Dick’s Sporting Goods Hopes Discounted Prices Will Save It From Doom

Image courtesy of Mike Mozart

Let’s take a moment to pay our respects to the dearly departed sporting good stores who have passed on in recent years: Sports Authority, Gander Mountain, Eastern Mountain Sports, Sport Chalet, Golfsmith and we’re probably missing a few. Dick’s Sporting Goods has fed on the bones of some of its former competitors, taking over their locations and inventory, but it still needs a plan to stave off the doom that consumed so many of its competitors.

That plan? More promotional pricing. At least that’s what Dick’s is saying after releasing quarterly financials showing stagnant, lower-than-expected sales figures.

Sales at stores open at least one year were up only 0.1%, lower than the company’s expected, modest growth of 2% to 3%.

CEO Edward Stack said on an investors call today that the company will “aggressively be promoting our business to drive market share to our stores and online.”

How’d We Get Here?

The second quarter’s flat sales are an about-face from Dick’s first quarter, when they increased 2.4%.

That figure was buoyed, however, by Dick’s taking advantage of Sports Authority’s demise and opening stores in new areas, as well as taking over some former Golfsmith locations after the golf chain filed for bankruptcy.

Still, the decrease wasn’t exactly a surprise: Stack had warned during the first quarter that he believed the troubles plaguing the sporting goods sector would continue. And they apparently are.

Making Changes

Stack noted on the call with investors today that the retailer would increase discounts in order to bring in more customers.

Specifically, the retailer will target marketing and pricing efforts in regions where there’s more competition.

“We’ve conducted extensive consumer research, and the customers have told us they feel our prices are not competitive in today’s environment,” Stack said. “Consequently, we have become more promotional and competitive.”

Additionally, the company will use its new “best price guarantee” tool to attract customers. Under the program, if a customer finds a product somewhere else for a lower price Dick’s will match that cost.

Stack noted on the call that the company also plans to “surgically invest” in the hunting and athletic apparel business.

To do so, Stack says Dick’s will work to “capture as much market share as possible that was left behind by Gander Mountain”, another retailer that closed many stores in recent months.

As for apparel, Stack says that the category has seen meaningful increases in distribution and promotion. To this end, the retailer will continue to focus on its private brands, which saw a 7% increase in sales during the second quarter.

These private brands are expected to bring in $1 billion in sales this year.

Going Online

Stack said during the call that the company will continue to support and promote its online division. The company plans to provide its e-commerce customers with a better experience, Stack said.

“Looking ahead, we are planfully investing in the online experience through faster delivery, better pricing, more targeted marketing, and continued improvements in our digital channels,” Stack said. “This is going to be a bit more expensive in the short-term, but it is what we need to do for the long-term benefit of the company and our shareholders.”

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