DKS : NYSE : US$52.71
Dick’s Sporting Goods operates as a sporting goods retailer in the United States. It provides apparel, athletic shoes and accessories for sports. It also engages in ecommerce and catalog operations. Dick’s Sporting Goods was founded in 1948 and is headquartered in Pennsylvania.
All amounts in US$ unless otherwise noted.
SOLID LONG-TERM STRATEGY UNFOLDS;
REITERATE BUY, RAISE TARGET TO $60
Coming out of DKS’ analyst day, we continue to be positive on both its near- and longer-term prospects. While it is encouraging that current trends improved from Q2, we are more constructive on DKS’ long-term growth targets, which still appear conservative despite exceeding our previous estimates. By 2017, DKS expects $10B in sales (11% CAGR) on a store comp of 2.5% (~4%-4.5% with e-commerce) and 150bps of EBIT expansion. New stores (300+ openings) will be the main growth driver.
However, more efficient space utilization (e.g. increased footwear/ apparel) will also be critical to spurring comp growth and margin expansion. Initiatives to fully optimize its e-commerce platform via omni-channel sales and IT systems are in place and are expected to grow to $1.1B by 2017 (30% CAGR). The analyst day served as another reminder that DKS is a best-in-class retailer with a solid growth profile.
We reiterate our BUY rating and are raising our target to $60.
Women’s and youth categories are a major in-store focus as DKS shifts sq. ft. away from less productive golf and fitness equipment. We view this as incrementally positive for sales of key brands like UA and Nike, particularly as DKS is already adding sq. ft. to UA’s pad via the UA Studio line devoted to women’s yoga wear. On youth, DKS’ exclusive with UA’s Alter Ego product should be a strong boost to Q3/4 comps as it has secured ~80% of UA’s current production.
Our $60 target is based on a blend of 18x 2014E EPS/9x EBITDA