Over the past few years DSG has been busy acquiring sporting good businesses. These businesses include Chick's, Galyan's Trading Co., and Golf Galaxy. With no plans to merge in the near future DSG has set its sights on moving westward. DSG has a very strong presence east of the Mississippi River, but it is very spotty to the west. One of the big purchases and steps toward their own personal manifest destiny was to acquire Chick's who had built a name for itself out west.
In another article is seems as is DSG is not slowing down.
When asked about a possible acquisition of Bass Pro Shops, Cabela's or Sports Authority Inc., Kullman declined to be specific but said that Dick's is "an organic grower" that would consider opportunities that make strategic sense regardless of market valuation. He declined to comment further on potential targets.
I would look out for DSG in the future and more acquisitions. DSG must continue to grow to show profitability gains due to the trending Internet purchases. DSG is fending off Amazon and other dot coms as it continues to build its brick and mortar presence.
http://www.thedeal.com/content/consumer-retail/dicks-seeks-acquisition-play.php
Saturday, April 19, 2014
Dick's Sporting Goods, Ch. 13: Strategic Alliances
Dick's Sporting Goods use a strategic alliance to its advantage back in 2012. It invested in JJB Sports of the UK. This was the first investment and expansion overseas for DSG, based out of Pittsburgh. This alliance was created for the benefit of both companies. DSG would end up holding a 61% share of company, allowing it to reap the rewards of the 2012 Summer Olympic Games held in England. JBB had been fighting bankruptcy over the last few years. With DSG's support they would be able to provide confidence to their investors and potentially turn around the company's direction.
The ultimate hope for DSG was that JJB showed enough potential to be a multi-line sporting goods company in the UK and throughout Europe.
This alliance ended up crashing and burning as DSG quickly removed its obligation from JJB after the conclusion of the Olympics.
"Chairman and CEO Edward Stack said that the JJB Sports investment was high risk from the outset, and that Dick's has no further funding obligations to JJB and will continue to monitor the situation."
http://www.thedeal.com/content/restructuring/dicks-sporting-goods-to-invest-in-jjb.php
http://www.businessweek.com/ap/2012-08-14/dicks-sporting-goods-sinks-in-uk-investment
The ultimate hope for DSG was that JJB showed enough potential to be a multi-line sporting goods company in the UK and throughout Europe.
This alliance ended up crashing and burning as DSG quickly removed its obligation from JJB after the conclusion of the Olympics.
"Chairman and CEO Edward Stack said that the JJB Sports investment was high risk from the outset, and that Dick's has no further funding obligations to JJB and will continue to monitor the situation."
http://www.thedeal.com/content/restructuring/dicks-sporting-goods-to-invest-in-jjb.php
http://www.businessweek.com/ap/2012-08-14/dicks-sporting-goods-sinks-in-uk-investment
Tuesday, April 8, 2014
Dick's Sporting Goods, Ch 12: Implementing Corporate Strategy
| Name (Connections) | Board Relationships | Title | Type of Board Member | Age |
| Edward Stack | 22 Relationships | Executive Chairman and Chief Executive Officer | -- | 58 |
Other Board Members On Board*
| Name (Connections) | Board Relationships | Type of Board Member | Primary Company | Age |
| William Colombo | 15 Relationships | -- | Galyan's Trading Company, LLC | 57 |
| Lawrence Schorr | 8 Relationships | -- | Boltaron Performance Products, LLC | 59 |
| Larry Stone | 14 Relationships | -- | Dick's Sporting Goods Inc. | 61 |
| Jacqualyn Fouse Ph.D. | 18 Relationships | -- | Celgene Corporation | 52 |
| Emanuel Chirico | 82 Relationships | -- | PVH Corp. | 55 |
| Allen Weiss | 107 Relationships | -- | Dick's Sporting Goods Inc. | 59 |
| Vincent Byrd | 30 Relationships | -- | The J. M. Smucker Company | 58 |
| Mark Barrenechea | 24 Relationships | -- | Open Text Corporation | 48 |
Above is the list of the Board of Directors at DSG. DSG practices duality as Edward Stack is both the CEO and Director of the Board. This has been an ongoing issue and debate for many companies but there has been no sufficient data presented that companies that have duality operate on any different margins than those that do not. This board is also not very diverse with 1 woman and 8 men. They all range between the ages of 48 and 61, a gap of 13 years. This could potentially be a risk that DSG should consider. An expansion of the board to 10-15 members would be more practical as the company continues to grow and expand westward.
