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Dick's Sporting Goods (DKS -1%) fades a quick pop higher today, sparked by its Q3 (Oct) report again showcasing the sporting goods retailer's ability to extract the most out of a dynamic economic environment. DKS exceeded top and bottom lines for the fifth consecutive quarter on healthy same-store sales growth. DKS also raised its FY25 (Jan) earnings, sales, and comp forecasts, signaling a favorable holiday shopping season ahead.

Today's rapid pullback following highs of +5.8% likely resulted from the stock getting slightly ahead of itself. Shares soared by over +10% in just three trading sessions leading into Q3 numbers, pricing in plenty of the highlights from Q3.

• Revenue growth may have been relatively light at 0.5% yr/yr to $3.06 bln. Likewise, adjusted EPS ticked $0.10 lower yr/yr to $2.75. However, management warned last quarter that a key back-to-school week shifted out of Q3 and into Q2, hurting Q3 numbers. Therefore, a somewhat light top and bottom-line performance was expected.
• Conversely, since it adjusted for the calendar shift, same-store sales growth was robust, up +4.2% and consistent with the +4.5% posted last quarter. DKS noted the back-to-school season was excellent, with specific school-related categories, including footwear, athletic apparel, and team sports, performing strongly during the quarter. The company enjoyed a 4.8% jump in average ticket, partially offset by a 0.6% decline in transactions.
• Merchandise margins improved by 84 bps yr/yr, half the expansion from last quarter when DKS was still lapping favorable yr/yr figures due to elevated inventory shrink. DKS's steady margin improvements emanated from better sales mix and assortment quality. Alongside clearance inventory falling meaningfully yr/yr in Q3, management has emphasized bringing in higher-demand products, helping boost margins and differentiate it from competing retailers.
• Also acting as a significant competitive differentiator is DKS's ongoing comprehensive store remodeling. The company opened three House of Sport locations (its 100,000 square foot stores containing rock climbing walls, batting cages, ice rinks, etc.) during Q3, bringing it to 19 total locations ahead of the holiday season. In 2025, DKS anticipates opening around 15 more locations, putting it on track for 75-100 by 2027. Meanwhile, DKS is revamping its 50,000-square-foot "Field House" locations, which it said continued to do well in sales and profitability during Q3.
• DKS sees its upbeat momentum persisting to close out FY25. The company raised its adjusted EPS guidance to $13.65-13.95 from $13.55-13.90 and sales forecast to $13.2-13.3 bln from $13.1-13.2 bln. DKS also hiked its comp outlook for the year to +3.6-4.2% from +2.5-3.5%.

As has been the case all year, DKS is putting up impressive numbers despite operating in an economic environment ripe with promotions, a strained end consumer, and heightened uncertainty. Management mentioned that during Q3, growth was observed across all income demographics, even as it leaned less on markdowns. With DKS simultaneously outperforming its peers, this trend highlights its superb competitive advantage, stemming from its high-quality product assortment, attention to in-person shopping experiences with its ongoing store remodels, and ability to leverage sports' increasing influence on culture. Given this, we continue to view DKS as an attractive buy-and-hold retailer.