DKS Stock Alert: Dick’s Sporting Goods Acquires Moosejaw From Walmart
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shares of the retailer Dick’s sporting goods (NYSE:DCS) surged notably higher amid a soft session on Wall Street. As investors digested concerns about ever-rising interest rates, DKS shares rose about 1.5% by early afternoon. News broke that Dick’s was buying outdoor retailer Moosejaw Walmart (NYSE:WMT). Although the development bodes well for footprint expansion in theory, it also poses risks for the consumer economy.
According to the accompanying press release, the acquisition will expand Dick’s outdoor portfolio. The specialty retail brand Public Lands currently leads this segment. In addition, the acquisition will reinforce Dick’s commitment to long-term business opportunities in the burgeoning multi-billion dollar outdoor category. Management expects the transaction to close in March this year.
Notably, the release didn’t include the cost of the deal. Per CNBC, Walmart bought Moosejaw in February 2017 for $51 million. Also, the news outlet notes that the move is a rare one for Dick’s. On paper, the acquisition should complement Moosejaw’s brick-and-mortar strengths with Dick’s e-commerce acumen. Therefore, the deal may have a positive impact on the chart performance of DKS stock.
Further than CNBC pointed out that quarantined Americans have been drawn to outdoor activities throughout the coronavirus pandemic. This allows them to enjoy some much-needed downtime while greatly reducing the risk of infection.
Key Benefits for DKS Stock
It is almost certain that Dick’s will look to capitalize on the positive momentum that the Covid-19 crisis has created for the outdoor industry. Penn State research found that outdoor recreational activities increased by 20% during the pandemic. This dynamic led to the emergence of a new group of outdoor enthusiasts CNBC.
Another benefit of DKS storage centers is scale. A Walmart spokesman told the news outlet that Walmart used its brand to reinforce Moosejaw’s relevance. “While operating as a standalone company, Moosejaw was able to leverage Walmart’s scale and customer reach to fuel the Moosejaw madness.” Dick’s hopes to achieve even better results given that the company already has a formidable presence in the outdoor industry.
Finally, Moosejaw benefits from an enviable demographic dynamic. Specifically, the primary demo is the 18-24 year olds category. Combined with brand loyalty, Moosejaw can grow with its regular customer base. Over time, this should help lift DKS stock.
Concerns from the consumer economy weigh heavily
While DKS stock has potential upside from the deal, it also poses significant risks. Above all, demand in the outdoor segment could drop. According to Canada CBC last year, “[a]After a sudden surge in demand for outdoor recreation gear during the COVID-19 pandemic, sporting goods stores in Ottawa and Outaouais say business is gradually returning to pre-pandemic levels.”
Another concern for DKS stock is the costs associated with outdoor activities. As consumers face the pressure of historically high inflation, their motivation to open their wallets has diminished. Also, they may not necessarily choose branded products when generics work well for them.
Finally, potential investors in DKS stock should note that web traffic and engagement fell significantly from October through December of last year Similarweb. Therefore, additional research may be required before diving in.
On the day of publication Josh Enomoto had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author and are governed by InvestorPlace.com Posting Policies.