Quietly Outperforming: The Retail Stock Everyone’s Missing Out On 🤫📊

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When you think of retail stocks, names like Amazon and Walmart usually come to mind. But not all winners are in the spotlight. Dick's Sporting Goods (DKS) has been quietly thriving in 2024, and if you're not paying attention, you might miss an opportunity. Let’s break down why this under-the-radar stock deserves a closer look.

DKS Is Having a Great Year

Dick's Sporting Goods is proving it can deliver results. In the third quarter of 2024, the company reported earnings per share (EPS) of $2.75, beating analyst expectations of $2.68. Revenue climbed to $3.06 billion, a modest but important increase over the same quarter last year.

The real standout number? Same-store sales, which rose 4.2% compared to just 1.9% a year ago. That’s a clear sign more customers are shopping at Dick’s—and spending more when they do.

CEO Lauren Hobart credited this success to a stellar back-to-school season. With kids heading back to classrooms and sports fields, demand for athletic gear and school essentials surged. Dick’s also captured market share from competitors, cementing its position as a leader in the sporting goods space.

DKS isn’t just coasting on seasonal demand, though. The company has been focused on improving its product offerings, enhancing in-store experiences, and leaning into digital sales. E-commerce now accounts for 20% of the company’s revenue, up from 18% last year. This blend of physical and online shopping has made Dick’s more versatile and resilient.

The Inventory Question

One concern hanging over DKS is its inventory. As of the third quarter, inventory levels were 13% higher than the same time last year. For some, that raises a red flag. Why is inventory piling up, and can the company sell it all?

Dick's leadership isn’t worried. CFO Navdeep Gupta explained that this isn’t a case of overstocking the wrong items. Instead, the company has invested in products they expect to sell well during the holiday season, like athletic apparel, outdoor gear, and fitness equipment.

It’s a smart bet. Historically, nearly 40% of Dick’s annual profits come from the fourth quarter, thanks to holiday shopping. Having extra inventory on hand means they’re ready to meet demand and keep customers happy. With consumer spending expected to grow by 3.7% during the holidays this year, according to the National Retail Federation, Dick’s is positioned to capitalize.

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The Stock Is Quietly Climbing

While Dick's Sporting Goods doesn’t get much buzz, its stock is telling a different story. Shares of DKS are up more than 41% in 2024, far outpacing the S&P 500’s gain of around 25.5%.

This performance is even more impressive when you consider that retail stocks, in general, have faced headwinds this year, including inflation and cautious consumer spending. DKS has bucked the trend by delivering consistent growth and beating expectations.

But here’s an interesting twist: historically, DKS tends to underperform during the holiday season. Between Black Friday and year-end, the stock typically sees a small dip of about 1.5%, based on a 10-year average. For investors, this seasonal lull could be a buying opportunity—especially with the company raising its full-year EPS forecast to $13.65–$13.95 and projecting total revenue of $13.2–$13.3 billion.

Why Pay Attention to DKS?

Dick's Sporting Goods may not have the flashiest brand, but they’ve carved out a solid niche. They’re the go-to retailer for sports gear, outdoor equipment, and activewear. And they’re not just riding trends—they’re setting them.

One standout feature is their loyalty program, ScoreCard, which now boasts over 20 million active members. This program isn’t just about perks; it’s a strategic move that mirrors Costco’s wildly successful membership model. Like Costco, Dick’s uses its loyalty program to create a steady stream of repeat customers. Members tend to spend significantly more—on average, $250 annually, compared to non-members’ $180. This makes ScoreCard not just a loyalty driver but also a powerful revenue booster.

By tapping into this proven business model, Dick’s is building a foundation of loyal shoppers who keep coming back. And in retail, customer loyalty is often the secret ingredient for long-term success.

The Takeaway

Dick's Sporting Goods is a stock that’s flying under the radar—but maybe not for long. The company is delivering strong financial results, navigating challenges like inventory concerns, and setting itself up for a successful holiday season. Its stock has performed well all year, and the company’s long-term strategy looks solid.

If you’re looking for a retailer that’s quietly outperforming and has room to grow, DKS might be worth a closer look. With the holiday season around the corner, this could be a good time to explore what Dick’s has to offer—not just in their stores, but in your portfolio.

What’s your take on DKS? Do you see it as a hidden gem, or are there better opportunities out there?

Disclaimer: This article is intended for informational purposes only and should not be construed as financial advice. Always conduct your own due diligence and consult with a financial advisor before making any investment decisions. The opinions expressed here are based on the analysis of available data and may not reflect the most current market conditions.

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