http://investing.businessweek.com/research/stocks/people/board.asp?ticker=DKS
Tuesday, April 1, 2014
Dick's Sporting Goods, Chapter 11: Diversification Strategies
Dick's Sporting Goods is in the sporting goods and retail industry. This would put them in a limited diversification, single business category according to the book. 95% or more of DSG's sales are that of sporting goods retail. While there is diversification of what field of sporting goods they sell, they are still considered a focused industry and would be nowhere close to that of a Berkshire-Hathaway.
Because DSG is so diversified in what sporting goods it sells it can capitalize on economies of scope within its product offerings. As touched on in the last chapter, DSG has integrated and acquired the rights to many name brands that are only sold at DSG locations. These agreements with other companies, such as Callaway and their Top-Flite line, saves DSG money by being able to purchase the items at an even lower manufacturing price than before, but also creates demand in the product for Callaway because it is only offered at DSG. This allows both sides to maintain higher profits. Dick's doesn't have to produce it, and Callaway doesn't have to sell it. This would fall under the shared activities section of Chapter 11.
DSG is now starting to diversify its stores, as they begin to open Field & Stream stores in the northeast to center solely around the outdoors.
Because DSG is so diversified in what sporting goods it sells it can capitalize on economies of scope within its product offerings. As touched on in the last chapter, DSG has integrated and acquired the rights to many name brands that are only sold at DSG locations. These agreements with other companies, such as Callaway and their Top-Flite line, saves DSG money by being able to purchase the items at an even lower manufacturing price than before, but also creates demand in the product for Callaway because it is only offered at DSG. This allows both sides to maintain higher profits. Dick's doesn't have to produce it, and Callaway doesn't have to sell it. This would fall under the shared activities section of Chapter 11.
DSG is now starting to diversify its stores, as they begin to open Field & Stream stores in the northeast to center solely around the outdoors.
Dick's Sporting Goods, Chapter 10: Vertical Integration Strategies
Dick's Sporting Goods does not vertically integrate into other fields but it does integrate certain brands to privatize them to sell only at DSG stores. This creates demand for the product and higher profit margins upon agreements with the company who created the brand and continues to produce the products.
In the golf section alone, DSG owns the rights to Top-Flite, made by Callaway, Walter Hagen, Maxfli, and Nickent.
Other brands include Koppen and Ativa.
When Dick's is unable to completely own a brand it seizes the opportunity to create deals to own certain rights to specific products and designs from larger, more popular brands such as Nike and Under Armor.
While Dick's hasn't integrated into the production of items directly as a DSG brand shirt or pair of shorts, it has cut out costs by owning brands.
In the golf section alone, DSG owns the rights to Top-Flite, made by Callaway, Walter Hagen, Maxfli, and Nickent.
Other brands include Koppen and Ativa.
When Dick's is unable to completely own a brand it seizes the opportunity to create deals to own certain rights to specific products and designs from larger, more popular brands such as Nike and Under Armor.
While Dick's hasn't integrated into the production of items directly as a DSG brand shirt or pair of shorts, it has cut out costs by owning brands.
Saturday, March 22, 2014
Dicks Sporting Goods, Chapter 9: Tacit Collusion: Cooperation to Reduce Competition
Dick's Sporting Goods hasn't come under fire for any collusion thus far. The main reason for this could possibly be the low barrier to entry in the field of sporting goods. A high barrier to entry, as stated in chapter 9, would be a trait that would potentially be that of a business involved in collusion, even as it may be rare.
A look at DSG's net profit margin over the last decade will help show that low profits margins could insist on a low barrier to entry.
