Dick’s Sporting Goods (DKS) disappointed Wall Street on Tuesday when it reported far deeper sales fourth quarter declines than even it had forecast.
But relief is one the way, in 2017 at least.
The recently announced bankruptcy protection filing of archrival Sports Authority called for 140 of its stores to be closed, giving Dick’s some breathing room to win back market share it has lost to everyone from Kohl’s (KSS) to Amazon.com (AMZN) to Walmart (WMT) in recent years as those stores have ramped up their activewear offerings.
Dick’s said comparable sales fell 2.5% during the holiday quarter (it had told Wall Street to expected them to range from a 2% drop to a 1% increase), meaning the retailer had its first annual comparable sales decline since 2009.
But when Sports Authority emerges from bankruptcy protection, it will have slimmed down to 323 stores, to Dick’s 640 or so namesake locations (the company also owns chain of golf stores). That means some markets will now be free of a direct competitor, but also that some of the prime locations Sports Authority is closing could be snapped up in bankruptcy auction by Dick’s.
“We’re going to be pretty aggressive to try to capture some of that displaced market share,” Dick’s CEO Ed Stack told Wall Street analysts on a call to discuss its financial results.
A decade ago, Dick’s and Sports Authority were roughly on par, two retailers with annual sales of $3 billion, and 300 stores each. With Sports Authority, the size gap will grow. While not committing to anything during Sports Authority’s bankruptcy auctions, Stack said the company would look at the stores its rival is trying to sell, as part of its efforts to build up Dick’s presence in markets where its presence is scarce. But those decisions will be made market by market, with favor given to areas without a Dick’s store.
For now, though, Sports Authority’s downsizing could hurt Dick’s. Clearance sales at stores it is closing, as well as those it is keeping, will pressure Dick’s to cut its own prices. But after that, it will be boon.
“As we go forward into 2017, net-net it will be positive,” Stack said.
