Dick’s Sporting Goods will sidestep retail spending weakness, analysts say

By James Rogers

Retailers have seen discretionary spending fall this earnings season

Dick’s Sporting Goods Inc., which reports fourth-quarter results ahead of the market on Tuesday, is expected to sidestep the spending weakness that has impacted many retailers this earnings season.

“[Dick’s Sporting Goods] Trends have likely proved resilient in the face of fluctuating consumer behavior,” UBS analyst Michael Lasser said in a note released on Monday [Dick’s] significant stake while gaining [the fourth quarter].”

The analyst also referred to the company’s stock as a “rock” in contrast to other names in the retail sector. “[Dick’s] Stocks seem to have a lot of pull to want to go higher,” he wrote, referring to the company’s third-quarter results last year. “There were errors in the printing. Still, the stock is up 10.1% on the day of publication, showing that the market is bullish on the prospects for this retailer.”

Related: As consumers withdraw discretionary spending, what’s next for retailers?

In the third quarter, Dick’s (DKS) beat estimates with positive same-store sales and also provided an upbeat outlook. The company’s stock is up 15.1% over the past three months, outperforming the S&P 500’s 1.2% gain.

UBS has a neutral rating on Dick’s Sporting Goods.

One of the key trends of this retail earnings season has been a decline in discretionary spending as consumers rebalance their budgets in an uncertain macro environment.

Related: Costco still shows strength despite contraction in discretionary spending, analysts say

But in a note published last month, DA Davidson analyst Michael Baker wrote that sporting goods have held up well. In a separate note, the analyst also described Dick’s as one of the best-performing stocks in the retail sector since the pandemic began. The company’s stock is up 262.8% over the past three years, compared to a 37.3% gain for the S&P 500.

Analysts polled by FactSet expect Dick’s Sporting Goods to report earnings of $3.26 per share, or $3.19 on an adjusted basis, on sales of $3.646 billion.

In a recent report, analytics firm Placer.ai said that Dick’s Sporting Goods and sportswear retailer Hibbett Inc. (HIBB) had seen an increase in foot traffic since 2019, before the COVID-19 pandemic hit. In the fourth quarter of 2022, Dick’s foot traffic increased 0.8% compared to 2019, while Hibbett grew 28%.

Now read: Hibbett’s profit and sales fall below estimates as shoppers buy shoes but shun clothes

“The two chains’ emphasis on expansion in recent years likely helped them consistently outperform foot traffic,” Placer.ai wrote. “[Dick’s] has also focused on partnerships, teaming up with brands like Peloton and Stanley to bring a broader consumer base to their stores.”

However, last week Hibbett Inc.’s fiscal fourth quarter results and guidance for the current year fell short of estimates. The Birmingham, Alabama-based company’s results were weighed down by supply chain issues and promotional activity.

Of 27 analysts polled by FactSet, 13 have an overweight or buy rating, 13 have a hold rating and one has an underweight rating on Dick’s Sporting Goods.

Additional reporting by Ciara Linnane.

-James Rogers

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03-06-23 1535ET

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