Dick's Sporting Goods (DKS) decision to drive store space away from firearms might be a smart move in the long term.
Shares of the sporting goods retailer have fallen precipitously in Tuesday's trading following an earnings report that reflected continued sales declines.
Helping to curb the outlook for the company are its flailing firearm sales figures in its hunting category.
"We continue to see double-digit declines in Hunt and electronics, which together impacted the comp sales by 3% for the quarter," CEO Edward Stack told analysts during an earnings conference call on Tuesday morning.
The declines in hunting categories, made up largely of firearms and ammunition, are of particular interest given the recent anniversary of the company's ban on "assault style weapons" following the massacre of students at Marjory Stoneman Douglas High School in Parkland, Fla. The company also raised the age of purchase to 21 for the products.
"We support and respect the Second Amendment, and we recognize and appreciate that the vast majority of gun owners in this country are responsible, law-abiding citizens," Dick's said in a statement following the decision. "But we have to help solve the problem that's in front of us."
Immediately after the decision, traffic paradoxically popped, despite backlash from gun advocates and former hunting customers.
As the company sought to shift focus from popular firearms like the AR-15, the retailer removed nearly all of its hunting products at 10 locations, in a pilot program to test the performance of stores that replace hunting sections with sporting merchandise.
An immediate glance at the data suggests this move was in error. Sales have continued to decline and store traffic has faltered as the drag in hunting continues to hamper results. The decision to cut hunting from an additional 125 stores announced by management on Tuesday would seem an even more quizzical decision in the context.
Yet, the decline in firearm sales is more indicative of broader industry trends rather than any political stance by Dick's.
In fact, since the pro-gun Donald Trump was elected, gun sales have fallen 16.5% as concern over regulation has faded from the front of many gun owners' minds.
Additionally, the data coming from the pilot program of 10 stores that discontinued gun sales was overwhelmingly positive according to Stack.
"These 10 stores generated positive comp sales and had a strong margin rate improvement during the fourth quarter," he explained. "Following this success, we will remove Hunt from approximately 125 DICK'S stores in 2019 where the category under performs. It will be replaced with merchandise categories that can drive growth each based on the needs of that particular market."
Given the improvement seen in the initial experiment, the expansion of the program could amplify the improvement seen.
So, while the store traffic and sales numbers are severely disappointing, the noisy political issues over firearms appear to not be the primary culprit of the poor performance. In the end, the reallocation of floor space to better selling products could actually be a key to recovery.
