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Dick’s Sporting Goods: Visitor Acquisition Strategies Driving Share Gains

R.J. Hottovy
Mar 10, 2023
Dick’s Sporting Goods: Visitor Acquisition Strategies Driving Share Gains

With Dick’s Sporting Goods Q4 2022 update this week, we thought we’d revisit some of our previous analysis on the chain and the broader sporting goods retail category. We’ve spent a lot of time over the past several months examining which retail categories have seen structural changes that may drive visits above pre-pandemic levels (fitness) and others that may have seen demand pull forward and may now face “air pockets” (consumer electronics and women’s apparel). Sporting goods is an interesting category within this discussion, because while the category certainly benefited from a pull forward in demand and certainly there is increased awareness for healthy and active lifestyles coming out of the pandemic, it’s not evident that there are structural changes in demand that would drive category visits substantially higher in the years to come. Nevertheless, Dick’s has capitalized on several broader trends driving visits across the retail sector (including experiential retail formats, elevated and differentiated merchandise assortment, and new approaches to customer acquisitions) and now finds itself positioned for visitation share gains and improved store economics longer-term.

Below, we take a deeper look at the Dick’s results and the overall category:

  • Sporting goods category visits per location have started to normalize... We’ve plotted visits per location for the sporting goods retail category below. Like other retail categories that benefited from changes in consumer behavior during the pandemic, sporting goods retailers saw an uptick in visits during 2021 as more consumers took up new sports, fitness, and wellness activities during the pandemic. As a category, sporting goods retailers averaged 56.7K quarterly visits per location during 2021, a 6.6% increase from the average quarterly visits per location from 2017-2019. However, quarterly visits per location fell 8.4% in 2022, putting this metric below 2017-2019 averages and suggesting some demand for sporting goods was pulled forward.
  • …but Dick’s outperformance has continued. While Dick’s hasn’t been immune from a drop-off in visits per location, it’s clear that the chain is deviating from the rest of the category. From 2017-2019, Dick’s averaged 82.8K quarterly visits per location. Like the rest of the category, Dick’s saw an uptick in visits per location in 2021, with an 8.5% increase to 89.8K. However, the chain only experienced a 3.4% decline in visits in 2022, which we believe is indicative of the company’s successful customer acquisition strategies, loyalty program, and elevated/differentiated merchandising strategies. Dick’s was on the short list of discretionary retailers to post positive transaction growth during its most recent quarter, with the 5.3% increase in comparable sales being driven by a 7.6% increase in transactions, partly offset by a 2.3% decline in average ticket.

We also see this outperformance in category visitation share gains. In 2017, Dick’s saw 43.8% of the visits among the six largest pure-play sporting goods retailers (a list that also includes Academy Sports + Outdoor, REI, Hibbett Sports, Big 5, and Dunham Sports). By 2022, this number had increased to 47.1%, and reinforcing management’s comments about “considerable” market share gains (specifically calling out the footwear, athletic apparel, team sports and golf categories).

  • Dick’s higher-end customer base is helping to drive visitation frequency. What is driving this outperformance? Ultimately, we believe there are several reasons, but we think the answer starts with an improved and more differentiated assortment. Out of the six sporting goods chains we identified in the previous chart, Dick’s ranked second in terms of trade area household income over the past twelve months (trailing only REI). With Dick’s consumers less sensitive to the potential price sensitivity that has started to impact other retailers, we expect healthy visitation trends to continue in the future. data indicates that Dick’s is not only seeing an increase in incremental visitors, but also a generally positive trendline with respect to visit frequency. In our view, this supports the relative health of the Dick’s customer as well as merchandising strategies and loyalty program efforts.

  • Leveraging new formats to accelerate square footage growth. Management expects to return to square footage growth in 2023, with plans to open nine new Dick’s House of Sport locations (eight of which are existing Dick’s and Field & Stream combo store conversions, along with one relocation). The company also anticipated beginning construction on more than 10 new Dick’s House of Sport locations that will open throughout 2024. The chain will also exit the Field & Stream brand and plans to convert its 17 existing Field & Stream stores to Dick’s House of Sport or larger-format Dick’s stores. In addition, the company plans to add more experiential Golf Galaxy Performance Centers and add premium full-service footwear to 100 stores, bringing this in-store concept to over 75% of its existing locations.

Dick’s House of Sport continues to deliver impressive results compared to legacy results. The initial Dick’s House of Sport location in Victor, NY posted 2.5 times as many visitors as the next closest legacy Dick’s location during 2022, but also saw higher visits per square foot, visitor frequency, and dwell time (below). Our additional data sets also reveal greater transactions per square foot and a 7% higher average ticket at the Dick’s House of Sport location.

The Victor House of Sport location also had roughly a 34% larger trade area than the Rochester location, adding more support to the future potential of this store format.

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R.J. Hottovy

Head of Analytical Research,

R.J. Hottovy, CFA has covered the restaurant, retail, and e-commerce sectors for 20 years as an equity analyst and strategist for Morningstar, William Blair & Co., and Deutsche Bank. R.J. also brings a wealth of experience with early-stage investments as a committee member for the IrishAngels / Vitalize venture capital group. Over the past three years, he advised over 50 food service companies on more than $200 million in early-stage capital raises and M&A transactions.

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