Sporting goods retailer, DICK’S Sporting Goods Inc. DKS is currently enjoying a favorable place in the investors’ book. The company earned this coveted spot backed by its strong earnings trends, long-term growth plans, store expansion strategy, omni-channel initiatives and healthy financials. These factors have aided it to gain the Zacks Rank #2 (Buy) and carry a VGM Style Score of “B”.
Moreover, the company’s shares have surged a whopping 58.7% in the past one year, outperforming the Zacks categorized Retail-Miscellaneous/Diversified industry that has recorded a growth of 10.7% in the same period. Moreover, we note that the industry occupies a space in the top 34% of the Zacks Classified industries (89 out of the 265).
DICK’S Sporting’s unique strategy of offering exclusive branded merchandise, sourced from leading manufacturers, provides it with a platform to better compete with other players. Furthermore, in order to achieve the dual objectives of boosting gross margin while offering compelling value to customers, the company leverages its strong vendor relationships to source overstock and closeout merchandise at substantial discounts.
Coming to its growth endeavors, DICK’S Sporting has been aggressively expanding its store base and eCommerce capabilities to achieve its long-term revenue target of $8.7–$9.0 billion by the end of fiscal 2017. To achieve this target, DICK’S Sporting intends to increase its retail store count to 735–750 by the end of fiscal 2017.
Further, the company remains focused on exploring every opportunity to drive sales growth and expand the eCommerce business. This is evident from the fact that the business generated about 9.6% of net sales in third-quarter fiscal 2016, up from 8% contributed in the year-ago quarter.
We believe that its strategic measures of consolidating store base and the use of technology to provide better services will enhance the company’s relationship with present customers apart from attracting new ones. Moreover, these measures are likely to promote DICK’S Sporting’s products effectively, consequently, boosting its top line and bottom line.
Further, DICK’S Sporting continues to efficiently utilize cash flows to accomplish its long-term growth targets as well as fund share repurchases and pay quarterly dividends. The company’s regular buybacks and dividend payments not only reflect its confidence in future prospects, but also shed light on its commitment toward shareholders.
Driven by these factors, DICK’S Sporting scored a hat trick with earnings beat, when it reported third-quarter fiscal 2016 results. Results gained from robust comps growth, gross margin expansion and tough inventory management. Further, with the declaration of bankruptcy by major rivals like the Sports Authority, the company is expected to benefit its ongoing performance. Based on the robust results and expectations of market share gains in the future, the company’s management raised its fiscal 2016 view, thus maintaining investor’s optimism on the stock.
Other Key Picks
Some other favorably placed stocks in the same industry include Barnes & Noble Inc. BKS, Cabela’s Inc. CAB and ULTA Salon, Cosmetics & Fragrance Inc. ULTA, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Barnes & Noble, with a long-term earnings growth rate of 10%, has surged nearly 33.6% in the past one year.
Cabela’s, with a long-term earnings growth rate of 12.5%, has returned 26.6% in the past one year.
ULTA Salon has jumped 41.4% in the past one year. The stock has a long-term earnings growth rate of 19.5%.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Cabela's Inc (CAB): Free Stock Analysis Report
Barnes & Noble, Inc. (BKS): Free Stock Analysis Report
Dick's Sporting Goods Inc (DKS): Free Stock Analysis Report
Ulta Salon, Cosmetics & Fragrance, Inc. (ULTA): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research