Dive Brief:
- In a tough environment for retailers, Dick’s Sporting Goods performed strongly in the third quarter. The retailer recorded net sales of nearly $3 billion, an increase of 7.7% year over year, and up more than 50% from 2019.
- Comps continued a strong winning streak: They were up 6.5% in the third quarter, on top of 12.8% growth in 2021, 23.2% growth in 2020 and 6% growth in 2019, according to a company press release.
- As a result, Dick’s raised its outlook for the year. The retailer now expects comps to be down up to 3%, compared to an earlier projection of comps down by up to 6%.
Dive Insight:
Merchandise margin was a drag on Dick’s earnings in an otherwise bright quarter. That metric declined by 438 basis points year-over-year due to excess inventory from Q2 that the retailer had to clear to prep for holiday.
“We had gotten a lot of late receipts in from spring that came in on top of our back-to-school inventory and we were heavy in apparel,” CEO Lauren Hobart said on a call with analysts Tuesday. “And we aggressively took care of that this quarter to clean up our inventory so we could take in holiday merchandise and start 2023 clean.”
The retailer has pushed excess inventory to its value concepts, which has been “very successful” in getting rid of product, but the journey to a clean inventory position will continue through the fourth quarter, CFO Navdeep Gupta said. That said, Dick’s can correct its bottom line over time, GlobalData Managing Director Neil Saunders said in emailed comments.
“In normal times today’s results from Dick’s would be very strong. However, that the company is driving growth on top of high gains from prior years at a time when most in retail are seeing demand fade, makes them exceptional,” Saunders said. “In our view, Dick’s remains a very bright spot in a darkening retail sky.”
Part of that success has been thanks to the company’s investment in private labels. Those brands are at 14% penetration and are especially helpful in an environment where consumers are dealing with higher prices thanks to inflation. Hobart pointed to the retailer’s DSG private label in particular as performing extremely well because of the price point, though she said Dick’s was not seeing consumers trade down.
The company’s new store concepts are bright spots as well. Dick’s is opening pop-ups in its off-price Warehouse format to test the market response before converting them to long-term Going, Going, Gone stores if consumer response is good. The company’s experiential House of Sport concept has been “absolutely tremendous,” according to Hobart, and Dick’s is “really excited” about the outdoor banner Public Lands, which opened five new locations in the past month.
“Public Lands: still in test phase. House of Sport: definitely a key part of our roll-forward strategies,” Hobart said.
