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  1. Home
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For Dick's Sporting Goods, E-Commerce Is as Much an Enemy as a Friend

Dick's troubles will only deepen as more and more retails sales occur online.
By KEVIN CURRAN Mar 12, 2019 | 05:03 PM EDT
Stocks quotes in this article: DKS, AMZN, ADDYY, UA, NKE, FL

E-commerce threatens to eliminate -- not enhance -- the sales prospects at Dick's Sporting Goods  (DKS)  .

True, growth in e-commerce sales represented the one lone bright spot Tuesday in Dick's fourth-quarter earnings report, which showed sagging sales numbers and disappointing forward guidance that sent the stock slumping 11%. However, e-commerce's ray of good news could be fleeting for the chain.

After all, Dick's entree into e-commerce not only steps into the wheelhouse of Amazon  (AMZN)  , but runs into the online efforts of the chain's own suppliers, like Nike (NKE) , Under Armour (UA)  and Adidas (ADDYY) . For example, Nike's direct-to-consumer revenue has doubled in just the past five years to more than $10 billion, according to Statista.

"Digital is allowing us to realize our vision for smart retail to remove friction and personalize experiences through the intersection of digital and physical environments," Nike CEO Mark Parker said in mid-2018. Clearly, the "friction" he spoke of referred in part to intermediaries like Dick's.

To be sure, Nike's efforts to reduce its reliance on third-party retailers like Dick's or Foot Locker (FL) for sneaker sales hasn't been entirely successful. For example, Foot Locker has seen its sales grow despite a heavy reliance on Nike, leveraging a seamless online platform and consumer loyalty to its advantage.

But as for Dick's, even if suppliers don't snuff out its e-commerce efforts, the chain must contend with the squeezed margins available to online players that don't approach the scale that makes Amazon successful. Coupled with the big investments necessary to build an online presence, that's not a great recipe for Dick's to see success any time soon.

"Dick's has to both spend even more money building out its omnichannel experience and suffer from lower gross margins, because you just can't make as much money online as offline," TheStreet's Jim Cramer wrote in his analysis of the company's latest results. "Dick's knows that it has to constantly update its Web site because that's what Amazon does, and that costs money -- more money for Dick's than it does for Amazon. So, Dick's dropped the bomb that has destroyed the stocks of many a retailer this period. The company said it would have to spend to keep up with its competitors."

Yes, Dick's has long been a survivor in sports retail, outlasting former competitors like Sports Authority and MC Sports. But as e-commerce's share of total U.S. retail purchases only accelerates, Dick's might be doing too little too late.

Or as Cramer put it: "I think you have to stay away, as it is just too hard right now to be in a bricks-and-mortar retailer selling goods that can often be found cheaper and gotten faster online. Judging by the market reaction Tuesday to Dick's earnings report, he's far from alone in making that case.

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TAGS: Earnings | Investing | Stocks | Retail | Sports business | E-Commerce | Analyst Actions | Sports | Stock of the Day

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