"It's likely that DKS is in an industry with low barriers to entry, spurring high competition. If Gross Margins are at least satisfactory, it's likely DKS invests heavily in R&D and Sales, General & Administrative expenses.
Only $3.13 of every $100 of Revenue have been profit, on average over the past 10 years."
The reason DSG has remained successful in a volatile market is because of their contracts with high end brands and their commitment to invest in new equipment and facilities.
A look at DSG's net profit margin over the last decade will help show that low profits margins could insist on a low barrier to entry.
"It's likely that DKS is in an industry with low barriers to entry, spurring high competition. If Gross Margins are at least satisfactory, it's likely DKS invests heavily in R&D and Sales, General & Administrative expenses.
Only $3.13 of every $100 of Revenue have been profit, on average over the past 10 years."
| 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | |
| Net Income | 38.26M | 52.82M | 68.91M | 72.98M | 112.61M | 155.04M | -35.09M | 135.36M | 182.08M | 263.91M |
| divided by | ||||||||||
| Revenue | 1.27B | 1.47B | 2.11B | 2.62B | 3.11B | 3.89B | 4.13B | 4.41B | 4.87B | 5.21B |
| Net Profit Margin | 3.01% | 3.59% | 3.27% | 2.78% | 3.62% | 3.99% | -0.85% | 3.07% | 3.74% | 5.06% |
There is evidence that other sporting goods companies are trying to potentially collude against Dick's to make the playing field more level.
"The CEO of Modell's Sporting Goods is accused of going into a suburban New Jersey store of the rival chain Dick's Sporting Goods, claiming to be a senior vice president of Dick's. A lawsuit filed against him claims Mitchell Modell tried to get confidential information about Dick's online sales and the process it uses to deliver merchandise more quickly."
With this information made public, other sporting goods stores, or all retail for that matter, could obtain private information that would help other companies potentially collude against DSG in order to flatten the competitive marketplace.
http://www.dailyfinance.com/2014/03/03/warren-buffett-investment-advice-modells-ceo-spy-dicks-sporting-goods/
http://www.vuru.co/analysis/DKS/economicMoat
Monday, March 3, 2014
Dick's Sporting Goods, Chapter 8: Flexibility: Real Options Analysis Under Risk and Uncertainty
Being in the retail business comes with a lot of risk and uncertainty. Again, in the annual report submitted to the SEC, you can find the obvious risks and uncertainties. I will have the excerpt from the report listed below with my comments in the non-bold form.
DSG states that "Our business is dependent on the general economic conditions in our markets and ongoing economic and financial uncertainties may cause a decline in consumer spending that may adversely affect the Company's business, operations, liquidity, financial results and stock price."
The uncertainty can be found in the economic future of the United States, both near and far. The riskiness can be found in current decisions being made without complete information available to the company without knowing the economic impact it may have, such as new deals with brands for merchandising rights, store expansions into potentially profitable areas, and the movement of online sales and availability of products.
All of our stores are currently located within the United States, making our operating results highly dependent on U.S. consumer confidence and the health of the U.S. economy. While the national economy is experiencing some level of recovery from the recent downturn, we cannot predict how robust the recovery will be or whether or not it will be sustained. If the economic recovery continues to be slow, or if the economy experiences a prolonged period of decelerating or negative growth, our results of operations may be negatively impacted.
The current economy's percentage of disposable income has been very volatile as can be seen in this graph.
It seems as if the US still haven't quite fully recovered from the recession and enormous hit taken in 2009. The projections say that disposable income is supposed to grow, but that is another risk and uncertainly that DSG must weigh on. The next bit of the excerpt continues to strengthen this thought...
As a business that depends on consumer discretionary spending, the Company may be adversely affected if our customers reduce, delay or forego their purchases of our products as a result of continued job losses, foreclosures, bankruptcies, higher consumer debt and interest rates, higher energy and fuel costs, reduced access to credit, falling home prices, lower consumer confidence, uncertainty or changes in tax policies and tax rates and uncertainty due to national or international security concerns. Decreases in same store sales, customer traffic or average value per transaction negatively affect the Company's financial performance, and a prolonged period of depressed consumer spending could have a material adverse effect on our business. Promotional activities and decreased demand for consumer products, particularly higher-end products, could affect profitability and margins. In addition, adverse economic conditions may result in an increase in our operating expenses due to, among other things, higher costs of labor, energy, equipment and facilities. Due to recent fluctuations in the U.S. economy, our sales, operating and financial results for a particular period are difficult to predict, making it difficult to forecast results to be expected in future periods.
