Why Goldman Thinks Sports Authority IP Auction Is 'Best-Case Outcome' For Dick's Sporting Goods

Dicks Sporting Goods Inc DKS announced after market close on July 20 that it had completed the purchase of The Sports Authority (TSA)'s intellectual property, among other things.

Goldman Sachs’ Stephen Tanal maintains a Buy rating on Dick's, with a price target of $53.

TSA Purchases

Tanal mentioned that the company had announced that apart from TSA’s intellectual property, it has also purchased the name “The Sports Authority,” TSA’s domain names, trademarks and customer information.

The entire purchase was completed for $15 million and included the rights to acquire 31 store leases for $8 million, along with any cure costs related to the bankruptcy.

“Separately, a WSJ article published July 19 stated that TSA liquidation sales are happening faster, and that most or all stores are likely to be closed by the end of July,” Tanal stated.

Related Link: The Sports Authority Sale Hearing A "Best-Case Outcome" For Dick's Sporting Goods

Best-Case Outcome

The analyst believes the results of the TSA auction reflect the “best-case outcome” for Dick's.

A large majority of TSA stores are likely to close sooner than anticipated and Dick's has already gained access to valuable customer information, along with control of the TSA brand and website.

The lease options on a few “cherry picked” TSA sites would also complement Dick's footprint.

“If TSA were to close all stores by this month end, we would expect market share gains to accrue to DKS earlier, which could render our 3Q forecast conservative,” the analyst added.

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