Dick’s Sporting Goods’ Impressive Momentum Is Threatened by Competition and Industry Conditions

We believe no-moat Dick’s Sporting Goods lacks an edge as sporting goods are sold through many channels. Although its sales and profitability growth over the past three years has been very high, we believe a slowdown is likely, as sporting goods retail is vulnerable to external competition. According to IBISWorld, sporting goods retail sales experienced average annual growth of just 1.3% in the five years before the pandemic. While Dick’s recent sales growth has generally outpaced this level, some of its rivals have posted strong results of their own. The firm’s competitors include e-commerce operators (such as wide-moat Amazon), mass retailers, specialty stores (narrow-moat Lululemon, Foot Locker, Bass Pro Shops/Cabela’s), and branded stores and owned e-commerce from major vendors. As an example of the latter, wide-moat Nike’s direct-to-consumer sales constituted about 44% of its fiscal 2023 Nike brand revenue sales, up from less than 20% before 2015. While Dick’s has strong relationships with Nike and other vendors, we do not believe its market position is strong enough to prevent it from offering exclusive merchandise in alternate channels. We forecast its compound average yearly sales growth at 4%-5% over the next decade.