Can Dick's Sporting Goods Survive In An Amazon World?
Dick’s Sporting Goods’ share price plummeted in 2017, to approximately 24.48 USD. Since this two-year low, shares have trended upwards to about $35 today. Can the good times continue for Dick's? The fierce competition that the retail sector has faced from Amazon & e-commerce companies could affect Dick’s ability to retain customers and survive in an ever changing landscape.
In terms of market capitalization, revenue, and square footage, Dick is the clear leader of the sporting goods industry; however, Dick’s ability to occupy the e-commerce space requires a structural adjustment that could be compromised in an economic downturn. With this being said, the company has little long-term debt, approximately $114 million in cash, and a revolving credit facility of $1.25 billion, which will allow them to continue to invest and develop their online marketplace. Dick’s financial health, long-standing customer relations, and expansion in the e-commerce space might allow them to discover a niche in the economic landscape.
Although Dick’s hunting business was a vital source of revenue for the company Dick’s disinvested from this revenue stream in 2016 in response to political pressure. Dick’s has looked for profits in other places, and as a result Dick’s has heavily invested in its exclusive brands such as Alpine Design or Second Skin. These brands generate higher gross margins for the company compared to third-party brands, and in 2017, these brands exceeded $1 billion in revenue - a number that has grown by 2 percent since 2015. In 2018, e-commerce accounted for 20 percent of total net sales for the company. Although Dick’s has expanded its exclusive brands and e-commerce presence, their lower margins compared to exclusively online retailers could impact their relative profitability in the near term.
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Written by James Mueller & Edited by William Turchetta & Alexander Fleiss