Pressure from our competitors could require us to reduce our prices or increase our spending for advertising and promotion. Increased competition in our current markets or the adoption or proliferation by competitors of innovative store formats, aggressive pricing strategies and retail sale methods, such as the Internet, could cause us to lose market share and could have a material adverse effect on our business, financial condition, results of operations and cash flows.
As touched on in my past blogs, competition can be harsh in the retail world, but DSG has a proven track record that risk from other complementary companies are not as big of a threat as the Internet and the mega site Amazon. The opening and expansion of the brand DSG must be followed closely with Internet sales as a large portion of Dick's profits is now online. Amazon could continue to eat into those profits and force DSG to consider other avenues of expansion other than brick and mortar stores as supported below.
In addition, as the popularity and use of Internet sites continue to increase, our business faces increased competition from various domestic and international sources, including our suppliers. We may require significant capital in the future to sustain or grow our business, including our store and eCommerce operations, and there is no assurance that cash flow from operations will be sufficient to meet those needs or that additional sources of capital will be available on acceptable terms or at all.
Sources:
http://www.sec.gov/Archives/edgar/data/1089063/000104746913003238/a2213667z10-k.htm
https://www.ibisworld.com/gosample.aspx?cid=1&rtid=4
Tuesday, February 25, 2014
Dick's Sporting Goods, Chapter 7: Product Differentiation
Chapter Seven of our book is all about product differentiation…something DSG excels at!
In DSG's annual report to the SEC, they list some of their strategies and reasons for differentiation.
"Brand Partnerships. We carry a wide variety of well-known brands, including adidas, Callaway Golf, Columbia, Nike, Remington, TaylorMade-adidas Golf, The North Face, Under Armour and Wilson. In addition to the cost efficiencies of shared investments with our brand partners, we seek to leverage our partnerships to offer authenticity and credibility to our customers, while differentiating us from our competitors. We partner with our brands on important marketing initiatives and product launches, in addition to leveraging athletes that the brands bring to us for our marketing campaigns. Our brand partnerships also provide us with access to exclusive products and allow us to collaboratively develop enhancements that differentiate our customers' shopping experience, such as our brand shops, which provide our customers with a wider and deeper selection of products from our key brands, or co-branded microsites to enhance our customers' online experience."
In the list of ways that a firm can differentiate their products listed in Table 7.1 "brand partnerships" covers many all in one step. Making the same product more affordable at DSG than its competitors, consumer marketing, product reputation, product features, linkages with other firms and product mix could all be found in DSG's "brand partnership" strategy.
"Omni-channel Development. We are upgrading site functionality, expanding content, investing in new capabilities and beginning to leverage our store network to provide customers with an enhanced shopping experience that enables our customers to buy and receive products where, when and how they want. We believe that leveraging all of our sales channels to deliver a consistent, seamless and high-quality customer experience across our stores, on the web and via mobile technology will differentiate us from our online-only competitors."
In addition to all of the before mentioned ways to differentiate DSG adds distribution channels to that list. One of the reasons Dick's Sporting Goods has not fallen to the monster Amazon like many other competitors is because it has created and continually improved its online experience.
"Private Brands. We also offer a wide variety of private brands such as adidas baseball, DBX, Epic, Field & Stream, Fitness Gear, Köppen, Maxfli, Nickent, Nishiki, Quest, Reebok (performance apparel), Slazenger (golf and racquets), Top-Flite, Umbro (performance equipment, footwear and apparel) and Walter Hagen. Our private brands and other exclusive products offer our customers products that they cannot find anywhere else. Our private brands also offer exceptional value and quality to our customers at each price point and obtain higher gross margins than we obtain on sales of comparable branded products. Our private brands are designed and developed to offer our customers differentiated assortments from our competitors. We have invested in a development and procurement staff that continually sources products targeted specifically to our customers' needs."
