Dick's (DKS) Expected to Capture 15-25% of TSA Foregone Revenues - Goldman Sachs

Goldman Sachs analyst Stephen Tanal weighed in on Dick's Sporting Goods (NYSE: DKS) after competitor The Sports Authority (TSA) filed to restructure under Chapter 11 of the US Bankruptcy code this morning. As part of the restructuring, TSA has identified approximately 140 stores and two distribution centers in Denver and Chicago that it intends to close or sell in the coming months.

Tanal sees positive implications for as a result. The TSA stores closed generated $5.5mn of sales on average; applying this to 140 stores implies ~$770mn of total retail sporting goods sales. "We believe most stores closed or sold would be in DKS’ market areas (it does not appear that TSA has filed a list of specific locations), as DKS has been a major source of competitive pressure on TSA. As we also showed in our Jan. 21 report, sales capture to DKS could be 15%-25% of TSA’s foregone revenues ($116-$193mn, based on 140 stores), at 15%-25% incremental EBIT margins on new sales ($17-$48mn, or 3.0%-8.4% of our 2016E EBIT).

The analyst notes that since the Jan. 19 close, DKS shares are up 26% vs. the S&P 500 +5%, in their view largely on the anticipation of a filing at TSA.

The firm maintained a Neutral rating price target of $49 on DKS.

For an analyst ratings summary and ratings history on Dick's Sporting Goods click here. For more ratings news on Dick's Sporting Goods click here.

Shares of Dick's Sporting Goods closed at $43.25 yesterday.

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