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Why Dick's Sporting Goods Is Seeing a Rebound

By Pearl Wang – Aug 4, 2020 at 6:00AM

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Sporting goods retailers are seeing strength from improving demand and re-opening of stores. Here's why investors should consider Dick's Sporting Goods.

Dick's Sporting Goods (DKS 1.42%), the largest U.S. sporting goods retailer, has a lot of things going for it right now -- like strong demand for sporting goods -- supporting its revenue growth.  Here are a few reasons why investors should consider Dick's Sporting Goods.

Revenue rebounded after the first quarter

Dick's comparable store sales for the fiscal first quarter (ended May 4) decreased by 29.5% due to coronavirus-driven store closures, but revenue has strongly recovered since then, thanks to reopenings, pent-up demand, and interest in sporting goods. On June 12, Dick's announced "strong early sales" from its reopened stores. The sporting goods and apparel retailer is reinstating previously reduced salaries for staff, as well as its briefly suspended dividend program, and reopened all of its stores by the end of June.

The entrance to a Dick's Sporting Goods Store

Image source: Dick's Sporting Goods.

Another indication of rebounding revenue is strong sales data in the sporting goods sector. Spending on sporting goods increased by 20.6% year over year in June, according to U.S. retail sales data released on July 16.

Further, competitor Hibbett Sports gave guidance on July 20 for an impressive rebound, with comparable sales up 70% in its current quarter. The company cited pent-up demand, stimulus checks, and closures at competitors. These same factors will likely also boost revenue at Dick's Sporting Goods stores, since Dick's management also cited the same positive boosts to its revenue.

New store concept brands should help boost revenue

Dick's Sporting Goods is opening three Overtime outlet centers, which will sell apparel, footwear, and equipment at discounts of up to 75% off. The three stores are opening in Pennsylvania, Maryland, and Connecticut, and will offer popular brands like Nike, adidas, and Brooks.

Further, five Dick's Sporting Goods WarehouseSale temporary pop-up shops have opened in five states on June 15. These off-price stores offer even deeper discounts (up to 90% off) on footwear and apparel.

With the new Overtime and WarehouseSale outlets, Dick's will have a stable of 11 clearance and outlet stores in nine states. The expansion of value-priced outlet centers should be positive for sales, as consumers increasingly favor off-price merchandise and "treasure hunt" shopping experiences. While consumer confidence in the U.S. is still wobbly due to shutdowns and high unemployment, more people will likely flock to off-price centers.

Overall, Dick's Sporting Goods is seeing an impressive recovery from the depressed sales caused by coronavirus-related shutdowns earlier this year. The consumer discretionary company is benefiting from increased consumer spending on sporting goods, pent-up demand, and higher sales as all stores reopen. Its new off-price concepts also help to make Dick's Sporting Goods stock a worthwhile investment in an environment where shoppers are seeking bargains more than ever.

Pearl Wang has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Dick's Sporting Goods Stock Quote
Dick's Sporting Goods
DKS
$119.18 (1.42%) $1.67

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