Is Dick's Sporting Goods the Next to Fail?

Dick's Sporting Goods (NYSE: DKS) reported strong fiscal fourth-quarter results earlier this week. For the quarter ending Feb. 1, 2020, same-store sales (comps) increased by 5.3%, driven by higher traffic and spending. Management expects flat-to-2% comps next year, which incorporates supply chain disruptions due to the novel coronavirus pandemic affecting results. There may be a further effect on sales with more people staying home, but I expect this is temporary and that normal shopping patterns will resume once the fears over the outbreak ease.

While Dick's has held up well, this has not been a fun time for the sporting goods industry. Privately owned Modell's Sporting Goods on Wednesday filed for bankruptcy and plans to close all of its stores. Others, like Big 5 Sporting Goods, have only a $40 million market cap, indicating serious issues. Another industry participant, Hibbett Sports, while reporting solid fiscal third-quarter results, has lost 60% of its market value over the last five years. Over the years, there have been other notable bankruptcies, including Sports Authority's 2016 filing and Michigan-based MC Sports 2017 filing.

What's Dick's secret? After all, this latest positive earnings report comes as Dick's shook up its merchandise after it stopped selling guns and de-emphasized hunting merchandise.

Source Fool.com