Dick's (DKS)

Sporting goods retailer Dick’s Sporting Goods (NYSE:DKS) reported Q1 CY2025 results topping the market’s revenue expectations, with sales up 5.2% year on year to $3.17 billion. On the other hand, the company’s full-year revenue guidance of $13.75 billion at the midpoint came in 0.8% below analysts’ estimates. Its GAAP profit of $3.24 per share was 0.7% above analysts’ consensus estimates.

Company Overview

Started as a hunting supply store, Dick’s Sporting Goods (NYSE:DKS) is a retailer that sells merchandise for traditional sports as well as for fitness and outdoor activities.

Some of us spend our leisure time vegging out, but many others take to the courts, fields, beaches, and campsites; sports equipment retailers cater to the avid sportsman as well as the weekend warrior. Shoppers can find everything from tents to lawn games to baseball bats to satisfy their athletic and leisure needs along with competitive prices and helpful store associates that can talk through brands, sizing, and product quality. This is a category that has moved rapidly online over the last few decades, so these sports and outdoor equipment retailers have needed to be nimble and aggressive with their e-commerce and omnichannel presences.

Retailers offering sporting and outdoor goods include Academy Sports and Outdoor (NASDAQ:ASO), Sportsman’s Warehouse (NASDAQ:SPWH), and Hibbett (NASDAQ:HIBB).

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

With $13.6 billion in revenue over the past 12 months, Dick's is a mid-sized retailer, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale.

As you can see below, Dick’s sales grew at a mediocre 8.3% compounded annual growth rate over the last six years (we compare to 2019 to normalize for COVID-19 impacts) as its store footprint remained unchanged.

This quarter, Dick's reported year-on-year revenue growth of 5.2%, and its $3.17 billion of revenue exceeded Wall Street’s estimates by 0.7%.

Looking ahead, sell-side analysts expect revenue to grow 3% over the next 12 months, a deceleration versus the last six years. We still think its growth trajectory is satisfactory given its scale and suggests the market is forecasting success for its products.

Number of Stores

A retailer’s store count influences how much it can sell and how quickly revenue can grow.

Dick's listed 885 locations in the latest quarter and has kept its store count flat over the last two years while other consumer retail businesses have opted for growth.

When a retailer keeps its store footprint steady, it usually means demand is stable and it’s focusing on operational efficiency to increase profitability.

Same-Store Sales

The change in a company's store base only tells one side of the story. The other is the performance of its existing locations and e-commerce sales, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales provides a deeper understanding of this issue because it measures organic growth at brick-and-mortar shops for at least a year.

Dick’s demand has been spectacular for a retailer over the last two years. On average, the company has increased its same-store sales by an impressive 4% per year. Given its flat store base over the same period, this performance stems from not only increased foot traffic at existing locations but also higher e-commerce sales as demand shifts from in-store to online.

In the latest quarter, Dick’s same-store sales rose 4.5% year on year. This performance was more or less in line with its historical levels.

Gross profit margins are an important measure of a retailer’s pricing power, product differentiation, and negotiating leverage.

Dick’s unit economics are higher than the typical retailer, giving it the flexibility to invest in areas such as marketing and talent to reach more consumers. As you can see below, it averaged a decent 35.5% gross margin over the last two years. Said differently, Dick's paid its suppliers $64.47 for every $100 in revenue.

Dick’s gross profit margin came in at 36.7% this quarter, in line with the same quarter last year but missing analysts’ estimates by 0.8%. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting it strives to keep prices low for customers and has stable input costs (such as labor and freight expenses to transport goods).

Operating margin is a key profitability metric because it accounts for all expenses necessary to run a store, including wages, inventory, rent, advertising, and other administrative costs.

Dick's has managed its cost base well over the last two years. It demonstrated solid profitability for a consumer retail business, producing an average operating margin of 10.8%.

Looking at the trend in its profitability, Dick’s operating margin might fluctuated slightly but has generally stayed the same over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q1, Dick's generated an operating profit margin of 11.5%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Dick's has shown robust cash profitability, giving it an edge over its competitors and the ability to reinvest or return capital to investors. The company’s free cash flow margin averaged 5.6% over the last two years, quite impressive for a consumer retail business.

Taking a step back, we can see that Dick’s margin dropped by 6.2 percentage points over the last year. If its declines continue, it could signal increasing investment needs and capital intensity.

Dick's burned through $86.68 million of cash in Q1, equivalent to a negative 2.7% margin. The company’s cash flow turned negative after being positive in the same quarter last year, which isn’t ideal considering its longer-term trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Dick’s five-year average ROIC was 24.5%, beating other consumer retail companies by a wide margin. This illustrates its management team’s ability to invest in attractive growth opportunities and produce tangible results for shareholders.

Dick's reported $1.04 billion of cash and $4.57 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.96 billion of EBITDA over the last 12 months, we view Dick’s 1.8× net-debt-to-EBITDA ratio as safe. We also see its $27.01 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We liked that Dick's revenue and EPS narrowly outperformed Wall Street’s estimates. On the other hand, its full-year EPS guidance missed and its gross margin fell slightly short of Wall Street’s estimates. Overall, this print was mixed. The stock remained flat at $172.50 immediately following the results.

Updated: July 9, 2025 at 10:40 PM EDT

Before making an investment decision, investors should account for Dick’s business fundamentals and valuation in addition to what happened in the latest quarter.

There are some positives when it comes to Dick’s fundamentals. Although its revenue growth was mediocre over the last six years and analysts expect growth to slow over the next 12 months, its wonderful same-store sales growth is among the best in the consumer retail sector. Plus, Dick’s market-beating ROIC suggests it has been a well-managed company historically.

Dick’s P/E ratio based on the next 12 months is 14.4x. Looking at the consumer retail landscape right now, Dick's trades at a pretty interesting price. If you believe in the company and its growth potential, now is an opportune time to buy shares.

Wall Street analysts have a consensus one-year price target of $204.70 on the company (compared to the current share price of $210.31).