Even though one of its major competitors, Sports Authority, has recently entered bankruptcy, Dick's Sporting Goods (DKS 1.42%) continues to face significant challenges.
In this clip from the Motley Fool Money podcast, Jason Moser joins Chris Hill to explain what has happened to the company and how the Internet has created fiercer competition than Dick's has been able to handle. He also looks at how the sports retailer plans to generate more sales.
A transcript follows the video.
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This podcast was recorded on March 11, 2016.
Chris Hill: A warmer than expected winter is getting the blame for falling sales at Dick's Sporting Goods. The company says same-store sales fell 2.5%. Fair charge, Jason?
Jason Moser: Perhaps. I think we've heard a lot about the bankruptcy of Sports Authority here. I would advise people to not leap to the assumption that just because Sports Authority claimed bankruptcy that Dick's Sporting Goods has it made here. I think the biggest challenge Dick's Sporting Goods faces right now is its position in the value chain there.
So, a time ago, retailers like Dick's Sporting Goods had a far stronger competitive position, because they were seen as kind of the gateway to a lot of these very popular brands. So the thing is now, with the advent of the Internet, and the evolving business models, the direct-to-consumer model is really taking over. So brands like Under Armour and Nike are able to offer their goods to customers directly. So we focus on those direct-to-consumer sales that Under Armour and Nike continue to grow at rapid rates, 25% and 26% respectively, in their most recent quarters.
And while Dick's Sporting Goods is doing well growing their e-commerce business, it still pales in comparison to what Nike and Under Armour are able to do. And furthermore, those companies are able to really target their customers a bit more, getting the data and understanding really what their customers want. So, again, I think that Dick's is caught a little bit here in a tough spot, because they need to offer a number of different brands in a number of different areas of the sporting world, and it costs a lot of money to maintain those big stores that they have. So while they're continuing to try to tout the experience to bring traffic in, a lot of people are finding there are other ways to get those brands that they really like. I like the company. I think they will gain share from the Sports Authority bankruptcy. But, again, I would caution investors not to leap to the assumption that they've just got it made.
Ron Gross: Is Sports Authority liquidating? Or are they just restructuring?
Moser: I believe it's just restructuring.
Gross: So they'll maybe close some under-performing stores, but there'll still be a presence.
Moser: Yeah, we'll see a presence out there. But I think the bankruptcy, honestly, is probably the least of their worries. We've stepped into Sports Authority before, it's just been a miserable experience from day one. They need to go to marketing school.
Jeff Fischer: I think so many retailers in the long term face getting squeezed more and more by apps, by companies that are quicker on their feet and innovative. And if your argument is, like a Cabela's(CAB), maybe, or in this case, entertainment, "Come on in and be entertained," well, there are a lot of other ways to be better entertained than a retail store.