Dick's Sporting Goods (NYSE:DKS) last month reported third-quarter adjusted earnings per share (EPS) of $2.01 on revenue of $2.41 billion, higher than consensus estimates of $1.08 EPS on $2.2 billion. The retailer reported a strong quarter, delivering a record same-store sales increase of 23.2%, boosted by strength from both digital and brick-and-mortar sales.

While some retailers face challenges from consumers shifting their spending patterns, Dick's has benefited from the coronavirus pandemic and the demand it created from consumers buying more products for home fitness, golf, and outdoor activities, as well as athletic apparel to be comfortable in while staying at home at the request of health officials.

That was the top-level assessment of Dick's latest report. Let's take a more detailed look at the third-quarter results and what was said by management and see what it really means for the stock going forward. Here are three takeaways to consider.

A runner lacing up shoes

Image source: Getty Images.

1. Both digital and brick-and-mortar results were strong

Dick's Sporting Goods saw strength in both its brick-and-mortar and digital businesses during the third quarter. Consolidated comparable-store sales increased by 23.2% year over year, which was a record for the company, and above the 20.7% in the prior quarter. The growth was driven by both more transactions, and higher average tickets (sales per customer). There was expansion across the major categories sold by the retailer: hardlines, apparel, and footwear.

Digital revenue increased 95% year over year in the third quarter, comprising 21% of total business compared to 13% last year. Impressively, year-to-date sales in the digital segment are already higher than full-year digital sales in 2019. Mobile is also expanding, with mobile sales penetration above 50%.

This strength resulted from Dick's omnichannel capabilities and consumers' continued shift to shopping online. CEO Edward Stack explained on the third-quarter earnings call: "Our stores were the key to this unprecedented growth, and serve as the hub of our industry-leading omnichannel experience. Brick-and-mortar stores comps grew [by] double digits, and our stores fulfilled 70% of our online sales, which increased nearly 100% for the quarter."

2. The private-label business will drive future growth

Dick's private-label business (which it refers to as "vertical brands") is an important part of its growth strategy. Management said it believes this segment can drive business growth because it has control over all aspects of the product, including design, marketing, operations, and the supply chain. These brands are also strong competitors against popular premium brands, as they offer quality technical and performance features.

Over the last five years, Dick's CALIA brand of female athleisure clothing has expanded to become the second-largest women's brand in the company. The DSG brand is another vertical brand that sells everything from sports gear to women's and children's apparel at value prices. DSG has been a success, becoming the largest private-label brand one year after launching.

The retailer's vertical brands, combined with valuable partnerships with well-known national athletic brands like The North Face (owned by VF Corp.), Callaway Golf, and Nike, are integral parts of its merchandising strategy. Dick's will continue to invest in expanding its private labels and partnerships.

Stack explained on the earnings call: "Looking ahead, we will invest in making our vertical brands even stronger. This includes improved space in-store, increased marketing, and expanding into additional product categories. At the same time, we will also continue to invest in our strategic partnerships with key national brands such as Nike, Callaway, and The North Face."

3. Despite any near-term volatility, Dick's is well-positioned in the long term

Near-term performance may be impacted by some additional store restrictions in certain areas of the U.S., such as Chicago and Los Angeles, due to increased cases of COVID-19. On Nov. 27, Los Angeles ordered nonessential retail businesses to operate at 20% capacity and asked people to stay at home as much as possible. However, Dick's is well-equipped to operate with restrictions given its omnichannel and curbside-pickup capabilities. Curbside and in-store pickup grew 300% compared to BOPIS (buy online, pick up in-store) sales last year.

The sporting-goods retailer will continue to invest in technology to make the shopping experience more convenient and low-contact, which is important to shoppers in the current environment. President Lauren Hobart noted on the Q3 earnings call: "[W]e recently rolled out a contactless self-checkout app called Scan, Pay & Play. It's [in] over 300 stores, which enables an efficient checkout solution for our athletes, while also giving them the ability to quickly look [at] our pricing information and product descriptions as they shop in our stores."

What should investors make of all this?

While Dick's in-store traffic may be affected by the recent restrictions in some areas of the U.S., its strong omnichannel and digital operations will likely help offset this. Furthermore, Dick's record revenue during the second quarter (ended Aug. 1, 2020) shows its ability to sustain business growth even during periods of business restrictions and social distancing. The consumer discretionary company even delivered a 20.7% increase in comparable sales in the second quarter. Increased social distancing may even drive more purchases of sports equipment as consumers shift dollars away from group entertainment and events. Given these factors, investors should consider shares of Dick's Sporting Goods.