The sporting goods industry has been one of the late-stage winners in the wake of the COVID-19 pandemic, recording double-digit price growth amid growing enthusiasm for sporting activities and the need to stay fit and healthy. As people across the country are slowly embracing outdoor activities again to stay active and healthy, the industry is expected to see a meaningful increase in demand for products across all categories.

Although team sports and indoor sports struggled due to the postponement or cancellation of major sporting events last year, there has been a significant surge in participation in outdoor individual sports and home workouts. The speedy ramp-up of vaccinations and the sector’s rapid digital penetration should help the sporting goods brands outperform the broader market as the year progresses.

The growing demand for performance gear by young people, the progressive casualization of work dress codes, as well as the more recent “athleisure” trend, have created strong tailwinds for leading sporting goods companies such as DICK’S Sporting Goods, Inc. (DKS), Hibbett Sports, Inc. (HIBB), and Big 5 Sporting Goods Corporation (BGFV). We think these stocks are poised to advance based on their eye-popping online sales surge and a strong industry backdrop.

DICK’S Sporting Goods, Inc. (DKS)

Founded in 1948, DKS is a sporting goods retailer operating primarily in the Eastern United States. The company offers sporting goods equipment, fitness equipment, golf equipment, and hunting and fishing gear, and other accessories. It also owns and operates Golf Galaxy, Field & Stream, and e-commerce websites, as well as GameChanger, a youth sports mobile app for scheduling, communications, and live scorekeeping.

In  December, DKS and Instacart announced a partnership to launch same-day delivery from more than 150 stores. This new partnership will give DKS’ customers access to all the top-quality sporting goods they need and have their purchases delivered  in as fast as an hour to customers in the U.S. .

Also, in November, the company announced that Edward W. Stack, Chairman and Chief Executive Officer, will assume the role of Executive Chairman in February 2021. DKS has also announced the appointment of Lauren R. Hobart, the current President of DICK’S, as President and CEO. This leadership transition should be an important step in the company’s long-term succession plan and help support the company’s strategic growth initiatives.net sales increased 22.9% year-over-year to $2.41 billion for the third quarter ended October 31, 2020. Its e-commerce sales increased 95% during the third quarter of 2020 versus  the third quarter of 2019. Its gross profit grew 45% from its  year-ago value to $842.17 million. And the company’s net income rose 207.8% year-over-year to $177.22 million, while its EPS rose 208.8% to $2.10 over this period.

A consensus EPS estimate of $0.79 for the next quarter ending April 31, 2021 represents a 146.2% improvement from its  year-ago value. Also, DKS beat the Street’s EPS estimates in three of the four trailing quarters, which is impressive. The consensus revenue estimate of $2 billion for the next quarter represents  38.5% growth from the same period last year. The stock has gained 58.4% over the past year.

DKS’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

DKS has a grade of A for Growth and Momentum, and B for Quality. Of the 33 stocks in the Athletic & Recreation industry, DKS is ranked #10.

In addition to the POWR Ratings grades I have just highlighted, you can see the DKS ratings for Stability, Sentiment, and Value here.

Hibbett Sports, Inc. (HIBB)

Based in Birmingham, Alabama, HIBB operates in  retail sales of athletic-inspired fashion products. The company provides athletic footwear, athletic and fashion apparel, team sports equipment, and related accessories. It operates stores in small- and mid-sized communities, and e-commerce websites under the names of hibbett.com and citygear.com.

In December, HIBB announced that it had entered an exclusive partnership with Nike (NKE) and footwear news site, NiceKicks, to launch a Small-Town Sneakerhead digital campaign and video premiere. This should help HIBB further engage with the sneaker community and inspire new customers to buy its premium sneaker collection.

HIBB’s net sales have increased 20.3% year-over-year to $331.4 million in the third quarter ended October 31, 2020. Its comparable sales increased 21.2%, while its brick-and-mortar sales increased 17.5%. The company’s non-GAAP gross margin was 38.1% compared to 32.4% in the prior year. HIBB reported cash and cash equivalents of $177.7 million, and its net income increased 1015.5% year-over-year to $25.27 million over this period.

A consensus EPS estimate of $5.81 for the current year represents a 149.4% increase year-over-year. In fact, HIBB beat the Street’s EPS estimates in three of the four trailing quarters, which is impressive. The consensus revenue estimate of $1.39 billion for 2021 represents  a 17.7% increase from the same period last year. The stock has gained 127.6% over the past year.

HIBB’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

HIBB has a grade of A for Momentum, and B for both Growth and Value. Among the 33 stocks in the same industry, it is ranked #7.

To see additional POWR Ratings for Stability, Quality, and Sentiment for HIBB, click here.

Big 5 Sporting Goods Corporation (BGFV)

BGFV is a sporting goods retailer in the Western United States. It sells athletic shoes, apparel, and accessories, fitness, camping, hunting, golf, and other sports accessories. It also sells private label items under its own trademarks – Golden Bear, Harsh, Pacifica, and Rugged Exposure.

BGFV’s net sales for the fourth quarter ended January 3, 2021  increased 19% year-over-year to $290.5 million. The company’s same-store sales increased 10.5%, while its  merchandise margins increased by approximately 240 basis points over this period.

A consensus EPS estimate of $0.23 for the next quarter ending March 31, 2021 represents a 130% improvement year-over-year. The consensus revenue estimate of $245.7 million for the next quarter represents a 12.8% increase year-over-year. The stock has gained 275.6% over the past year.

It is no surprise that BGFV has an overall rating of A, which equates to Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

BGFV has a grade of A for Growth, Value, and Momentum. In the same industry, it is ranked #1.

Click here to see the additional POWR Ratings for BGFV (Stability, Quality and Sentiment).

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DKS shares were trading at $71.85 per share on Wednesday afternoon, up $1.79 (+2.55%). Year-to-date, DKS has gained 27.82%, versus a 2.38% rise in the benchmark S&P 500 index during the same period.

About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...

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