Sportswear retailer Dick’s Sporting Goods' Q2 same-store sales rose 2.8%, beating its own expectations for a decrease of between 1% and 4% and Retail Metrics’ forecast for a 1% drop. Revenue rose 7.9% to $1.97 billion, beating analyst expectations of closer to $1.88 billion, according to Thomson Reuters.
Executives also said that going-out-of-business sales from Sports Authority hadn’t hit its own sales as much as it anticipated, and that many Dick’s stores have already taken market share from its bankrupt rival.
Dick's is in the midst of deciding which Sports Authority leases to hold onto and which ones to walk away from, executives told analysts on Tuesday.
While many analysts had anticipated that Sports Authority’s liquidation would hurt many competing Dick’s stores, the problem hasn't seemed to materialize.
Expectations for Dick's this quarter were low, Retail Metrics analyst Ken Perkins said in a note to clients on Tuesday. "With one of its main competitors going out of business and selling all of its inventory at discounted prices, there was concern that Dick’s would lose business during the quarter," he said. "That did not come to fruition, as the nation’s leading sporting goods chain racked up an impressive 13 cent positive earnings surprise.”
Dick's beat those expectations handily, with Sports Authority's liquidation having a weaker-than-expected impact on Dick's business.
Dick’s Sporting Goods bought 31 leases at Sports Authority’s bankruptcy auction in June, and enjoys flexibility in a deal that allows the retailer to keep or reject any of those leases, COO Andre Hawaux told analysts on a conference call on Tuesday.
The leases are primarily located in underpenetrated markets in areas of California and South Florida. "Our plan is to convert any TSA [Sports Authority] location we retain into a DICK’S store and expect to reopen these stores over the next 12 months,” Hawaux said.
Dick’s also bought the retailer's intellectual property, including its flagship brand name, The Sports Authority, as well as private brands and customer information.
Matt Powell, a sports industry analyst at the NPD Group, predicted earlier this summer that the Sports Authority stores could be turned into an off-price chain using the Sports Authority name. But that doesn’t seem to be Dick’s plan. Off-price retail, led by TJX Cos., is a thriving area in retail, though there’s some evidence that retailers with flagship brands suffer some cannibalization by their off-price efforts.