"Private Brands" is the last example I will use. Having the sole right to sell high quality products that have proven themselves in the market is another example of how DSG differentiates itself. This adds to their product mix and will attract loyal customers who have faith in a certain brand.
Sources:
http://www.sec.gov/Archives/edgar/data/1089063/000104746913003238/a2213667z10-k.htm
In DSG's annual report to the SEC, they list some of their strategies and reasons for differentiation.
"Brand Partnerships. We carry a wide variety of well-known brands, including adidas, Callaway Golf, Columbia, Nike, Remington, TaylorMade-adidas Golf, The North Face, Under Armour and Wilson. In addition to the cost efficiencies of shared investments with our brand partners, we seek to leverage our partnerships to offer authenticity and credibility to our customers, while differentiating us from our competitors. We partner with our brands on important marketing initiatives and product launches, in addition to leveraging athletes that the brands bring to us for our marketing campaigns. Our brand partnerships also provide us with access to exclusive products and allow us to collaboratively develop enhancements that differentiate our customers' shopping experience, such as our brand shops, which provide our customers with a wider and deeper selection of products from our key brands, or co-branded microsites to enhance our customers' online experience."
In the list of ways that a firm can differentiate their products listed in Table 7.1 "brand partnerships" covers many all in one step. Making the same product more affordable at DSG than its competitors, consumer marketing, product reputation, product features, linkages with other firms and product mix could all be found in DSG's "brand partnership" strategy.
"Omni-channel Development. We are upgrading site functionality, expanding content, investing in new capabilities and beginning to leverage our store network to provide customers with an enhanced shopping experience that enables our customers to buy and receive products where, when and how they want. We believe that leveraging all of our sales channels to deliver a consistent, seamless and high-quality customer experience across our stores, on the web and via mobile technology will differentiate us from our online-only competitors."
In addition to all of the before mentioned ways to differentiate DSG adds distribution channels to that list. One of the reasons Dick's Sporting Goods has not fallen to the monster Amazon like many other competitors is because it has created and continually improved its online experience.
"Private Brands. We also offer a wide variety of private brands such as adidas baseball, DBX, Epic, Field & Stream, Fitness Gear, Köppen, Maxfli, Nickent, Nishiki, Quest, Reebok (performance apparel), Slazenger (golf and racquets), Top-Flite, Umbro (performance equipment, footwear and apparel) and Walter Hagen. Our private brands and other exclusive products offer our customers products that they cannot find anywhere else. Our private brands also offer exceptional value and quality to our customers at each price point and obtain higher gross margins than we obtain on sales of comparable branded products. Our private brands are designed and developed to offer our customers differentiated assortments from our competitors. We have invested in a development and procurement staff that continually sources products targeted specifically to our customers' needs."
"Private Brands" is the last example I will use. Having the sole right to sell high quality products that have proven themselves in the market is another example of how DSG differentiates itself. This adds to their product mix and will attract loyal customers who have faith in a certain brand.
Sources:
http://www.sec.gov/Archives/edgar/data/1089063/000104746913003238/a2213667z10-k.htm
Tuesday, February 18, 2014
Dick's Sporting Goods, Chapter 6: Cost Leadership
Cost leadership is defined as gaining advantages by reducing a business' economic costs below all of its competitors. For a company to be successful, a company must develop a system that is beneficial in a way that allows them to maintain and control their costs in competition with their competitors. The first step that DSG took to lower costs was to build distribution centers. DSG currently has four distribution centers across the US. They are located in Smithton, PA, Plainfield, IN, Atlanta, GA, and Goodyear, AZ. Having multiple distribution centers strategically located allows for DSG to have its merchandise readily available while not incurring extra costs of another middle man when ordering and receiving the goods from the multiple brands they sell.
