Does Golf Have Dick's in the Rough? Analysts Weigh in

In yesterday's quarterly earnings report Dick's Sporting Goods, Inc.'s

management highlighted structural problems with its golf department as the primary driver of poor performance for the quarter. Upon this news, a number of analysts have downgraded the company, but there are still those with a positive view. Among the firms that have downgraded Dick's are Credit Suisse, Canaccord, and Raymond James all of which have the equivalent of a Neutral rating for the company. The common and primary concern among these firms is Dick's golf department which accounts for approximately 20 percent of Dick's sales. These firms see a slowdown in the the golf industry as a whole and believe that Dick's will need to increase promotional activity which will continue to drive down margins. Canaccord analyst Camilo Lyon commented, "Dick's believes golf clearance activity will be confined to Q2, yet we are less optimistic and believe markdowns could spill into 2H14." Wells Fargo, which has Dick's at Outperform, concurs that golf posses a short-term issue. Moreover, the firm noted Dick's management doesn't "feel we've found the bottom yet". However, the firm sees comp growth of 6.6 percent excluding golf and hunting as well as increased merchandise margins as suggesting "strong offsets to promotional pressure from hunting and golf." In a coinciding view, Cititgroup analysts wrote, "Though current weakness should continue to impact the business for the next year, we still believe Dick's is still a best-in-class retailer that is benefiting from some of the strongest athletic trends to date." Investors appear to agree with management that shares have not yet reached bottom, as Dick's shares continue to trade lower in the early hours of today's session.