Dick's Sporting Goods, Inc. "We See A Cup More than Half Full" (Buy) Lasser

Research evidence excerpt

Dick's Sporting Goods, Inc. "We See A Cup More than Half Full" (Buy) Lasser

We also think the near-term outlook is favorable for the Foot Locker business. We are

modeling a -0.5% comp for this segment, which compares to the consensus of -1.3%

and the market’s bar of around flattish. We think the market will find this performance

to be promising since its still in the early innings of integration. Previously, the company

noted that it did not expect its actions to drive a meaningful turn in this business until

back-to-school. So, early progress should put this segment on even better footing.

From a profitability perspective, we are forecasting $11mm of operating income. This is

probably conservative. It’s based on the assumption that this segment achieves a 30.4%

gross margin. This would be the highest level for this line item over the last few years. So,

it should be interpreted as a positive sign.

We also think DKS will speak favorably on the outlook for Foot Locker. This is due in part

to its deployment of Fast Break renovations. The 21-store Fast Break pilot delivered

comps likely in the MSD – HSD % range, and the conversion is now ramping towards

250 stores by back-to-school. As we show in Figure 2, we think the roll out of the Fast

Break concept can add ~200 of comp contribution to the Foot Locker business by

2027e. In fact, we think DKS has seen such success with these renovations that it could

accelerate the rollout and land this year to having nearly 350 or more of these locations.

Together, these factors mean that DKS is very likely to reiterate its full year guidance that

calls for $22.1 billion to $22.4 billion of sales and non-GAAP EPS of $13.50 to $14.50.

Though, there’s a chance that the first quarter was nicely above expectations such that it