Don't Celebrate Dick's Sporting Goods' Earnings Beat -- Just Sell It

NEW YORK (TheStreet) -- Sales in the athletic goods retail industry have exploded during the past decade, and according to research firm Statista, athletic gear will continue be a hot seller in the years ahead. 

Ordinarily, this would bode well for a leading athletics retailer. Dick Sporting Goods (DKS) Obviously, as sales of sporting goods trend higher, it benefits all athletic retailers, especially pure-play chains like Dick's.

That said, Dick's, headquartered in Coraopolis, Pa., must operate flawlessly if it expects to fend off the likes of Foot Locker (FL), which has beaten earnings estimates for 12 consecutive quarters. And as evidenced by Dick's own first-quarter earnings results, there are areas of struggle, owed to some ill-timed decisions made by management.

Sure, Dick's did what it had to do to beat Wall Street's revenue and earnings estimates this week. Still, for its stock to trend higher, the company must first reverse its trends of slowing revenue growth and declining same-store sales. And with its subsidiary Golf Galaxy stores weighing it down, these fixes won't be easy.

In the just-ended quarter, for instance, same-store sales at Golf Galaxy stores plummeted 11%, which is an accelerated decline from the fourth quarter when same-store sales at Golf Galaxy slowed by 7.1%. In other words, it's not enough that same-store sales at Dick's flagship store inched higher by 1.8%. First-quarter net same-store sales growth of 1% still marks a slowdown from last year's first quarter climb of 1.5%.

In that context, Dick's first-quarter revenue and earnings beat looks less impressive. What's more important to focus on are the underlying fundamentals, which don't indicate a strong foundation for the retailer -- at least not yet. And the company affirmed this with its outlook for the rest of the year.

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