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Bear of the Day: Dick's Sporting Goods (DKS)

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Dick's Sporting Goods (DKS - Free Report) topped our Q4 earnings and sales estimates in early March, and its stock price has surged over 65% since the market’s March 23 lows. Despite the recent climb, DKS shares are down big over the last year and its brick-and-mortar stores have been impacted by the coronavirus. Plus, sports might not return anytime soon.

What’s Going On?
 
Dick’s was one of countless retailers that closed its brick-and-mortar stores in an effort to slow the spread of the coronavirus. The company, like many firms deemed non-essential has continued to operate its direct-to-consumer business. DKS is also currently offering contactless curbside pick up in most states around the U.S.

Dick’s has slowly started to reopen stores in states “where local guidelines and public health considerations allow,” while operating under various social distancing protocols and more. Despite trying to return to something close to normal operations where it can, Dick’s might face a larger dilemma: When will people return to gyms, and when will sports leagues start again?

Even before the coronavirus, DKS faced broader headwinds in the Amazon (AMZN - Free Report) age, as giants such as Nike (NKE - Free Report) and Adidas (ADDYY - Free Report) continue to expand their own e-commerce businesses. Meanwhile, Lululemon (LULU - Free Report) and other brands have expanded without any presence in traditional wholesale sporting goods retail shops.

 

 

 

 

 

 

 

 

Outlook

Our current Zacks estimates call for the retailer’s first quarter revenue to fall 19.5% from the year-ago period, with its Q2 sales projected to sink nearly 14%.

At the bottom end of the income statement, DKS adjusted Q1 earnings are projected to tumble from +$0.62 in the year-ago period to a loss of -$0.09 a share.

Peeking ahead, the company’s adjusted second quarter earnings are projected to fall roughly 44%, with its fiscal year EPS figure expected to tumble over 48%. The nearby chart also shows how far Dick’s overall earnings outlook has fallen recently.

 

 

 

 

 

 

 

 

Bottom Line

Dick’s is currently a Zacks Rank #5 (Strong Sell), based on its negative earnings revision trends. Clearly, the company has the ability to bounce back when things start to return to normal, but its near-term outlook makes DKS a risker pick.

Investors will get a more complete picture of the pandemic’s impact on DKS when it reports its Q1 fiscal 2020 financial results on June 2.

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