New MKM Survey Shows Positive Implications For Dicks, Amazon, Cabelas

MKM Partners’ inaugural sporting goods survey suggested favorable longer-term industry dynamics. While acknowledging the challenges facing sporting goods retailers, analyst Patrick McKeever said that the survey responses about future spending intentions were encouraging.

The Survey included nearly 1,200 consumers who had shopped for sporting goods over the past year.

Poised To Benefit From Industry Rationalization

McKeever said that the Survey supported the view that Dicks Sporting Goods Inc (NYSE: DKS) was “best positioned” to benefit from industry rationalization. He added that smaller sporting goods chains were “most at risk,” and that Dick's was building “one of the best omni-channel platforms.”

If Dicks could capture even 20 percent of the displaced business following the TSA and Sport Chalet closings, it would add $560 million of sales in FY17. “Assuming a 25% flow-through and a 38% tax rate, it would add $87 million to net income, or $0.75-$0.80/share,” the analyst wrote.

Faired Well As Expected

Not surprisingly, the Survey showed strength for Amazon.com, Inc. (NASDAQ: AMZN), with consumers shifting more of their spending online, McKeever noted.

Strong Brand

For Cabelas Inc (NYSE: CAB), the Survey highlighted the brand’s strength. The company faired well on questions related to shopping intentions post the TSA and Sport Chalet closings, brand recognition, online destinations, shopping/spending intentions and overall customer satisfaction, the analyst mentioned.

MKM Partners has Buy ratings on Dicks, Amazon and Cabelas, with price targets at $55, $850 and $56, respectively.