DKS' Q1 earnings conference call was unusually unsettling with the news that management did not know where the "bottom" was in the deteriorating golf market and that ammunition sales were correcting after many quarters of customer hoarding. It's been well-reported that golf and hunting combined comprise 30% of their revenue. The two issues will take some digestion (and fixing) before things move up to any great extent. On a positive note, all other categories performed very well to expectations.
I'm a believer that ammo sales will settle as they anniversary prior quarters. It doesn't hurt that shooters burn through ammo at a steady rate. I've seen no reports that shooting sports are turning down. It's the decline in golf that caught so many analysts off guard. Numbers of people who quit the sport in 2013 range from 380K to 1MM. That's quite a hit, especially when the trend shows no sign of a bottom.
Management is doing the right thing by curtailing space dedicated to golf, blasting out over-stocked inventory (bought a new Tailormade R1 driver myself!) and expanding space for growing areas like women's and youth sports apparel. Margins in these areas are higher than golf, too, which many people don't consider. But what comes of Golf Galaxy? No answer there.
The whole industry is affected so I give no credence to those proclaiming the end of DKS. Most have an emotional ax to grind that has no place in the discussion. DKS sells popular name-brand merchandise through an outstanding brick-and-mortar presence as well as a well-regarded ecommerce site. In time, perhaps several quarters, I expect to see these bumps resolved. Expect volatility in the meantime.
they are going to have to sell off galaxy if they want to continue positive comp "reporting' trend. I don't believe that they separate out each division (i.e. field and stream, GG, DKS stores, and Runner concept. as far as apparel expansion is concerned, I agree that's there more opportunity to do that, but now you are looking at CapEX to refixture stores to reduce so you can expand golf.
Good analysis and I agree with it but I think the reason it is down in the last two weeks has more to do with the fact that someone (or maybe two people because it was in huge blocks about a week apart) bought almost 10,000 July 45 Calls that expire tomorrow.