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DICK's Sporting (DKS) in Troubled Waters: Hurdles to Linger?
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Dick's Sporting Goods, Inc. (DKS - Free Report) has been reeling under major sports industry woes of late. The company is battling a soft hunting business, along with pressurized margins. Incidentally, these headwinds caused DICK's Sporting’s bottom line to lag the Zacks Consensus Estimate in the second quarter of fiscal 2017, which marked the company’s first negative earnings surprise in the last six quarters.
In fact, management also lowered fiscal 2017 view, as it expects these hurdles to linger. So, let’s take a closer look at the obstacles looming over the company and see what’s in store for this sporting goods retailer.
DICK’s Sporting Troubled by Industry Woes
The company belongs to the sporting goods space that has turned extremely competitive and promotional, owing to consumers’ rapid shift to online shopping. While most retailers including DICK’s Sporting are trying all means to boost omni-channel operations, competition from online giant Amazon.com Inc. (AMZN) remains a major deterrent.
Amazon’s growing dominance has been weighing upon DICK’s Sporting, as some of its most significant vendors including NIKE, Inc. (NKE - Free Report) , Adidas AG (ADDYY - Free Report) and Under Armour, Inc. (UAA - Free Report) have resorted to considerable direct-to-consumer selling. These factors, along with NIKE’s plans to sell directly on Amazon remains a major threat to DICK’s Sporting’s top line.
Efforts to Stay Afloat Amid the Competition Hurt Margins
Given the stiff competition, DICK’s Sporting is undertaking several efforts to boost its e-commerce operations. This is partly evident from the recent relaunch of its website. While these endeavors bode well for the long term, costs associated with these investments remain a deterrent for the company’s margin. Margins are also bearing the brunt of intense promotional activities undertaken by the company to thrive amid the mounting competition.
DICK’s Sporting’s gross margin contracted 17 basis points (bps) and 82 bps in the first and second quarters of fiscal 2017, respectively. This was largely due to higher shipping and fulfilment expenses associated with the online sales. Further, management expects fiscal 2017 gross and operating margins to decline year over year, which reflects chances of these boulders to linger.
FY17 View & Hunting Business Weakness: Major Concerns
DICK’s Sporting’s hunting category remained extremely challenging in the second quarter. Incidentally, comparable store sales (comps) at this category fell by double digits, which was worse than management’s expectations. Also, the gross margin remained stressed owing to increased promotions. Further, management expects the hunting business to witness tough times in the remainder of fiscal 2017. Despite its strong efforts to capture displaced market share from liquidation of rival firms, the company anticipates the hunting category to remain drab.
Unfortunately, management expects all aforementioned barriers to persist in fiscal 2017, which compelled it to curtail fiscal 2017 earnings per share and comparable-store sales forecasts when it released its last quarterly results. For fiscal 2017, which will have an additional week, management updated its adjusted earnings guidance to the range of $2.80-$3 per share versus $3.65-$3.75, guided earlier. Despite the benefits from industry consolidation, comps for the year are anticipated to be flat to down low single-digit compared with 1-3% growth projected earlier.
While DICK’s Sporting’s remains committed toward its merchandise plan and strategies of boosting digital operations and exploiting industry consolidation, these plans may take a while to offset the prevailing glitches.
4 Stocks to Watch after the Massive Equifax Hack
Cybersecurity stocks spiked on recent news of a data breach affecting 143 million Americans. But which stocks are the best buy candidates right now? And what does the future hold for the cybersecurity industry?
Equifax is just the most recent victim. Computer hacking and identity theft are more common than ever. Zacks has just released Cybersecurity! An Investor’s Guide to inform Zacks.com readers about this $170 billion/year space. More importantly, it highlights 4 cybersecurity picks with strong profit potential.
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DICK's Sporting (DKS) in Troubled Waters: Hurdles to Linger?
Dick's Sporting Goods, Inc. (DKS - Free Report) has been reeling under major sports industry woes of late. The company is battling a soft hunting business, along with pressurized margins. Incidentally, these headwinds caused DICK's Sporting’s bottom line to lag the Zacks Consensus Estimate in the second quarter of fiscal 2017, which marked the company’s first negative earnings surprise in the last six quarters.
In fact, management also lowered fiscal 2017 view, as it expects these hurdles to linger. So, let’s take a closer look at the obstacles looming over the company and see what’s in store for this sporting goods retailer.
DICK’s Sporting Troubled by Industry Woes
The company belongs to the sporting goods space that has turned extremely competitive and promotional, owing to consumers’ rapid shift to online shopping. While most retailers including DICK’s Sporting are trying all means to boost omni-channel operations, competition from online giant Amazon.com Inc. (AMZN) remains a major deterrent.
Amazon’s growing dominance has been weighing upon DICK’s Sporting, as some of its most significant vendors including NIKE, Inc. (NKE - Free Report) , Adidas AG (ADDYY - Free Report) and Under Armour, Inc. (UAA - Free Report) have resorted to considerable direct-to-consumer selling. These factors, along with NIKE’s plans to sell directly on Amazon remains a major threat to DICK’s Sporting’s top line.
Efforts to Stay Afloat Amid the Competition Hurt Margins
Given the stiff competition, DICK’s Sporting is undertaking several efforts to boost its e-commerce operations. This is partly evident from the recent relaunch of its website. While these endeavors bode well for the long term, costs associated with these investments remain a deterrent for the company’s margin. Margins are also bearing the brunt of intense promotional activities undertaken by the company to thrive amid the mounting competition.
DICK’s Sporting’s gross margin contracted 17 basis points (bps) and 82 bps in the first and second quarters of fiscal 2017, respectively. This was largely due to higher shipping and fulfilment expenses associated with the online sales. Further, management expects fiscal 2017 gross and operating margins to decline year over year, which reflects chances of these boulders to linger.
FY17 View & Hunting Business Weakness: Major Concerns
DICK’s Sporting’s hunting category remained extremely challenging in the second quarter. Incidentally, comparable store sales (comps) at this category fell by double digits, which was worse than management’s expectations. Also, the gross margin remained stressed owing to increased promotions. Further, management expects the hunting business to witness tough times in the remainder of fiscal 2017. Despite its strong efforts to capture displaced market share from liquidation of rival firms, the company anticipates the hunting category to remain drab.
Unfortunately, management expects all aforementioned barriers to persist in fiscal 2017, which compelled it to curtail fiscal 2017 earnings per share and comparable-store sales forecasts when it released its last quarterly results. For fiscal 2017, which will have an additional week, management updated its adjusted earnings guidance to the range of $2.80-$3 per share versus $3.65-$3.75, guided earlier. Despite the benefits from industry consolidation, comps for the year are anticipated to be flat to down low single-digit compared with 1-3% growth projected earlier.
While DICK’s Sporting’s remains committed toward its merchandise plan and strategies of boosting digital operations and exploiting industry consolidation, these plans may take a while to offset the prevailing glitches.
4 Stocks to Watch after the Massive Equifax Hack
Cybersecurity stocks spiked on recent news of a data breach affecting 143 million Americans. But which stocks are the best buy candidates right now? And what does the future hold for the cybersecurity industry?
Equifax is just the most recent victim. Computer hacking and identity theft are more common than ever. Zacks has just released Cybersecurity! An Investor’s Guide to inform Zacks.com readers about this $170 billion/year space. More importantly, it highlights 4 cybersecurity picks with strong profit potential.
Get the new Investing Guide now>>