Dick’s Sporting Goods is the largest remaining sporting goods store, following bankruptcy filings involving rivals like The Sports Authority, Sport Chalet, Gander Mountain and Eastern Mountain Sports. But thinned out competition doesn't mean an easy race.
The company on Tuesday reported a disappointing Q2 profit and a 0.1% comparable sales gain. The sporting goods retailer expects Q3 same-store sales to drop “in the low single-digits’ following a 5.2% jump a year earlier. The retailer cut its 2017 sales and gross margin forecasts as it anticipated steeper promotions.
While CEO Edward Stack said he likes the position the company has in the sporting goods marketplace and believes Dick’s will become stronger amidst the wave of industry consolidation, he acknowledges there are many changing market shifts that will keep the company fighting hard to keep its share.
“We will aggressively be promoting our business to drive market share to our stores and online,” he said on the call, adding the company’s consumer research shows its customers perceive the retailer’s prices are “not competitive in today's environment.” Retail is “in panic mode," he said. "Pricing in the marketplace has become unpredictable and at times irrational.”
Dick’s Sporting Goods has taken a page from other specialty retailers such as Best Buy and hopped on the price-matching bandwagon in the age of increased online competition led by Amazon and price transparency enabled by consumers’ mobile phones. The company, on its website, says it will match prices against those offered by retailers including not only its direct rivals such as Academy Sports, Cabela’s and Foot Locker, but also against those by Amazon, Walmart, Kohl’s and even by its vendors including Nike and Under Armour.
“Price transparency is here to stay,” Stack said. “Those who sit back and hope that it goes away or that it's going to change… are going to have a problem.”
One way the company is combating the effects of price transparency is to increase its private label offering such as Calia by Carrie Underwood. Stack said the line has become the company’s third-largest athletic women’s apparel brand. He expects the private label business to see double-digit growth, reaching about $1 billion in sales this year.
In response to growing online shopping, Dick’s Sporting Goods also reintroduced its ecommerce site on its own proprietary web platform and is investing in more targeted marketing and faster delivery, among initiatives that will be “a bit more expensive in the short-term,” Stack said. Online sales rose 19% in the latest quarter.
“Dick’s Sporting Goods is clearly the long-term winner in its category,” said John Zolidis, president of independent research and consulting firm Quo Vadis Capital. “What is less clear is how that category will look and to what extent sales will be conducted in stores in the future. … (Online) growth reflects consumer preference for more convenient shopping on the phone vs. shopping in terrestrial stores.”