• by Sarah Mahoney  @mahoney_sarah, November 26, 2024

Fueled by stronger-than-forecast sales, Dick’s Sporting Goods is barreling into the fourth quarter with strong financial momentum and a national ad campaign starring NFL great J.J. Watt.

And because nothing says “happy holidays” like a good Texas smackdown, Dick’s recruited four of the Lone Star State’s biggest names for a fun cause-related campaign: Olympian Simone Biles, Dallas Cowboys’ quarterback Dak Prescott, the San Antonio Spurs’ Chris Paul, and the Texas Longhorn’s Quinn Ewers, with a little Matthew McConaughey tossed in – for a Holiday Decor Showdown.  Each athlete, named as an honorary holiday decorating officer, helped create personalized holiday displays for their Texas hometowns. Biles’ effort sparkles with gold medal-inspired glitter, for example, while Ewers’ includes a longhorn-powered sleigh.

As part of the push, each athlete is handing out one of Dick’s $100,000 Sports Matter grants to a local youth sports organization.

The ads began as the company posted unexpectedly strong sales, with comparable-store sales rising 4.2% to $3.06 billion. (Most observers expected gains of just 2.4%.) And net income climbed 13% to $228 million, up from $201 million. As a result, the Pittsburgh-based company also raised its forecast for the full-year, and now expects sales in the range of $13.2 billion to $13.3 billion, or increases of 3.6% to 4.2%.

The results reflect a robust back-to-school season and prove that Dick’s core middle- and upper middle-class customers have kept their spending steady, in large part due to the company’s innovations. That includes the popularity of the retailer’s GameChanger software-as-service sports app, which is rapidly approaching $100 million in revenues, and the success of the House of Sport concept. The company now operates 12 of these super-sized experiential locations and plans to have between 75 and 100 in place by 2027.

“We saw 1.5 million more athletes enter our ecosystem over the past quarter, and we saw growth across all income demographics,” said Lauren Hobart, president and chief executive officer, in a conference call webcast for investors. “This is an exciting time for our industry, and the country is having what we call a sports moment.” Between excitement for women’s basketball, football, the next World Cup and the Olympics returning to the U.S. in 2028, “sports are going to continue to have an outsized influence on culture. That's why we have this confidence in our growth.”

Some observers are somewhat less confident, however, and see some cooling trends headed Dick’s way. “We believe a material portion of Dick’s comparable sales growth is coming from strength in 'hot’ hydration and footwear brands,” writes Seth Basham, an analyst who follows the company for Wedbush, along with sales of such brands as Stanley, Hoka and On. He says sales of hydration products may add “at least” a point of comparable-sales gains. “Hoka and On alone could drive another 1-2 points of comparable sales as they are added to more doors,” he says.

But innovation cycles in those categories are slowing, and as pandemic enthusiasm for health and working out continues to decline, heading back to pre-pandemic levels, “we note possible headwinds from slowing product cycle benefits (Hoka, On, hydration), broadening wholesale Nike distribution and tariffs.”

Nike, which is Dick’s largest vendor and accounts for 24% of 2023 merchandise purchases, is a larger-than-ever question mark in Dick’s fortunes. “On the one hand, Nike is doubling down on innovation and could lean into the relationship with Dick’s to showcase even more new products,” Basham says. But since Nike’s woes have that company stepping up efforts in many wholesale channels, “increased distribution at other specialty and mass retailers could chew away at the heart of Dick’s sales of mid-priced Nike merchandise.”