Market Overview

Sports Authority's Loss Isn't Dick's Sporting Goods' Gains

Sports Authority's Loss Isn't Dick's Sporting Goods' Gains

Investors weren't wrong in their thinking that the closure of The Sports Authority and Golfsmith would benefit some of the sporting goods retailers remaining in the game, such as Dicks Sporting Goods Inc (NYSE: DKS).

In fact, as noted by Gadfly's Shelly Banjo, Oppenheimer's retail analyst Brian Nagel boosted his rating on Dick's under the assumption that Sports Authority closure would boost its sales by as much as $225 million.

But something strange happened — the opposite now holds true as Dick's warned investors of a sales and earnings growth in the coming year. Banjo noted that while Dick's management insisted on its conference call that it is gaining market share, it didn't substantiate the claim with any hard numbers.

What Happened?

The question remains: Did any other retailer benefit at the expense of Dick's?

Banjo cited a report from Kevin Hillstrom, a former retail marketing executive who now runs a retail consulting business, which found that when a store like Sports Authority closes, 15 percent of its sales move online, 15 percent to go nearby stores — and 70 percent just disappear.

Meanwhile, not a single large department store posted a sales growth in the fourth quarter from a year ago, Banjo added.

"Yes, there will always be winners and losers in retail," she concluded. "But in today's environment, where shoppers are fickle and stores have to fight fiercely just to hang on to their customers, one company's pain doesn't exactly mean another's gain."

Related Link: Dick's Sporting Goods Downgraded On Wave Of Negative Industry Data

Related Link: Under Armour Sells Off Following Lowered Guidance, Sports Authority Restructuring


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