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Is DKS the Undervalued Retail Stock You've Been Waiting for?
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DICK’S Sporting Goods Inc. (DKS - Free Report) emerges as an attractive value opportunity in the Retail - Miscellaneous industry, trading at a forward 12-month price-to-earnings ratio of 15.36, below the industry average of 18.27 and the Retail-Wholesale average of 24.84. The stock is undervalued compared with its industry peers, offering compelling value to investors looking for exposure to the Retail-Wholesale sector.
DKS's P/E Performance
Image Source: Zacks Investment Research
DKS’ stock is currently priced at $225.31, trading 5.8% lower than its 52-week high of $239.30 reached on Aug. 23, 2024. The stock is currently trading above its 200-day and 50-day moving averages, highlighting a sustained upward trend.
DKS Trades Above 200 & 50-Day Moving Average
Image Source: Zacks Investment Research
DICK’S stock has been trending up the charts, recording growth of 61% year to date. This upside outpaces the broader Retail-Wholesale sector’s return of 29.9% and the Zacks Retail - Miscellaneous industry’s 8.7% growth in the same period. DKS’ shares also surpassed the S&P 500 index’s appreciation of 28% in the same time frame.
DKS's Price Performance
Image Source: Zacks Investment Research
DICK’S Growth Driven by Brand Strength & Digital Innovation
DICK’S Sporting Goods has been benefiting from brand strength and continued market share gains, leading to a robust top-line performance in third-quarter fiscal 2024. Strong comparable store sales (comps) and healthy transaction growth acted as tailwinds. Consolidated comps grew year over year due to higher transactions and average tickets.
The upside was driven by its four strategic pillars, including an omnichannel athlete experience, a differentiated product assortment, deep engagement with the DICK'S brand and knowledgeable, passionate teammates who provide exceptional service. Meanwhile, gross margin expanded year over year, primarily driven by an improvement in merchandise margin due to a favorable sales mix and the quality of the assortment.
DICK’S Sporting Goods is focused on business optimization to streamline costs, with robust omnichannel experiences and unique product assortments driving growth. Management is committed to digital innovation, as evidenced by over 5.5 million unique users engaging with GameChanger, a 21% increase year-over-year. The app, with nearly two million daily active users, enables the company to connect with athletes beyond traditional shopping, reinforcing its leadership in sports.
DICK’S Outlook Signals Continued Growth
DICK’S Sporting Goods continues to redefine the sports retail landscape through strategic investments, including the innovative House of Sport and DICK'S Field House concepts. The third quarter of fiscal 2024 saw a successful back-to-school season and continued market share gains. Building on this strong performance and sustained confidence in the business, the company has raised its full-year outlook once again.
The company raised its fiscal 2024 outlook, now expecting net sales of $13.2-$13.3 billion, with comparable sales growth of 3.6-4.2%. This reflects improvements from fiscal 2023 sales of $12.98 billion and 2.5% comps growth. DICK’S Sporting also maintained its projected EBT margin at 11.2% at the mid-point for fiscal 2024, showing growth from 10.8% in the prior year. Adjusted EPS is forecasted to be between $13.65 and $13.95, compared to $12.91 in fiscal 2023.
What Could Derail the DKS Stock’s Momentum?
Despite its strong performance and strategic initiatives, DICK’S Sporting Goods has been witnessing an uncertain macroeconomic environment coupled with higher wage rates and increased investments in talent, technology and marketing to enhance the athlete experience. These factors have contributed to elevated costs.
In the third quarter of fiscal 2024, adjusted selling, general and administrative (SG&A) expenses increased year over year, resulting in deleveraging as a percentage of sales. This deleverage was attributed to adverse sales impacts from the calendar shift, as well as strategic investments in marketing, technology and talent, along with increased incentive compensation.
Management expects modest deleverage in adjusted SG&A expenses for the full fiscal year due to its strategic investments aimed at fostering long-term growth. DICK’S Sporting also anticipates pre-opening expenses for the fourth quarter of 2024 to be slightly higher than the previous year, driven by the timing and mix of store openings.
Final Thought on DKS Stock
Investors should consider DKS stock due to its brand strength and continued market share gains. The company’s four strategies are key drivers of growth. The company’s outlook signals continued growth, projecting strong sales and profit growth for fiscal 2024. However, challenges such as elevated costs due to higher wages, increased investments, and the uncertain macroeconomic environment could pose risks to its momentum. Currently, the stock has a Zacks Rank #3 (Hold), reflecting a balanced outlook for its future performance.
Three Picks You Can’t Miss
We have highlighted three better-ranked stocks, namely, The Gap, Inc. (GAP - Free Report) , Abercrombie & Fitch Co. (ANF - Free Report) and Gildan Activewear Inc. (GIL - Free Report) .
The Zacks Consensus Estimate for GPS’ current financial-year sales and earnings suggests declines of 0.8% and 41.3%, respectively, from the year-ago reported figures.
Abercrombie & Fitch, a specialty retailer of premium, high-quality casual apparel, currently has a Zacks Rank #2 (Buy). ANF has a trailing four-quarter average earnings surprise of 14.8%.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current fiscal-year sales and earnings indicates growth of 14.9% and 69.3%, respectively, from the prior-year levels.
Gildan Activewear, a distributer and manufacturer of activewear products, currently carries a Zacks Rank #2. GIL has a trailing four-quarter earnings surprise of 5.4%, on average.
The Zacks Consensus Estimate for Gildan Activewear’s current fiscal-year sales and earnings suggests an improvement of 1.5% and 15.6%, respectively, from the year-earlier levels.
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Is DKS the Undervalued Retail Stock You've Been Waiting for?
