Dick's Sporting Goods Hit With A Slew Of Downgrades After Record Drop

Dicks Sporting Goods Inc DKS experienced its greatest single day share decline after reporting weaker sales and earnings and cutting guidance in its second-quarter earnings report this week.

The sporting goods leader was hit with a slew of downgrades, with increasing fears that defending its market share will be difficult in a tough retail environment.

An Onslaught Of Downgrades

“We do not see any easy path out of the current downward trajectory in margins and associated impairment of earnings,” said Deutsche Bank analyst Mike Baker.

Related Link: Dick's Sporting Goods Revisits 2011 Lows After Q2 Miss

Deutsche Bank downgraded its rating from a Buy to a Hold and lowered its price target from $50 to $28.

Although Dick’s is seeing less brick and mortar retail competition after The Sports Authority bankruptcy, it has become clear that competition is coming from other channels.

“We had previously thought that sporting goods was relatively well protected from Amazon but have been become less confident that this is the case,” said MKM Partners analyst Patrick McKeever.

McKeever also raised the concern of brands like Nike Inc NKE and Under Armour Inc UAA opting to increase their focus on direct to consumer channels, could have a meaningful impact on Dick’s.

MKM downgraded Dick’s from a Buy to a Neutral rating and lowered its price target from $47 to $30.

The combination of brand direct to consumer and third party online pure plays promotional stance is creating a “perfect storm (that) force DKS to more aggressively invest in pricing to defend market position, resulting in heavy merchandise margin/GM,” said Buckingham Research analyst Eric Tracy.

NPD analyst Matt Powell confirmed the increased promotional pricing activity seen at Dick’s, highlighting that this is this is the most promotional back to school season he has seen in 20 years, but believes the company is taking the right steps to defend its position.

“Dick’s forceful and aggressive approach to this change in the marketplace is exactly the right strategy,” Powell told Benzinga on Wednesday.

Buckingham Research downgraded its rating on Dicks from Buy to Neutral and lowered its price target from $44 to $27.

Other Analyst Downgrades

Stifel Nicolaus downgraded from a Buy to a Hold rating. 

Susquehanna downgraded from Positive to Neutral.

Citigroup downgraded  from a Buy to Neutral.

RBC Capital downgraded from Outperformed to Sector Perform.

Canaccord Genuity downgraded from a Buy to a Hold rating.