There was the belief that when Dick's Sporting Goods (NYSE:DKS) abandoned the firearms market and then took positions that angered the gun community -- such as raising the minimum age to buy a firearm in its stores and pushing for more gun control laws -- it had permanently hurt itself. 

While it may have done so with hunters and other gun owners and enthusiasts, the retailer has used the opportunity to expand into sports where it was underrepresented and now is generating higher sales with better profit margins. 

Because Dick's sales are also heavily seasonal, with the fourth quarter generating a third of the total on average, it also has the chance now to spread its business out over more of the year to become more of an all-seasons retailer. And there's some data to indicate it may actually be working.

Balls and equipment from different sports

Image source: Getty Images.

A sporting chance for more growth

When Dick's reported second-quarter earnings in August, it said the 3.7% increase in net sales benefited from a 3.2% jump in same-store sales, fueled by increases in both the number of transactions made and the value of each sale. It was the strongest comps performance it had seen since 2016 and helped the retailer raise full-year earnings guidance.

The results are borne out by foot-traffic patterns analyzed by, a location data analytics firm. It found that after examining weekly visits at Dick's between August 2017 and August 2019, traffic surged at the retailer during the summer months, with early June seeing the biggest gains as traffic jumped over 52% above the baseline visits it established. noted that even the worst week was more than 5.4% above the floor.

That's good news for the retailer because it validates the actions it took in leaving the gun business behind.

Looking for new customers

The reaction from gun owners and enthusiasts had been immediate and swift, and it explains the traffic patterns the analytics firm witnessed. For a good year, the store suffered from lower sales, because while gun owners were heavily represented in Dick's hunting category, they also shopped extensively throughout the store. So not only did hunting revenue drop, but other departments like electronics also suffered steep declines.

Dick's decided to double down and began removing the hunting category from its stores. First in just 10 stores, and then expanding it to 125 stores, it also said it would sell its Field & Stream stores, which cater almost exclusively to hunters. 

When it eliminated the hunting department, it didn't just leave empty space, bringing in merchandise with broader appeal such as baseball gear and outdoor recreational apparel.

Dick's used the opportunity to showcase its private label brands, particularly as it sought to diversify by attracting more women through its CALIA line of apparel. But the retailer also recently launched a new Alpine Design brand and a discount label, DSG.

A more profitable opportunity

The new, expanded merchandise selection also has the benefit of carrying higher margins. Dick's reported earnings of $1.26 per share in the quarter, compared with $1.20 a year ago, even as net income slid 6%.

While reducing the number of outstanding shares had helped boost the per-share results, its reported margins were hurt as it put hunting gear on clearance to clean out inventory. Merchandise margins should improve in the back half of the year, but they won't clear up until the company finally decides what it's going to do with the category in the rest of its stores.

The question that remains is whether Dick's Sporting Goods will be able to get outdoor sports gear and apparel to replace hunting in the fall. Traffic patterns thus far suggest there's a good chance of that, but this looks like a story that still has a few more innings to play before it's over.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.