Dicks Sporting Goods Faces An Unlikely Competitor, Barclays Says

Dicks Sporting Goods Inc DKS may not be the Best Buy Co Inc BBY of the sporting goods industry after all, according to a new Barclays report. 

The Analyst  

Matthew McClintock downgraded Dicks Sporting Goods from Equal Weight to Underweight and lowered the price target from $33 to $25.

The Thesis

A big part of Dicks Sporting Goods narrative is that it was likened to Best Buy as a lone survivor in a dying retail segment, but McClintock said he does not see any similarity between the two. 

“We question how the DKS business model of a physical sporting goods box with a sparse labor model and no treasure hunt aspects will remain relevant as changing consumer preferences increasingly require intensive and specialized service/experiential levels to compete,” the analyst said. 

With the major sportswear brands transitioning into a mixture of style and performance, Dicks is not positioned to sell the stylish athleisure product that the industry has evolved into, McClintock said, adding that JC Penney Company Inc JCP, Kohl’s Corporation KSS and Nordstrom, Inc. JWN have all noted recent strength in athletic apparel while Dicks remained silent.

Dicks' positioning is inferior to department stores due to the mix shift away from performance to more stylish activewear clothing, McClintock said. Department stores are historically better equipped to sell stylish products than sporting goods retailers, and Dicks will have to address the issue, he said. 

Aside from differences in store environment, Dicks is simply not positioned to sell higher-end sportswear due to the vastly different labor model required to sell premium athletic apparel, McClintock said. Nordstrom’s has twice the employee coverage that Dicks has, and Lululemon Athletica inc. LULU has 10 times Dicks' coverage, according to Barclays. 

Price Action

Dicks shares were down 5.14 percent at $29.87 at the close Monday. 

Related Links:

Citi Upgrades Dicks Sporting Goods, A Retail Survivor

Dicks Sporting Goods Upgraded On 'Lone Survivor' Play

Photo by Mike Mozart/Wikimedia.