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DICK'S Sporting (DKS) Up on Business Strength, Risks Persist
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DICK’S Sporting Goods Inc. (DKS - Free Report) is well-poised for growth, courtesy of strength in its businesses, strong operational execution and store expansion initiatives. However, escalating operating costs and expenses amid a high inflationary environment remain concerning.
The Zacks Rank #3 (Hold) company has a market capitalization of $11.5 billion and belongs to the Zacks Retail - Miscellaneous industry.
Factors Influencing the Company’s Performance
DICK'S Sporting has been witnessing an increase in comparable store sales and healthy transaction growth. Strong growth in demand for several product categories, including footwear, athletic apparel and team sports, has been driving its top-line performance of late.
For instance, in first-quarter fiscal 2023, DKS generated net sales of $2,842 million, reflecting an increase of 5.3% year over year. The company’s compelling assortment and structural transformation initiatives have also proven beneficial. However, sales normalization in certain categories, including fitness and outdoor equipment, has been impacting its performance.
The company has been benefiting from its store expansion initiatives, as evident from the impressive performance of its previously launched DICK'S House of Sport, Golf Galaxy Performance Center, Public Lands and Going, Going, Gone! stores. Earlier, it launched two types of concept stores, namely OVERTIME by DICK’S Sporting Goods and DICK’S Sporting Goods Warehouse.
The two Golf Galaxy performance centers, featuring TrackMan and BioMech golf technologies, are also performing well. DKS remains focused on expanding its Golf Galaxy business’ presence through the Golf Galaxy Performance Center and converting temporary value chain stores to permanent locations. In the fiscal first quarter, the company acquired 12 stores, closed two stores and relocated one.
Driven by solid momentum in its business, DICK'S Sporting provided an upbeat fiscal 2023 view, expecting comparable store sales to be flat to up 2% on a year-over-year basis and projecting adjusted earnings to be $12.9-$13.8 per share, including 20 cents for the 53rd week.
Image Source: Zacks Investment Research
In the past six months, the company gained 8.7% against the industry’s decline of 5.1%.
However, the company has been grappling with the adverse impacts of rising costs and expenses. In the fiscal first quarter, DKS’ cost of sales recorded an increase of 5.7% year-over-year, whereas its selling, general and administrative expenses increased 12.8%.
The company’s adjusted gross margin contracted 28 basis points year over year to 36.2% in the quarter due to a weak merchandise margin. Escalating costs and expenses, if not controlled, might continue to affect its margins and profitability in the upcoming quarters.
Amid this backdrop, the Zacks Consensus Estimate for fiscal 2023 and fiscal 2024 earnings have been revised down by 0.2% and 0.9%, respectively, in the past 60 days.
Arhaus is a leading lifestyle brand and premium retailer in the home furnishings market. The Zacks Consensus Estimate for ARHS’ current financial-year sales suggests 2.9% growth from the year-ago reported figure. The company’s average earnings surprise in the last four quarters was 82.4%.
Bloomin' Brands operates casual and fine-dining restaurants globally. The Zacks Consensus Estimate for BLMN’s current financial year sales suggests growth of 7.4%, while earnings are likely to increase by 16.3% from the prior-year reported numbers. It has a trailing four-quarter earnings surprise of 8%, on average.
Bath & Body Works is a provider of home fragrance, body care and soap and sanitizer products. BBWI has a trailing four-quarter earnings surprise of 44.6%, on average.
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DICK'S Sporting (DKS) Up on Business Strength, Risks Persist
DICK’S Sporting Goods Inc. (DKS - Free Report) is well-poised for growth, courtesy of strength in its businesses, strong operational execution and store expansion initiatives. However, escalating operating costs and expenses amid a high inflationary environment remain concerning.
The Zacks Rank #3 (Hold) company has a market capitalization of $11.5 billion and belongs to the Zacks Retail - Miscellaneous industry.
Factors Influencing the Company’s Performance
DICK'S Sporting has been witnessing an increase in comparable store sales and healthy transaction growth. Strong growth in demand for several product categories, including footwear, athletic apparel and team sports, has been driving its top-line performance of late.
For instance, in first-quarter fiscal 2023, DKS generated net sales of $2,842 million, reflecting an increase of 5.3% year over year. The company’s compelling assortment and structural transformation initiatives have also proven beneficial. However, sales normalization in certain categories, including fitness and outdoor equipment, has been impacting its performance.
The company has been benefiting from its store expansion initiatives, as evident from the impressive performance of its previously launched DICK'S House of Sport, Golf Galaxy Performance Center, Public Lands and Going, Going, Gone! stores. Earlier, it launched two types of concept stores, namely OVERTIME by DICK’S Sporting Goods and DICK’S Sporting Goods Warehouse.
The two Golf Galaxy performance centers, featuring TrackMan and BioMech golf technologies, are also performing well. DKS remains focused on expanding its Golf Galaxy business’ presence through the Golf Galaxy Performance Center and converting temporary value chain stores to permanent locations. In the fiscal first quarter, the company acquired 12 stores, closed two stores and relocated one.
Driven by solid momentum in its business, DICK'S Sporting provided an upbeat fiscal 2023 view, expecting comparable store sales to be flat to up 2% on a year-over-year basis and projecting adjusted earnings to be $12.9-$13.8 per share, including 20 cents for the 53rd week.
Image Source: Zacks Investment Research
In the past six months, the company gained 8.7% against the industry’s decline of 5.1%.
However, the company has been grappling with the adverse impacts of rising costs and expenses. In the fiscal first quarter, DKS’ cost of sales recorded an increase of 5.7% year-over-year, whereas its selling, general and administrative expenses increased 12.8%.
The company’s adjusted gross margin contracted 28 basis points year over year to 36.2% in the quarter due to a weak merchandise margin. Escalating costs and expenses, if not controlled, might continue to affect its margins and profitability in the upcoming quarters.
Amid this backdrop, the Zacks Consensus Estimate for fiscal 2023 and fiscal 2024 earnings have been revised down by 0.2% and 0.9%, respectively, in the past 60 days.
Key Picks
Some better-ranked stocks are Arhaus, Inc. (ARHS - Free Report) , Bloomin' Brands, Inc. (BLMN - Free Report) and Bath & Body Works, Inc. (BBWI - Free Report) . While ARHS and BLMN sport a Zacks Rank #1 (Strong Buy), BBWI carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Arhaus is a leading lifestyle brand and premium retailer in the home furnishings market. The Zacks Consensus Estimate for ARHS’ current financial-year sales suggests 2.9% growth from the year-ago reported figure. The company’s average earnings surprise in the last four quarters was 82.4%.
Bloomin' Brands operates casual and fine-dining restaurants globally. The Zacks Consensus Estimate for BLMN’s current financial year sales suggests growth of 7.4%, while earnings are likely to increase by 16.3% from the prior-year reported numbers. It has a trailing four-quarter earnings surprise of 8%, on average.
Bath & Body Works is a provider of home fragrance, body care and soap and sanitizer products. BBWI has a trailing four-quarter earnings surprise of 44.6%, on average.