Dick's has followed the market’s trajectory closely, rising in tandem with the S&P 500 over the past six months. The stock has climbed by 6.8% to $224.38 per share while the index has gained 10.9%.
Is now the time to buy DKS? Find out in our full research report, it’s free.
Why Does DKS Stock Spark Debate?
Started as a hunting supply store, Dick’s Sporting Goods (NYSE: DKS) is a retailer that sells merchandise for traditional sports as well as for fitness and outdoor activities.
Two Positive Attributes:
1. New Stores Opening at Breakneck Speed
The number of stores a retailer operates is a critical driver of how quickly company-level sales can grow.
Dick's sported 3,115 locations in the latest quarter. Over the last two years, it has opened new stores at a rapid clip by averaging 99.6% annual growth, among the fastest in the consumer retail sector.
When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.
2. Surging Same-Store Sales Show Increasing Demand
Same-store sales is a key performance indicator used to measure organic growth at brick-and-mortar shops for at least a year.
Dick’s demand has been spectacular for a retailer over the last two years. On average, the company has increased its same-store sales by an impressive 3.6% per year.
One Reason to Be Careful:
Low Gross Margin Reveals Weak Structural Profitability
Gross profit margins are an important measure of a retailer’s pricing power, product differentiation, and negotiating leverage.
Dick's has bad unit economics for a retailer, signaling it operates in a competitive market and lacks pricing power because its inventory is sold in many places. As you can see below, it averaged a 34.6% gross margin over the last two years. Said differently, Dick's had to pay a chunky $65.43 to its suppliers for every $100 in revenue.
Final Judgment
Dick’s merits more than compensate for its flaws, but at $224.38 per share (or 15× forward P/E), is now the right time to buy the stock? See for yourself in our comprehensive research report, it’s free.
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