Dick's Sporting Goods: A 'Well-Managed' Business In Tough Retail Environment

Sterne Agee says Dicks Sporting Goods Inc (NYSE: DKS) should meet or exceed EPS guidance of $0.48–$0.50 and same-store sales guidance of flat to +1 percent when it reports first-quarter results on May 19.

While noting that Dick's is a "well-managed business in tough retail environment," analyst Sam Poser sees first-quarter EPS of $0.50, in line with the street and estimates consolidated SSS to increase 0.6 percent compared to consensus of +0.5 percent.

"Given that Easter and the largest volume part of 1Q was still ahead when guidance was given on March 9, we contend there is room for upside. We contend guidance is realistic and base case scenario," Poser wrote in a note.

The analyst, who has a Buy rating on the stock, contends there is likely upside to Dick's FY16 EPS & SSS guidance of $2.85–$3.00 and flat to +2 percent, respectively. Consensus estimates call for EPS of $2.97 on SSS of +1.5 percent.

Although Dick's may lose sales to the TSA bankruptcy and liquidations in the near term, the analyst said the company will benefit from TSA's absence starting in the second half of 2016.

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Poser's checks indicate that the removal of current product from premium vendors, such as Nike Inc (NYSE: NKE) and Under Armour Inc (NYSE: UA), from the stores slated for liquidation would minimize the near-term negative impact on the company.

"DKS will benefit from investments in the Dick's Sporting Goods brand, the partnership with the US Olympic Team, and the rollout of full-service footwear selling floors. Dick's will also benefit from taking its e-commerce business in house in FY17," Poser highlighted.

At the time of writing, shares of Dick's were down 1.17 at $37.22. Poser has a price target of $55.