store to stay relevant.

So far Dick's attitude and efforts seem appropriate, and its stock has actually been beating Amazon's exciting 2012 growth by 12.7%:

DKS Chart

DKS data by YCharts

This Fool is skeptical of the long-term sustainability of Dick's lead, though.

Amazon isn't a company that just dips its toes into a retail sector. It goes into an industry with the goal of changing consumers' expectations. Luxury is the only sector it hasn't been able to penetrate yet, due to the experience luxury consumers expect. And unfortunately for Dick's, premium brands does not a luxury experience make.

Trying on sneakers is also not considered a luxury experience by most shoppers, and Amazon knows this. With free shipping and free returns, Zappos.com has overcome a lot of the barriers for footwear e-tailers, becoming the largest online shoe store in the process.

There wouldn't be any trial and error if Amazon seriously pursues this path -- it already knows how to penetrate the market, and execution would likely be swift and seamless.

Dick's and its investors should probably be more concerned for the company's long-term prospects. I'm going to head over to my CAPS page and give the company a thumbs-down, because I don't expect it to continue outperforming the market over the next few years. To read about a company in the retail with some incredible long-term prospects, be sure to check out our special report entitled: "The Motley Fool's Top Stock for 2012." This report is completely free and only available for a limited time, so claim your copy by clicking here.

Fool contributor Amanda Buchanan owns shares of Amazon.com, but she holds no other position in any company mentioned. Click here to see her holdings and a short bio. The Motley Fool owns shares of Dick's Sporting Goods, Under Armour, and Amazon.com. Motley Fool newsletter services have recommended buying shares of Amazon.com, Nike, and Under Armour. Motley Fool newsletter services have recommended creating a bear put spread position in Under Armour. Motley Fool newsletter services have recommended creating a diagonal call position in Nike. The Motley Fool has a disclosure policy.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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