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DICK'S Sporting Takes the E-commerce Route Amid Coronavirus

Zacks Equity Research

Shares of DICK’S Sporting Goods, Inc. DKS have surged 86.1% in the past three months, significantly outperforming the industry’s growth of 39%. The stock’s bullish run on the bourses can be attributable to a strong online show that provided some cushion to the company’s otherwise soft performance due to the impacts of the novel coronavirus.

While stores remained closed since mid-March, the company witnessed strong online demand and leveraged its omnichannel capabilities to fulfill online orders and serve customers. This resulted in a 110% year-over-year rise in e-commerce sales during first-quarter fiscal 2020, which was nearly 39% of net sales.

Further, it rolled out the new curbside pickup service across the United States to serve customers better. Post the launch, curbside sales represented more than 40% of total e-commerce sales. The company noted that e-commerce spiked 210% post the store closures till the first-quarter end. Management also noted that the solid online performance has continued in the second quarter even after the stores reopened. Encouragingly, it anticipates enhancing the omnichannel experience through faster and more reliable deliveries as well as improved functionality of its website in fiscal 2020.

Moreover, it is on track to reopen stores following temporary store closures due to the coronavirus outbreak. The company has reopened a few stores since mid-April, in sync with the CDC and local health guidelines. Moreover, roughly 80% of its stores were open as of the end of May. Going ahead, it remains on track to reopen more stores in the second and third quarters of fiscal 2020. The company also noted that the reopening of stores is aiding sales in the second quarter. Apart from these, management’s recent move to resume dividend payment after suspending the same in the wake of the pandemic seems encouraging.

However, DICK’S Sporting is still reeling under the COVID-19 situation, which led to soft results in the first quarter of fiscal 2020. Management withdrew the fiscal 2020 view due to the uncertain impacts of the COVID-19 outbreak. Also, rising SG&A expenses, which led to a dismal gross margin, remain a concern.

All said, we believe that strong digital growth and store reopening initiatives are likely to help this Zacks Rank #3 (Hold) stock maintain momentum amid the COVID-19 crisis.

3 Stocks to Consider

The Kroger Co. KR has an impressive long-term earnings growth rate of 5.5% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Tractor Supply Company TSCO has an impressive long-term earnings growth rate of 12% and a Zacks Rank #2 (Buy).

Lowes Companies LOW, which presently carries a Zacks Rank #2, has an expected long-term earnings growth rate of 15.5%.

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Lowes Companies, Inc. (LOW) : Free Stock Analysis Report
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