Dick’s Sporting Goods is Stepping Up Its Sneaker Game
Strong online growth and positive sneaker trends are setting up the sports retailer for future gains, according to Cowen analyst John Kernan. The firm upgraded shares of Dick’s Sporting Goods to OUTPERFORM from MARKET PERFORM, with a price target increase to $50 (from $36).
Positive sneaker traction: Dick’s is becoming a more preferred destination for sneakers, according to the Cowen Consumer Tracker Survey. When asked “when I am shopping for sneakers, my first choice is to go to?” 23% of the total survey population chose Foot Locker vs. 12% for Dick’s Sporting Goods in May 2020. This compares to 24% for FL and 10% for DKS on average in 2019 and an average of 25% for FL vs. 7% for DKS five years ago.
A friend in Nike: Dick’s increasing share in sneaker preference might be partially attributed to its growing relationship with Nike, which is the largest manufacturer at Dick’s and now represents 21% of total purchases at the retailer. Five years ago, Nike accounted for 19% of total purchases. Cowen points out that this increase is a result of greater product allocation to DKS from NKE. Cowen estimates that DKS represents about 2.4% of Nike’s total wholesale.
The downside: Nike is increasingly prioritizing its own digital Direct-to-Consumer platforms. This means that a larger share of Nike’s marketing dollars could be allocated towards bringing consumers to its own website and away from retail partners such as Dick’s.
Amazon vs. Dick’s: When it comes to finding a better price, Dick’s has Amazon beat on several “Best Sellers” across key categories, particularly basketball sneakers and branded apparel. The top new footwear SKUs on dickssportinggoods.com include the Lebron 17, Kyrie 6, PG4, and Air Jordan Why Not Zer0.3, and the Kyrie 6 is the only one that is currently offered at a premium price on Dick’s.
Big picture: Dick’s is resonating more with more consumers as a footwear destination, and the retailer is fending off Amazon through better product allocation at better prices from key partners such as Nike. While physical retailers are struggling to fully adapt to the shift to online shopping, Cowen says Dick’s 20% market share of the U.S. sporting goods market could increase by 2.5% over the next five years as smaller rivals weaken financially or file for bankruptcy.
