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Dick's Rated Top Pick by Cowen on Back-to-School Sales

For Dick's Sporting Goods: 'Indications on back-to-school performance depict a strong season from a sales and margin perspective,'  Cowen says.

Dick’s Sporting Goods  (DKS) - Get Dick's Sporting Goods, Inc. Report on Friday received a top-pick designation at Cowen, which sees the retailer benefiting from back-to-school sales, overcoming supply-chain disruption.

“In the interim, U.S. consumers appear resilient, as indications on back-to-school performance depict a strong season from a sales and margin perspective, especially when including a return to team sports — a positive for the sporting goods channel and DKS in particular,” Cowen analysts wrote in a commentary cited by CNBC.

Dick’s stock recently traded at $116.21, down 3.2%. It has fallen 17% in the past month, as pandemic-induced enthusiasm has begun to ebb for investors. But it has still doubled year to date.

Morningstar analyst David Swartz has a bleak long-term outlook for Dick’s, putting fair value at $63.

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“We believe no-moat Dick’s Sporting Goods is struggling to stay relevant as sporting goods are sold through an increasing number of channels,” he wrote in a commentary last month.

“Although its sales have soared during the pandemic, we believe the impact is temporary, as growth in sporting goods retail has generally been minimal due to external competition.

“According to IBISWorld, sporting goods retail sales experienced average annual growth of just 1.3% in the five years before the pandemic.

“Dick’s competitors include e-commerce operators like wide-moat Amazon  (AMZN) - Get, Inc. Report, mass retailers like wide-moat Walmart  (WMT) - Get Walmart Inc. Report, specialty stores like narrow-moat Lululemon  (LULU) - Get Lululemon Athletica Inc (LULU) Report and Bass Pro Shops/Cabela’s, and branded stores and owned e-commerce from major vendors. …

“Further, we think the Covid-19 crisis has accelerated manufacturers’ direct-to-consumer efforts.“