DICK'S Sporting Goods' recent surge and CRUA's 2024 strategy

“The wilderness rescued me. I have been shaped by my experiences in the great outdoors. Feeling comfortable in the wild gave me the confidence to be who I am, not who others want me to be.” - Ben Fogle

Dick’s Sporting Goods

Where do I start? Firstly, this is a huge success story. The company grew enormously during covid, and as I found out, has managed to maintain growth post pandemic, where so many other outdoors companies have failed. Why? Let’s examine closely and we’ll start at the start.

In 1948, Richard ‘Dick’ Stark reputedly opened a fishing tackle shop with a $300 loan that he got from his grandmother after his Army surplus store employer told him he was a ‘dumb kid that didn’t know what he was doing’. This shop was in Binghampton, NY, a city of about 50,00 residents that lies in southern NY state, between NYC and Syracuse. By 1958 this small shop had matured into a fully fledged sporting goods store which became ‘Dick's Clothing and Sporting Goods’.

Over the next 20 years the product lines in the stores expanded to practically most of the categories that you would see today. Although dick’s son Edward worked during holidays etc. at the store when when was a teenager, he didn’t officially start full-time until 1977, when his father had to go for emergency heart surgery. Edward had qualified as a certified public accountant, and in 1984 when he became president and CEO when his father retired, around the time that their second store opened in the same city. It was clear that Edward had big plans and by two years later Dick’s had leaned heavily into traditional sports apparel, equipment and footwear.

“Dick's developed several private label brands: Adirondack Trading Company for casual clothing, Northeast Outfitters for hunting and work apparel and boots, DSX and DSXT for cycling apparel, and Steve Hill and Stone Hill Clubhouse for golf apparel and shoes.”

Dick's started growing its chain of sporting goods stores by opening two locations each in Syracuse and Rochester, New York. They opened their first store in the Buffalo area, specifically in Cheektowaga, in March 1992. Next, they expanded to the Hartford, Connecticut area with two stores, then opened another store in western Massachusetts, and one in Erie, Pennsylvania. The company mainly focused on small and medium-sized cities, especially in upstate New York, where they launched stores in Albany in both 1993 and 1994. I’m familiar with this part of the world as CRUA has a base in the Adirondacks, and a number of shareholders in the region. And I can tell you that it is real outdoors territory.

In July 1994, the company moved its headquarters to Coraopolis, Pittsburgh and opened four stores in the area, ranging from 32,000 to 70,000 square feet. It’s clear that the decision was an educated one and that Edward chose Pittsburgh for its airport access, national sports teams, and the presence of many outdoor enthusiasts, making it a prime spot for growth. By the end of 1994, Dick's had 22 stores across 11 markets in Pennsylvania, Connecticut, New York, and Massachusetts. The rapid pace of growth continued and by Jan 1997 there were 51 stores. Industry insiders estimated company sales at $10 million to $12 million per store, in contrast to, for example, The Sports Authority, with sales of $7.7 million per store, so it’s safe to conclude that the company was in a decent cash position when crossed with Edwards financial handling and prudence.

People were starting to take notice and in December 1999, Chain Store Age Executive named Edward Stack Retail Entrepreneur of the Year. By then, Dick's Sporting Goods had 83 stores across 15 states in the Northeast, Mid-Atlantic, and Midwest. The company experienced a higher rate of merchandise turnover than the industry average, reporting $728.3 million in revenues for 1999 and a net income of $11.2 million. To keep up with its growth and the more recent addition of online sales, Dick's opened a new $20 million distribution center in Pittsburgh in February 2000. The 383,000-square-foot facility was designed to handle twice the capacity needed for its existing stores. Equipped with 34 shipping and receiving doors, Dick's contracted a trucking company to provide 100 new drivers for distribution services. They also introduced a rapid computer sorting system and, in 2001, implemented integrated merchandise management applications for advanced analytics, promotional price management, and improved allocation and planning.

2001 was a red-letter year. The initial success of Dick's website hit a snag in 2000. They had to change the web address to dickssportinggoods.com because family internet filters were blocking the site. Although their advertising campaign increased site traffic, the discounts offered ate too much into their profits. By April 2001, the website had become unprofitable, so the company decided to stop managing it directly. Instead, they outsourced it to Global Sports Interactive (GSI), a specialist in online retailing of sporting goods. Through a ten-year agreement, Dick's licensed its name to GSI in exchange for royalty payments on online sales, interestingly choosing to receive company stock instead of cash. This was the year that Dick’s also implemented a state of the art sorting system and other new innovative / technological advances. Again, this is an interesting point and indicates an internal bias towards innovation and utilization of tech tools. Also, 2001 was the first year that the company hit $1billion + in sales, with over 130 stores..

