Insiders are signaling deep value in DICK’s Sporting Goods (NYSE: DKS), with a handful of directors buying shares in early Q3. The sales are not only counter to the trend but also a response to a deeply discounted share price. DKS shares imploded following the Q2 miss; however, the market is mispricing the opportunity. While headwinds exist, this isn't a retail turnaround; it’s an aggressive ecosystem expansion underpinned by technology and, more importantly, a vast data pool of athletic shopping habits and the revenue and earnings power it can generate.
The hurdle today is the shoe segment and, specifically, integrating Foot Locker and realizing its potential. The pain is store-count rationalization compounded by consumer headwinds; the opportunity is expanding DICK’s Sporting Goods, traditionally a big-box retailer, into niche, urban markets in a targeted way, providing athletes with what they’re looking for and the accessories to go with it. Foot Locker also provides real estate, making this a land grab as much as anything else, and entry into a coveted demographic: fashionable urbanites. Additional benefits include cross-selling and omnichannel integration.