Another way DSG remains atop the cost leadership pyramid in the sporting goods world is through having the latest inventory control systems. PDTs, otherwise known as portable data terminals, can be found in every store that Dick's calls home. These aren't large machines, like the name might suggest. These are handheld devices that keep up with inventory in each store. These devices scan for prices, print labels, have a history of every type of item that DSG has ever sold, and can give an employee access to other store's inventories. Having all of this information readily available at the click of a button allows DSG's upper management to control inventory flow to more profitable stores of certain items. In this industry, and most every business today, the quicker you can get market information, the more money you are going to make, allowing cost leadership to set in.
In an excerpt from business week…
"Year over year, Dick's Sporting Goods Inc. has been able to grow revenues from $5.2B USD to $5.8B USD. Most impressively, the company has been able to reduce the percentage of sales devoted to cost of goods sold from 69.40% to 68.52%. This was a driver that led to a bottom line growth from $263.9M USD to $290.7M USD."
This reduction of cost of goods sold is evidence that DSG has helped differentiate itself from the sporting retail pack as a cost leader.
http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=DKS
http://www.dickssportinggoods.jobs/distribution-center-jobs
Another way DSG remains atop the cost leadership pyramid in the sporting goods world is through having the latest inventory control systems. PDTs, otherwise known as portable data terminals, can be found in every store that Dick's calls home. These aren't large machines, like the name might suggest. These are handheld devices that keep up with inventory in each store. These devices scan for prices, print labels, have a history of every type of item that DSG has ever sold, and can give an employee access to other store's inventories. Having all of this information readily available at the click of a button allows DSG's upper management to control inventory flow to more profitable stores of certain items. In this industry, and most every business today, the quicker you can get market information, the more money you are going to make, allowing cost leadership to set in.
In an excerpt from business week…
"Year over year, Dick's Sporting Goods Inc. has been able to grow revenues from $5.2B USD to $5.8B USD. Most impressively, the company has been able to reduce the percentage of sales devoted to cost of goods sold from 69.40% to 68.52%. This was a driver that led to a bottom line growth from $263.9M USD to $290.7M USD."
This reduction of cost of goods sold is evidence that DSG has helped differentiate itself from the sporting retail pack as a cost leader.
http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=DKS
http://www.dickssportinggoods.jobs/distribution-center-jobs
Thursday, February 13, 2014
Dick's Sporting Goods, Chapter 5: Evaluating Firm Strengths and Weaknesses: The Resource-Based View
Under the VRIO framework, the question of imitability and having a sustained competitive advantage came to mind when trying to find what separated DSG from the rest of the field.
Although I have touched on this area of the company before, it is worth reinforcing to show DSG's dominance over the past few years. DSG was labeled "best in breed" by the stock research powerhouse Morningstar. It was awarded this honorary title because of its focus on high-end athletic needs.
The article states…
"The company’s competitive advantage consists of its emphasis on high-performance products designed for serious athletes/enthusiasts, rather than cheaper goods for casual participants. Nevertheless, you can buy products at various skill and price levels.
But Dick’s focus on higher-quality, higher-price products makes it more profitable than its rivals. It also lessens the competition Dick’s faces from other sporting goods and general merchandise retailers who don’t share that emphasis."
The more profitable DSG becomes, the more of a competitive advantage is gains on its competitors, which are becoming fewer and fewer every year, thanks to consolidations and the online retailers stealing some of the profits. The only question is can they continue to keep their edge. Internet sales and online competition seem to be the only thing that could potentially slow them down, as discussed in my last article. I don't see an imitator becoming a threat to Dick's anytime in the near future.
http://www.newsmax.com/Companies/Dick-s-Sporting-Goods-DKS/2012/02/29/id/431009
Although I have touched on this area of the company before, it is worth reinforcing to show DSG's dominance over the past few years. DSG was labeled "best in breed" by the stock research powerhouse Morningstar. It was awarded this honorary title because of its focus on high-end athletic needs.
The article states…
"The company’s competitive advantage consists of its emphasis on high-performance products designed for serious athletes/enthusiasts, rather than cheaper goods for casual participants. Nevertheless, you can buy products at various skill and price levels.
