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Dicks Sporting Goods Inc (DKS), Under Armour Inc (UA): Waiting for the Season to Start

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If investors are waiting for better results from Dicks Sporting Goods Inc (NYSE:DKS), they may have a few months to go. This company’s results have been fairly impressive given the breadth of competition from companies like Foot Locker, Inc. (NYSE:FL) and Amazon.com, Inc. (NASDAQ:AMZN). While the growth from companies like NIKE, Inc. (NYSE:NKE) and Under Armour Inc (NYSE:UA) may help Dicks Sporting Goods Inc (NYSE:DKS)’s move forward, the company needs to improve and this improvement can’t come quickly enough.

Under Armour Inc (NYSE:UA)

Waiting for What?

Last quarter, Dicks Sporting Goods Inc (NYSE:DKS)’s suffered from negative same-store sales, and investors sent the shares down on worries that this could be epidemic. At the time, this concern seemed overdone because last quarter is historically weaker than the rest of the year. In fact, in March the company’s comparable store sales decrease by 2.2% was actually an improvement over the 2.5% decrease the year prior.

However, this quarter’s same-store sales drop of 3.8% compares horribly to the company’s increase of 8.4% last year. If investors believed that three months would solve the problem, they were wrong. When you consider that analysts are calling for 15.9% EPS growth over the next few years, Dicks Sporting Goods Inc (NYSE:DKS)’s is going to have to do much better than this.

While Foot Locker, Inc. (NYSE:FL) doesn’t have the same ability to increase its store count in the way that Dicks Sporting Goods Inc (NYSE:DKS)’s can, analysts expect nearly 11% EPS growth over the next few years. With NIKE, Inc. (NYSE:NKE) growing by 11.8% and Under Armour Inc (NYSE:UA) growing by 21.7%, Dick’s and Foot Locker, Inc. (NYSE:FL) should both benefit. However, without a turnaround in their same-store sales growth, Dick’s growth may be muted.

Make Room

The good news is, Dicks Sporting Goods Inc (NYSE:DKS)’s can improve in two specific areas over the next few years. First, the company can manage its inventory more efficiently. Whenever I look at a retailer’s inventory, I try to compare it to their current quarter sales to get an idea of how much inventory they have to carry to create the sales.

In the last three months, Dick’s percentage of inventory to current quarter sales was 98.35%. By comparison, Foot Locker, Inc. (NYSE:FL) carried 71.37% of inventory to their current quarter sales. In the past, some analysts questioned Under Armour Inc (NYSE:UA)’s inventory management, but recently the company’s inventory to current quarter sales was just 68.6%. However, if Dick’s wants a model to follow for inventory management, they should look at NIKE, Inc. (NYSE:NKE), which carried just 53.81% of inventory to current quarter sales.

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