Dick's Sporting Goods Shutters an Iconic Brand, Invites Customers to Experiences

The sports retailer says its enormous House of Sport experience stores will power growth. That means an end to a prominent licensing deal.

Dick’s Sporting Goods (DKS) - Get Free Report is betting big on itself. Quite literally.

Despite worries about inflation and a possible economic recession, the sporting goods retailer said it would spend $600 million to $800 million this year to expand its store footprint. 

The strategy: to pull customers into sports experiences within what will be enormous new stores. Dick's will open nearly 20 of its 100,000-square-foot Dick’s House of Sport concepts by the end of 2024.

“We are excited to return to growing our square footage,” Chief Financial Officer Navdeep Gupta told investors earlier this week. “Dick’s House of Sport will be the primary driver of the square footage growth.”

A Key Part of the Plan: Closing Field & Stream

A key component to this plan: shuttering the Field & Stream brand. 

The decision to walk away from the Field & Stream name, which Dick’s has licensed since 2012, demonstrates the company’s growing confidence in creating and developing its own portfolio of store concepts, including Golf Galaxy, Public Lands, and Going, Going, Gone!

Company executives are especially bullish on Dick’s House of Sports concept, calling it the “future of retail.”

The enormous 100,000-square-foot (9,300-square-meter) facilities feature a 17,000-square-foot outdoor field and running track, which doubles as a skating rink in the winter and outdoor movie area in the summer; an indoor batting cage; three virtual golf bays, where visitors can golf at courses around the world; a putting green; a 32-foot high rock climbing wall, and wellness services like yoga.

“Dick’s House of Sport is redefining sports retail,” Chief Executive Lauren Hobart told analysts. “It's this way of thinking that drives us to continue to innovate and create market-leading disruption. 

"House of Sport is an experience that fosters deep community involvement, goes well beyond traditional retail and has become a destination where athletes can fuel their passions."

“Since launching House of Sport in 2021, our initial three locations have exceeded our expectations,” she said, “driving strong engagement with our brand partners while delivering much higher total sales and profit as well as much higher sales and profit on a per-square-foot basis.”

The company hopes to operate 75 to 100 House of Sport locations across the country over the next five years.

Dick's Challenges: Foot Traffic, Sharp Competition

But Dick’s faces many challenges. Like many retailers, the company enjoyed strong sales during the global pandemic as people sought to comfort and entertain themselves at home by buying lots of stuff over the internet.

But pandemic-goosed sales have receded as government stimulus programs ended and inflation-wary consumers have cut discretionary spending. As a result, several major retailers have slashed inventories and forecast comparable sales in a range of flat to single-digit declines for this year.

Dick’s reported flat same-store sales for 2022 and expects this year's figure to be flat to as much as a gain of 2%.

As the pandemic receded, store traffic to Dick’s stores actually fell three out of the four quarters last year versus 2021, according to data by Placer.ai. 

In the third and fourth quarters, traffic declined 5.6% and 2.8% respectively from the year-earlier periods.

Dick’s also faces strong competition from rivals like Hibbett  (HIBB) - Get Free Report, which is not only growing overall visit numbers but making significant progress increasing its share of returning visitors, Placer.ai data show.

In 2019, 84.2% of Dick’s visitors visited a Dick’s store at least twice while Hibbett saw just a 61.3% share of return visitors. By 2022, those numbers had declined by 3.4 percentage points for Dick's while increasing by 6.5 percentage points for Hibbett.

But Hobart noted to investors that the $140 billion sports retail market is still highly fragmented and thus remains up for grabs. Dick’s controls just about 8% of that market.

She hopes that Dick’s House of Sport will add some percentage points to the company’s corner over the next several years.