One of the reasons we enjoy sports is our natural, competitive nature. Often, the intensity of that competitive nature dictates the intensity of our love of sports.
With Sports Authority filing for bankruptcy this month, the competitive nature of the sports-retail industry just got that much more intense.
One of Sports Authority's main rivals, Dick's Sporting Goods (DKS), reported a 17% decline in fourth-quarter profits recently and offered downbeat guidance for the current quarter. Dick's also reported a 2.5% decline in comprehensive same-store sales -- online as well as brick and mortar.
Dick's rival Hibbett Sports (HIBB) reported a 2.7% rise in revenue in its most recent quarterly report, released today, but it also reported a 0.6% decline in same-store sales. The company also provided downside earnings guidance for the current year.
"This is certainly a unique time in the industry. The competitive landscape is evolving which is creating pressure for some and opportunities for others," Dick's CEO Edward Slack said in the company's earnings call.
Depending on where one stands, a moment of disruption can either be a crisis or an opportunity. And the future of the industry depends on how these retailers respond to this disruption.
Ironically, there certainly isn't a decline in the number of people participating in sports activities. Vendors like Nike (NKE) and Growth Seeker portfolio holding Under Armour's (UA), are experiencing strong periods of growth.
Sports Authority seems to be on the losing side of this contest, with the company announcing plans to shutter 140 stores in the coming months. It also is seeking bankruptcy protection, citing an "extremely competitive market," due in part to mid-channel competition.
Read up on Under Armour's chart
Dick's identified 90 to 100 Sports Authority closings that will be in the vicinity of Dick's stores. Sports Authority's demise won't be a windfall for other players in the sector by default, however, as sports apparel is increasingly getting traction at mid-channel retailers like Kohl's (KSS), which was recently upgraded to Buy by TheStreet's quant ratings service.
"As far as the competitive landscape, there are two things that the mid-channel Kohl's and those they may be doing fine with Nike," Slack said. "But we've got more of an elevated presentation and assortment than Kohl's does. With the product for that runner for that the fitness women, men, the young athlete presentation we have, we certainly keep an eye on them, but they haven't really impacted our business."
As sports retailers see more competition from retailers with a wider purview, as well as the ubiquitous online disruption presented by Growth Seeker holding Amazon (AMZN), the more aggressive retailers will be able to sweep up what is left behind by the less aggressive ones. An opportunity borne from crisis.
"I think this is will be very good for Dick's Sporting Goods as well as Trifecta Stocks holding Foot Locker (FL)," said Fabian Wealth Strategies portfolio manager Christopher Versace, who co-manages the TheStreet's Trifecta model portfolio. "As we saw when Borders and Circuit City fell, consumers will move to other locations, not forego spending."