More apparel and fewer guns will be in Dick’s store this spring.
Executives at Dick’s Sporting Goods told analysts on Tuesday morning’s conference call that the retailer will be removing guns from approximately 120 of its stores in places where the hunt category is underperforming. Stronger departments, such as apparel, athletic footwear, fitness and private label brands will fill the newly opened floor space.
“We have mentioned now for the second quarter in a row that our apparel business is positive,” Edward Stack, chief executive officer of Dick’s, said and credited an especially cold winter for increased outerwear sales. “We will continue to optimize our assortment, reallocate for space to regionally relevant growing categories and make stores more experiential.”
About 80 percent of the company’s total revenue comes from in-store sales, Stack said, and added that same-stores sales were mostly positive during the most recent quarter, dragged down only by the hunt and electronics businesses. Same-store sales of active apparel and footwear, specifically, grew in low-single digits during the quarter.
Meanwhile, Dick’s will be phasing out its hunt category, which includes guns, ammunition and hunting apparel, in some stores, while completely eliminating the electronics business.
The sporting goods retailer has been under pressure since the February 2018 high school shooting in Parkland, Fla., to remove guns from its shelves. The same month the company responded by halting the sale of assault-style rifles at all Dick’s stores and stopped selling guns to anyone under the age of 21. Revenues fell as a result.
Still, the decision to remove all firearms from some of Dick’s stores began in 2018’s third quarter, as a sort of test pilot. The company purged guns from 10 of its stores, substituting the category with a “more compelling assortment,” Stack said. He said those 10 stores had positive comp growth the following quarter.
Stack said hunt will not disappear from all stores, but instead, “generally follow industry trends.”
“The hunt business is very good in some place; other places it’s not very good,” he said and pointed out that while the sale of guns have been down, things like ammunition sales have been up.
The push to expand the company’s activewear selection is another sign of the continue ath-leisure trend — and something many retailers are doing.
Last week, department store rival Kohl’s said it would expand its activewear categories, while announcing a partnership with Planet Fitness. At least 10 Planet Fitness locations will open this year, situated adjacent to Kohl’s.
Foot Locker also caught the bug, capitalizing on active footwear. In February, the company invested $100 million into sneaker resale platform Goat, a sign of consumers continued love of athletic and athletic-inspired sneakers.
That said, not all brands have done well. In Dick’s stores in particular, activewear apparel, accessory and footwear maker Under Armour “continues to be difficult,” Stack said.
The company plans to make changes to the Under Armour assortment and even replaced some of Under Armour’s floor space with other brands with a longer shelf life, such as Nike and Adidas. But Stack was careful to say he’s still “enthusiastic about our Under Armour business going forward.”
In addition, the ceo said Dick’s is bringing new Nike apparel and footwear products to market this year, including fleece, introducing more golf apparel and adding a new private label that will take the place of a licensing deal Dick’s previously had with Reebok. The new label will be prominently displayed in stores across men’s, women’s, boys and girls sections.
“So when you walk in you will know that we’re in this business,” Stack said. “We think that it will do more business there than we did with Reebok.”
“We’ve made a big bet there,” Stack said on the company’s decision to further push apparel.
Still, the retailer fell short on both top and bottom lines for the quarter ending Feb. 2, and investors were not happy.
Revenues were just $2.49 billion for the three-month period, down from $2.66 billion the year before. Income also fell to $102.6 million, compared with nearly $116 million the year before.
Shares plunged more than 12 percent during Tuesday’s trading session, closing down 11.03 percent to $34.60 a share.
But Stack said the effects of the repositioning will likely not been seen until 2019’s third quarter.
In the meantime, the new growth strategies are centered on maximizing Dick’s existing store fleet, with the possibility of opening new stores as lease prices drop from closing Sears and J.C. Penney stores. The company had more than 800 physical locations at the end of 2018.
“We look at this as a multiyear initiative,” he said. “The 10 stores [that eliminated guns] we’re very pleased with. We’re expanding into 120 more stores and we’ll see how that goes. And if that goes well, as expected, we would probably [remove guns from] another bunch of stores next year.”