Dick's Is The No. 1 Pick In Sports Retail

Susquehanna’s Sam Poser believes Dicks Sporting Goods Inc’s (NYSE: DKS) FY16 guidance could prove conservative. In addition, management lowered FY17 guidance, citing potential pressure from the liquidations of The Sports Authority and Sports Chalet.

Poser initiated coverage of Dicks Sporting Goods with a Positive rating and $65 price target.

Benefiting From Liquidations

“We believe that over the next few years DKS will pick up at least $500M to $750M of the approximate $3.3B of annual revenue driven by TSA and Sport Chalet combined,” the analyst mentioned.

Related Link: Foot Locker A Top Pick At Susquehanna, Initiated At Positive

Poser noted that the Sports Authority and Sports Chalet liquidations were concluded faster than expected and were unlikely to have impacted 2Q16 as much as anticipated, with some retailers commenting sales were progressing better than the mid-single digits since the liquidation of Sports Authority was concluded.

TSA Properties Acquired

According to the Susquehanna report, “DKS acquired 30 of TSA's locations. The acquired locations include 5 key stores in Florida and 9 locations in California. It's important to note that other than Dick's Sporting Goods, there is no other big box sporting goods retailer in California, which should provide material growth opportunities for DKS.”

The company has also acquired Sports Authority’s intellectual property, as well as a large amount of consumer data.

Naming Dicks Sporting Goods as the No. 1 pick, Poser stated the company intended to take its ecommerce platform in-house in 2017, which was likely to lead to an incremental $0.15 to the EPS.

Poser also said the retailer is protected from Amazon.com, Inc. (NASDAQ: AMZN), as "approximately 60 percent of Dick's product is exclusive one way or the other. Guns & Ammo, which makes up a small but material amount of DKS's sales, cannot be sold online."

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