DICK’S Sporting Goods Inc. (DKS - Free Report) emerges as an attractive value opportunity in the Retail - Miscellaneous industry, trading at a forward 12-month price-to-earnings ratio of 15.36, below the industry average of 18.27 and the Retail-Wholesale average of 24.84. The stock is undervalued compared with its industry peers, offering compelling value to investors looking for exposure to the Retail-Wholesale sector.
DKS's P/E Performance
Image Source: Zacks Investment Research
DKS’ stock is currently priced at $225.31, trading 5.8% lower than its 52-week high of $239.30 reached on Aug. 23, 2024. The stock is currently trading above its 200-day and 50-day moving averages, highlighting a sustained upward trend.
DKS Trades Above 200 & 50-Day Moving Average
Image Source: Zacks Investment Research
DICK’S stock has been trending up the charts, recording growth of 61% year to date. This upside outpaces the broader Retail-Wholesale sector’s return of 29.9% and the Zacks Retail - Miscellaneous industry’s 8.7% growth in the same period. DKS’ shares also surpassed the S&P 500 index’s appreciation of 28% in the same time frame.
DKS's Price Performance
Image Source: Zacks Investment Research
DICK’S Growth Driven by Brand Strength & Digital Innovation
DICK’S Sporting Goods has been benefiting from brand strength and continued market share gains, leading to a robust top-line performance in third-quarter fiscal 2024. Strong comparable store sales (comps) and healthy transaction growth acted as tailwinds. Consolidated comps grew year over year due to higher transactions and average tickets.
The upside was driven by its four strategic pillars, including an omnichannel athlete experience, a differentiated product assortment, deep engagement with the DICK'S brand and knowledgeable, passionate teammates who provide exceptional service. Meanwhile, gross margin expanded year over year, primarily driven by an improvement in merchandise margin due to a favorable sales mix and the quality of the assortment.
DICK’S Sporting Goods is focused on business optimization to streamline costs, with robust omnichannel experiences and unique product assortments driving growth. Management is committed to digital innovation, as evidenced by over 5.5 million unique users engaging with GameChanger, a 21% increase year-over-year. The app, with nearly two million daily active users, enables the company to connect with athletes beyond traditional shopping, reinforcing its leadership in sports.
DICK’S Outlook Signals Continued Growth
DICK’S Sporting Goods continues to redefine the sports retail landscape through strategic investments, including the innovative House of Sport and DICK'S Field House concepts. The third quarter of fiscal 2024 saw a successful back-to-school season and continued market share gains. Building on this strong performance and sustained confidence in the business, the company has raised its full-year outlook once again.
The company raised its fiscal 2024 outlook, now expecting net sales of $13.2-$13.3 billion, with comparable sales growth of 3.6-4.2%. This reflects improvements from fiscal 2023 sales of $12.98 billion and 2.5% comps growth. DICK’S Sporting also maintained its projected EBT margin at 11.2% at the mid-point for fiscal 2024, showing growth from 10.8% in the prior year. Adjusted EPS is forecasted to be between $13.65 and $13.95, compared to $12.91 in fiscal 2023.
What Could Derail the DKS Stock’s Momentum?
Despite its strong performance and strategic initiatives, DICK’S Sporting Goods has been witnessing an uncertain macroeconomic environment coupled with higher wage rates and increased investments in talent, technology and marketing to enhance the athlete experience. These factors have contributed to elevated costs.
In the third quarter of fiscal 2024, adjusted selling, general and administrative (SG&A) expenses increased year over year, resulting in deleveraging as a percentage of sales. This deleverage was attributed to adverse sales impacts from the calendar shift, as well as strategic investments in marketing, technology and talent, along with increased incentive compensation.
Management expects modest deleverage in adjusted SG&A expenses for the full fiscal year due to its strategic investments aimed at fostering long-term growth. DICK’S Sporting also anticipates pre-opening expenses for the fourth quarter of 2024 to be slightly higher than the previous year, driven by the timing and mix of store openings.
Final Thought on DKS Stock
Investors should consider DKS stock due to its brand strength and continued market share gains. The company’s four strategies are key drivers of growth. The company’s outlook signals continued growth, projecting strong sales and profit growth for fiscal 2024. However, challenges such as elevated costs due to higher wages, increased investments, and the uncertain macroeconomic environment could pose risks to its momentum. Currently, the stock has a Zacks Rank #3 (Hold), reflecting a balanced outlook for its future performance.
Three Picks You Can’t Miss
We have highlighted three better-ranked stocks, namely, The Gap, Inc. (GAP - Free Report) , Abercrombie & Fitch Co. (ANF - Free Report) and Gildan Activewear Inc. (GIL - Free Report) .
Gap, a leading apparel retailer, currently sports a Zacks Rank #1 (Strong Buy) at present. GPS has a trailing four-quarter earnings surprise of 101.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GPS’ current financial-year sales and earnings suggests declines of 0.8% and 41.3%, respectively, from the year-ago reported figures.
Abercrombie & Fitch, a specialty retailer of premium, high-quality casual apparel, currently has a Zacks Rank #2 (Buy). ANF has a trailing four-quarter average earnings surprise of 14.8%.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current fiscal-year sales and earnings indicates growth of 14.9% and 69.3%, respectively, from the prior-year levels.
Gildan Activewear, a distributer and manufacturer of activewear products, currently carries a Zacks Rank #2. GIL has a trailing four-quarter earnings surprise of 5.4%, on average.
The Zacks Consensus Estimate for Gildan Activewear’s current fiscal-year sales and earnings suggests an improvement of 1.5% and 15.6%, respectively, from the year-earlier levels.