REI vs Dicks Sporting Goods - a look at their figures

REI vs Dick’s Sporting Goods - Income statements (P&L on this side of the water)

I’ve written about DSG and REI before, and you can find the company Deep Dives here: https://dereksdeepdive.beehiiv.com/

Now, back to the topic. First, a picture tells a thousand words, so let’s take a look:

(First of all, credit to Eoin Comerford, former CEO of Moosejaw, for putting the above graph together. Seriously insightful. Eoin contributes on LinkedIn and is well worth a follow. I’ll put a link at the bottom.)

Brilliant insight into two very different outdoor retail models. At first glance we see that Dick’s revenues are multiples higher, which is probably to be expected. The really interesting line for me is total Operating Expenses. 41% vs 25%, with payroll making up the biggest difference.

Dick’s has gotten this just right. But REI is left with a conundrum. A big part of their brand is not to be a Dick’s, and that requires a different approach to staffing. But as we can see, an income statement is unforgiving.

At a glance, maybe REI is ‘too good a place to work’, and Dicks is crap. Well, looking at Glassdoor suggests otherwise, with DSG beating REI even on Culture and Values:

Now, the above should be taken with a pinch of salt, as we’ve all heard the negative feedback from disenfranchised ex employees, especially when the media are circling. But it is a reference point.

Further analysis shows that REI cost of goods sold (COGs) is definitely favorable, but not enough to offset the difference in Op Ex. So this is a classic example of business model vs brand. And it’s one that even small retailers and small brands like ourselves struggle with all the time. It’s no problem to sell a tenner for a fiver. Hence it’s about the bottom line.

Eoin C mentions an interesting point in his post:

“STORE PRODUCTIVITY: The number that jumps off the page is REI’s 4-Wall Revenue/Sq. ft of over $600. This is a truly impressive number that is double specialty retail averages and is a testament to the stickiness of the co-op membership model. Frankly, with this kind of productivity, REI should be wildly profitable. But the co-op model is a blessing and a curse because large profits would be unseemly, leading to a lack of focus on cost.”

This is a key part of the brand mentioned above. Co-Ops are a different animal. However for management, the financials remain the ultimate barometer. This can be a tough scales to balance. It would certainly appear that REI’s current financials are a lesson on cost focus, and the (not always obvious) importance of margins. I’ve become obsessive over the P&L as Op Ex was running too high at our small scale up. And it’s a hugely insightful practice.

Is this a fair comparison? One could argue that it’s Big Box vs specialty. But then, is REI really a specialty retailer? Or do they linger in that dreaded middle ground where one should wander with extreme care? Either w3ay, I think, strategically, they need to be careful that they don’t compromise on what makes they REI in the first place. And REI did have an over-buy issue like the rest of the industry, which gutted the GM as discounting was required on its own brand. So it’s less throwing the baby out with bathwater and more getting margins back in my opinion.

And as for DSG, steady as she goes. I always thought it interesting to see how the Cabela’s thing would affect the brand. And this remains to be seen.

Yeti Holdings Q2

Yeti keeps on growing, while for others the new norm is ‘not lose too much’. As some will know, I’m a big fan of Yeti. But even I am astounded at their continued trajectory. They announced Q2 figures last week, and still they go. Some of the highlights:

• Net sales increased 15%, inclusive of the recall reserve adjustment in the second quarter of 2023 that reduced sales by $24.5 million ; Adjusted net sales, which exclude the recall reserve adjustment, increased 9% (This was the magnet lined closure recalls on their Hoppers and Sidekick dry)

• Coolers & Equipment net sales increased 31%; Coolers & Equipment adjusted net sales increased 14%

• Drinkware net sales and adjusted net sales both increased 6%

• Wholesale net sales increased 21%; Wholesale adjusted net sales increased 11%

• Direct-to-consumer net sales increased 11%; Direct-to-consumer adjusted net sales increased 7%

• International net sales increased 35%; International adjusted net sales increased 34%

• U.S. net sales increased 12%; U.S. adjusted net sales increased 5%

• Gross margin expanded 360 basis points to 57.0%; Adjusted gross margin expanded 280 basis points to 57.7%

• Operating margin expanded 200 basis points to 14.5%; Adjusted operating margin expanded 160 basis points to 17.3%

• EPS increased 34% to $0.59; Adjusted EPS increased 23% to $0.70

Here’s the link if you’d like to read more:

https://investors.yeti.com/news/news-details/2024/YETI-Reports-Second-Quarter-2024-Results/default.aspx

A big part of the Yeti growth trajectory has been in finding new territories that work for them. Indeed, I remember speaking with Matt Reintjes a number of years ago when he indicated as such, that this was to become a big part of their macro strategy, and it has come to pass. I can now walk into my local outdoor store here in Tralee, Co Kerry, Ireland an purchase Yeti Ramblers. That’s quite a turn-up for the books. But they put a lot of research into product / market fit, as well as product / geography fit and, I think they will continue to reap the rewards.

Link as promised:

Eoin Comerford, former CEO of Moosejaw