But Dick’s focus on higher-quality, higher-price products makes it more profitable than its rivals. It also lessens the competition Dick’s faces from other sporting goods and general merchandise retailers who don’t share that emphasis."
The more profitable DSG becomes, the more of a competitive advantage is gains on its competitors, which are becoming fewer and fewer every year, thanks to consolidations and the online retailers stealing some of the profits. The only question is can they continue to keep their edge. Internet sales and online competition seem to be the only thing that could potentially slow them down, as discussed in my last article. I don't see an imitator becoming a threat to Dick's anytime in the near future.
http://www.newsmax.com/Companies/Dick-s-Sporting-Goods-DKS/2012/02/29/id/431009
Friday, February 7, 2014
Dick's Sporting Goods, Chapter 4: Evaluating Environmental Opportunities
One of the areas of discussion in this chapter is that of consolidation. It focuses mainly on small to medium sized stores in the same or similar industries and their struggle of when to stay fragmented or when to join as one to become more profitable.
Dick's Sporting Goods has come a long way in the last few years. They have showed consistent growth and show no signs of slowing down. From having two stores in 1970, to boasting over 480 stores in 43 states, not including its 81 Golf Galaxy and new Field & Stream shops, DSG has an ultimate goal of around 900 stores with more attention to being more of a national power, rather than having most of its revenues produced on the east coast.
DSG began buying up its competitors in 2004 with the purchase of 48 Gaylan stores throughout the midwest. Not long after in 2007, DSG acquired Golf Galaxy, who became a fully-owned subsidiary. Later that year, DSG bought out Chick's, weathering through many headline jokes of "Dick's bought Chick's" who held a large base on the west coast. It is also a wholly-owned subsidiary. After purchasing the intellectual property rights of Field & Stream from the magazine, Dick's opened its first F&S shop in early 2013 with immediate plans to open 2 more in the near future.
http://www.popcitymedia.com/companies/dicks1028.aspx
http://www.bizjournals.com/cincinnati/news/2013/04/10/dicks-sporting-goods-opening-2nd.html
Dick's Sporting Goods has come a long way in the last few years. They have showed consistent growth and show no signs of slowing down. From having two stores in 1970, to boasting over 480 stores in 43 states, not including its 81 Golf Galaxy and new Field & Stream shops, DSG has an ultimate goal of around 900 stores with more attention to being more of a national power, rather than having most of its revenues produced on the east coast.
DSG began buying up its competitors in 2004 with the purchase of 48 Gaylan stores throughout the midwest. Not long after in 2007, DSG acquired Golf Galaxy, who became a fully-owned subsidiary. Later that year, DSG bought out Chick's, weathering through many headline jokes of "Dick's bought Chick's" who held a large base on the west coast. It is also a wholly-owned subsidiary. After purchasing the intellectual property rights of Field & Stream from the magazine, Dick's opened its first F&S shop in early 2013 with immediate plans to open 2 more in the near future.
http://www.popcitymedia.com/companies/dicks1028.aspx
http://www.bizjournals.com/cincinnati/news/2013/04/10/dicks-sporting-goods-opening-2nd.html
Thursday, January 30, 2014
Dick's Sporting Goods, Chapter 3: Evaluating Environmental Threats
One of the things that the chapter touches on is creating barriers to entry. One of those barriers to entry is economies of scale.
Because companies like Target and Best Buy have failed to create economies of scale, Amazon.com has taken huge chunks of sales away from many traditional mortar and brick stores. Dick's Sporting Goods could be placed under that category, but unlike many similar to it, Dick's has created economies of scale in relation to Amazon and here's why…
-Dick's has over a 7% advantage over Amazon when it comes to operating margin which means that Dick's is turning its sales into profits while Amazon makes less as it continues to grow.
-Dick's free cash flows are nearly even with Amazon's which is a feat in itself because Amazon is enormous compared to DSG.
-DSG has even surpassed Amazon in net income, even though this can be attributed to different strategies.