So, perfect timing for an IPO!

he company raised $88m Merrill Lynch as its underwriter. According to Crunchbase it has raised $1.5 billion over 4 rounds. But this has been returned many fold as the share price growth indicates:

By 2004 Dick’s acknowledged the value in buying market share in various segments. Dick's acquired Galyan's in July 2004. In November 2006, they agreed to buy Golf Galaxy for $225 million and later confirmed plans to close Golf Galaxy's headquarters in Eden Prairie, Minnesota, by mid-2008. That same year, Dick's signed a 20-year naming rights agreement for Dick's Sporting Goods Park, a soccer-specific stadium for the Colorado Rapids in Commerce City, Colorado.

By 2008, Dick's primarily operated in the Eastern United States but had started expanding to the Pacific Northwest and West Coast. By mid-2008, there were over 357 Dick's stores across 38 states. But Dick’s also had its failures along the way, such as the Tree Runner stores, opened in 2012 and closed in 2017.

Gun Sales:

Dick's-branded stores suspended assault-style weapon sales following the Sandy Hook Elementary School shooting in 2012, but the guns were still available for purchase at Field & Stream locations. But, following the Stoneman Douglas High School shooting in February 2018, Dick's stopped selling assault weapons and high-capacity magazines, and increased the minimum age for purchasing guns to 21. A visibly shaken Ed Stack, then the CEO and largest shareholder of Dick’s Sporting Goods, decided it was time for his 850-store chain to pull certain guns off its store shelves and famously declared “I don’t want to be part of the story anymore”. The accused 19-year-old shooter in the Parkland massacre hadn’t purchased his AR-15 assault-style rifle at a Dick’s Sporting Goods store. But he had legally bought a different shotgun months earlier at a local Dick’s outlet—and that hit close enough to home for Stack. And with those words, Ed Stack, a gun owner and gun rights supporter, set in motion a series of corporate actions that may serve as a model for other CEOs trying to balance their personal conscience and corporate interests when dealing with thorny societal issues, according to two Harvard Business School case studies.

“Increasingly, business leaders are expected to take stands on societal issues—to do societal good. It’s gone beyond ‘do no harm,’” says George A. Riedel, the Henry B. Arthur Fellow and senior lecturer at HBS, who wrote the pair of cases entitled “Dick’s Sporting Goods: Getting Out of the Gun Business.” “Standing on the societal sidelines is increasingly becoming less of an option for companies and business leaders.”

The 2012 licensing of Field and Stream for retail stores was another shrewd move. That’s a brand that elicits fond memories for a lot of families (including mine). It has also had its ups and downs however, with Sportman’s Warehouse purchasing a number in 2019 and others being converted into the new ‘Public Lands’ concept.

Current State of Play

While Lauren Hobart has taken the reins since 2018, with Lee Belitsky as her CFO, the company has really seen staggering growth ever since 2010, (below).

Dick’s has continued to acquire market share, most recently purchasing Moosejaw from Walmart in Feb 2023. Although an original footprint expansion was planned as a result, this got reigned back:

“After careful review of our outdoor specialty business, we have decided to form one team that will support the operations of Public Lands and Moosejaw. The team will be based at Public Lands’ headquarters in Pittsburgh, PA,” a Dick’s Sporting Goods spokesperson said via email. “This move supports our business optimization efforts and will allow us to operate more efficiently, quickly leverage best practices across our outdoor business and drive our long-term success. We look forward to continuing to provide outdoor enthusiasts great gear and service on Moosejaw.com, PublicLands.com and at Moosejaw and Public Lands retail locations.”

The increased rate of growth during the pandemic is not surprising as people were spending more time outdoors. What is impressive is the continuation of that growth, even into Q1 of this year with a 6.2% increase in sales when compared to Q1 2023. Their balance sheet is almost identical in value when compared to the same period. one would have to think that the company has a bright future and is in safe hands. I also like that it followed its conscience on the gun matter. Remember how important authenticity and insight are in brand building? And major future growth may have to come through acquisition. Although initiatives such as Dick’s House of Sport show something different. It shows that Dick’s is innovative in a way that so many others have failed. They embrace and test all the time. And there is a huge credit due to the hierarchy for that.

I have to say that I like the way that Dick’s has gone about its business. Of course it’s well beyond an outdoors store now. Mainstream sports have taken over, which is plain to see. But a lot of traditionalists still swear by Dick’s. It’s in the name. And I think they have also put their money where their mouth is on the gun issue. And, DICK’S Sporting boasts a robust history of returning value to shareholders. The company plans to open 10 House of Sport locations throughout 2024. By 2027, it expects 75 to 100 House of Sport stores nationwide. It’s also aggressively growing its other brands. Prudent. And more power to them. I think Dick Stark would tip his hat.

Hopefully you continue to get some value from the newsletter. Thanks for reading and please pass it on to anyone you think will benefit. Feel free to email with any suggestions or feedback. [email protected]

Until next week, and chapter 10, Go n-éirí leat!

Derek