Dick's Sporting Goods reports wider loss, online sales surge 110%

Yahoo Finance's Alexis Christoforous and Brian Sozzi break down Dick's Sporting Goods first-quarter earnings report with CFRA analyst Camilla Yanushevsky.

Video Transcript

ALEXIS CHRISTOFOROUS: We are watching Dick's Sporting Goods this morning after the retailer lost more money than expected last quarter. Revenue and comparable-store sales also missed estimates amid COVID-19 store closures.

Dick's e-commerce sales, though, surged 110% during the quarter, and the retailer saying the current quarter has gotten off to a strong start.

Here to break it down for us is CFRA Analyst Camilla Yanushevsky. Camilla, good to see you. I know that you had a buy rating on Dick's before the earnings report. I'm curious if you still have it now.

CAMILLA YANUSHEVSKY: Sure. Well, first off, thanks for having me. Really appreciate it. And yes, we have a buy rating on Dick's Sporting Goods that we've reiterated this morning and a $45 12-month price target.

And we thought the first-quarter results were a mixed bag. We saw EPS miss, revenues beat. And as you noted, e-commerce was definitely a bright spot. And we believe that the outlook is optimistic.

Our long-term thesis is essentially intact. If you look at the retail landscape right now, we think that sporting goods will fare better than other retailing categories, and that's because we're seeing elevated interest in sports and health equipment and then also pent-up demand as these stay-at-home orders are lifted, specifically for outdoor recreation.

Given that Dick's Sporting Goods is really the last man standing in this space, they're really well positioned to benefit from these favorable dynamics.

BRIAN SOZZI: Camilla, you know, I'm just going through in my head a little bit what my local Dick's Sporting Goods store looks like. It's gargantuan. There's two floors. There's so much stuff on the floors. In this new age of retail, does Dick's Sporting Goods need to shrink the size of its stores given that we may not see traffic come back the way it was?

CAMILLA YANUSHEVSKY: We actually don't think that they're going to be shrinking their footprint that much. We believe that we're going to be seeing a decelerated pace of store growth with more of a focus on robust omnichannel capabilities to rival Amazon. Right now their e-commerce, you can get orders within two business days. We see it taking it to the next level to same-day delivery.

Also, we think that the storefront is actually a competitive advantage to Amazon. It gives the convenience of in-store return and exchanges and also the expertise of staff. They're the last man standing, so like Best Buy, consumers like that storefront feel.

ALEXIS CHRISTOFOROUS: Yeah, you say last man standing. I like that because we saw Modell's and Sports Authority have to file for bankruptcy. So in many ways, they are the last man standing in this space.

But what about within the Dick's business? I know hunting is a big part of their business. That's under review right now. What do you expect on that front?

CAMILLA YANUSHEVSKY: Sure. Well, we believe that the net effect has been positive, and the decision to remove hunt has generated long-term goodwill. We all know that ESG's gaining a lot of traction, and we think that decision fits very well into the ESG model.

Also on the consumer side what we're seeing is that a lot of consumers are making purchasing decisions, especially the younger ones, based on how socially responsible a brand is.

And then there's also the financial side. Hunt is a low-margin business. And also the actual industry has been in deceleration for quite some time now.

BRIAN SOZZI: Camilla, how amazing will the discounts be this summer at Dick's Sporting Goods? I look at their inventory in the quarter down 2.1%, but sales were down 30%. So to me, they do have a little bit of an inventory problem, much like department stores.

CAMILLA YANUSHEVSKY: That's a very fair point, and they do have an inventory problem, which was an overhang actually from the fourth quarter. It's going to be a different picture depending on the category. There is elevated demand for the sports, health, and fitness equipment, and that's around 50% of the sales. And then the other side is the apparel and footwear, which there's going to be more challenges on that end.

But, you know, counties are opening up now. People are going out. They have great private labels. Athleisure is hot, and we think that they're going to be able to work through it.

ALEXIS CHRISTOFOROUS: All right, looking for the sales. Camilla Yanushevsky at CFRA, thanks for being with us.