-Another reason DSG can still create an economy of scale to Amazon is because they offer products that can't be found on Amazon at all. Of 190 of DSGs top products only 12 were sold and shipped by Amazon, and 55 of the products couldn't be found on Amazon at all. Guns and ammo are a large part of DSGs sales and can take credit for keeping Amazon away from DSG…for now.
http://www.forbes.com/sites/ycharts/2013/06/26/how-dicks-manages-to-fight-off-amazon/
Because companies like Target and Best Buy have failed to create economies of scale, Amazon.com has taken huge chunks of sales away from many traditional mortar and brick stores. Dick's Sporting Goods could be placed under that category, but unlike many similar to it, Dick's has created economies of scale in relation to Amazon and here's why…
-Dick's has over a 7% advantage over Amazon when it comes to operating margin which means that Dick's is turning its sales into profits while Amazon makes less as it continues to grow.
-Dick's free cash flows are nearly even with Amazon's which is a feat in itself because Amazon is enormous compared to DSG.
-DSG has even surpassed Amazon in net income, even though this can be attributed to different strategies.
-Another reason DSG can still create an economy of scale to Amazon is because they offer products that can't be found on Amazon at all. Of 190 of DSGs top products only 12 were sold and shipped by Amazon, and 55 of the products couldn't be found on Amazon at all. Guns and ammo are a large part of DSGs sales and can take credit for keeping Amazon away from DSG…for now.
http://www.forbes.com/sites/ycharts/2013/06/26/how-dicks-manages-to-fight-off-amazon/
Monday, January 20, 2014
Dick's Sporting Goods: Chapter 2. Firm Performance and Competitive Advantage
DSG has done a great job a having a "sustained" competitive advantage. Over the last few years DSG has rose above its competitors into a class of its own. Aside from increasing annualized total return of 55.9%, it has all of the measurables you would look for when it comes to numbers. For the purpose of this blog assignment I will include some percentages that can be seen in Chapter 2 of our textbook using some simple and adjusted accounting measures.
Altman's Z-score ratio: 6.45
P/E ratio: 22
Current Ratio: 1.5
Debt to Equity: 0.01
Inventory Turnover: 3.7
Tobin's Q ratio: 2.51
The z-score ratio is a ratio that will determine the probability that a firm will declare bankruptcy. If the score is less than 1.8, it will fail. If it is between 1.8 and 3.0, it will probably not fail. If it is above 3.0, it will not fail. DSG's score of 6.45 is far above concern and can show a good competitive advantage.
Tobin's q is the ratio of a firm's market value to the replacement cost of its assets. Anything greater than 1.0 is an indicator that a firm is generating superior performance. DSG's is 2.51.
All of the above information can be found below on the links provided and will provide even more evidence why DSG is sustaining a competitive advantage.
http://www.advfn.com/exchanges/NYSE/DKS/financials
http://www.newsmax.com/Companies/Dick-s-Sporting-Goods-DKS/2012/02/29/id/431009
DSG has done a great job a having a "sustained" competitive advantage. Over the last few years DSG has rose above its competitors into a class of its own. Aside from increasing annualized total return of 55.9%, it has all of the measurables you would look for when it comes to numbers. For the purpose of this blog assignment I will include some percentages that can be seen in Chapter 2 of our textbook using some simple and adjusted accounting measures.
Altman's Z-score ratio: 6.45
P/E ratio: 22
Current Ratio: 1.5
Debt to Equity: 0.01
Inventory Turnover: 3.7
Tobin's Q ratio: 2.51
The z-score ratio is a ratio that will determine the probability that a firm will declare bankruptcy. If the score is less than 1.8, it will fail. If it is between 1.8 and 3.0, it will probably not fail. If it is above 3.0, it will not fail. DSG's score of 6.45 is far above concern and can show a good competitive advantage.
Tobin's q is the ratio of a firm's market value to the replacement cost of its assets. Anything greater than 1.0 is an indicator that a firm is generating superior performance. DSG's is 2.51.
All of the above information can be found below on the links provided and will provide even more evidence why DSG is sustaining a competitive advantage.
http://www.advfn.com/exchanges/NYSE/DKS/financials
http://www.newsmax.com/Companies/Dick-s-Sporting-Goods-DKS/2012/02/29/id/431009
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