Analysts continue to give positive reads on Dick’s Sporting Goods as the retail chain forges ahead with aggressive door expansions and its ecommerce overhaul.
Following its analyst meetings on Friday, Wall Street seems impressed by the firm’s newly minted CFO Teri List-Stoll, a former Kraft Foods Group EVP, CFO and senior advisor who joined the company in August.
The major topics, analysts said, included e-commerce, cost savings, store size and competition.
“List-Stoll will focus on how to balance expense control while driving growth, from a more data-driven point of view than has been in place at Dick’s,” Sterne Agee CRT analyst Sam Poser wrote in an Oct. 5 note. “She will focus on helping to develop more scalable processes such as product development for the Calia brand.”
Susquehanna Financial LLLP analyst Christopher Svezia, in an Oct. 5 note, also noted that he thought the new CFO was building an effective plan for the firm.
Watch on FN
“We walked away impressed with her experience and believe she brings the right philosophy to help grow the business more efficiently,” Svezia said. “In particular, the company’s cost structure will likely receive a fresh look while improved productivity will be a focus.”
Among his other highlights from Friday’s meetings, Poser said he was able to confirm that there will be an annual cost savings of $25 million to $30 million, or between 13 cents and 16 cents per share, when Dick’s takes its e-commerce platform in-house.
Dick’s CEO Edward Stack had unveiled plans, earlier this year, to launch the firm’s e-commerce business, which is currently run by eBay, on its own exclusive e-platform by January 2017.
Poser and other analysts have been upbeat on the move — citing Dick’s current e-commerce edge as proof that the company does digital well.
“Dick’s is currently paying GSI transaction fees to process orders. Those fees go away when e-commerce comes in house,” Poser explained. “Dick’s will continue to use third party distribution for e-commerce orders in 2017, but the costs should be more favorable than they are now with GSI.”
(GSI Commerce is a tech company that was acquired by eBay in 2011).
The in house e-commerce platform is now being tested at Golf Galaxy and will also be at Field & Stream ahead of the full-on transition in 2017.
Regarding store size, Svezia said he believes “50,000 square feet continues being the sweet spot” for Dick’s for a few reasons.
“This size allows the store to manage a healthy mix of product categories while offering compelling points of display (i.e., shop-in-shops); there is enough square footage to keep vendors satisfied; the latter is a key advantage since management noted that customers tend to shop across many brands which helps mitigate against investor worries over vendor [direct-to-consumer] growth,” Svezia said.
Further the analyst said, competition in the sporting goods retail arena has not changed much recently, and Dick’s continues to lead with its only major competitor being Academy Sports and Outdoors.
“Overall, we liked what we heard and continue to favor the risk/reward at these levels even on the heels of outperformance so far this year,” Svezia said.
