Sports authority files for chapter 11

Published: March 10, 2016

 photo courtesy of wikimedia commons since Sports Authority has filed for chapter 11, Dick’s Sporting Goods will have a much larger market share.

PHOTO COURTESY OF WIKIMEDIA COMMONS / SINCE Sports Authority has filed for chapter 11, Dick’s Sporting Goods will have a much larger market share.

JORDAN DEN HERDER
Staff Writer

Pre-market on Tuesday morning, giant retailer Dick’s Sporting Goods released their 2015 Quarter four earnings results to the public. To investors’ dismay, Dick’s shared sales revenue and earnings per share that were lower than analysts’ expectations. The quarter sales came in at around $2.24 billion, versus the expectation of $2.28 billion, yielding a $0.02 miss in the company’s Earnings per Share of $1.13 which is down from $1.30 from quarter four in 2014.

Dick’s CEO Edward Stack claimed that he was still confident in the company’s performance, and attributed the financial hiccup to the unusually warm winter months the country has been seeing thus far.

Despite a quick initial 4.5 percent plunge on the release of this negative earnings report, Dick’s Sporting Goods still saw its stock close in the green with a small increase, and the reason is due to its private competitor, Sports Authority, Inc.

On March 2 the rival sporting goods retailer filed for chapter 11 bankruptcy protection. To try and avoid a full chapter seven liquidation, Sports Authority has stated that they will be closing approximately 140 stores.

This is great news for Dick’s for a number of reasons. As of now, about 100 of those closing stores are within very close proximity to a current Dick’s Sporting Goods store. To eliminate an immediate competitor that is in close range will most likely mean a reasonable increase of customers and sales for those specific stores. In addition to this, Dick’s is now aggressively analyzing the other 40 stores as a great possibility to grab a stronger market share within the sporting goods industry.

According to some analysts at Deutsche Bank, Dick’s stores may be positioned to incur about 20 percent of closed Sports Authority store sales. With Sports Authority revealing a 2015 revenue of about $2.6 billion between its 463 stores, it is possible that Dick’s could easily receive a sales boost of around $150 million annually simply by staying in business, not to mention additional sales if they actually go through with the buyouts of some of Sports Authority’s closing stores.

With Sports Authority focusing on diverting a chapter seven, there is a lot of area that Dick’s can step in and control within the market, and it is already capitalizing. If it so happens that Sports Authority does conclude in liquidation, estimates claim that Dick’s could see as much as a 7 percent sales increase on their top line.

Junior Jason Martinez stated, with an air of caution, “Dick’s definitely caught a break here, but let’s wait and see how well they can use it to their advantage down the road.”

Contact the writer: jordan.denherder@scranton.edu

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