Dick’s CEO Sees Opportunity in Tough Times

Discussion
Jun 06, 2008

By George Anderson

Edward Stack is obviously one of those “when the going gets tough, the tough get going” sort of people. The chief executive of Dick’s Sporting Goods can see that sales at the chain’s stores have fallen off but he is convinced that now is the time for the retailer to grab market share away from the company’s competitors.

“We see that we execute our business better than the competition,” he told the Pittsburgh Tribune-Review. “A number of our competitors have indicated they’ve slowed their development programs. We continue to open stores.”

Dick’s, which grew to 434 stores last year after the acquisition of the Golf Galaxy and Chick’s Sporting Goods chains, is looking to have 800 stores in operation within the next seven or eight years, according to Mr. Stack. This year, the company plans to open 44 Dick’s stores and 10 Golf Galaxy units. The 15 Chick’s stores in California are expected to be flying the Dick’s banner by the end of next year.

Dick’s comparable store sales for the first three months of the year dropped 3.8 percent versus the same period in 2007. The chain expects numbers for the second quarter to be off between four and seven percent compared to a nearly six-point increase last year.

Discussion Questions: Is it a smart move for retailers such as Dick’s Sporting Goods to seek market share gains during periods where consumer purchases have slowed down? Does gaining market share require merchants to sacrifice margins and profits?

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13 Comments on "Dick’s CEO Sees Opportunity in Tough Times"


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Laura Davis-Taylor
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Laura Davis-Taylor
13 years 11 months ago

I agree with Ian. Smart, nimble organizations can take serious advantage of the old school retailers that find change and reacting quickly to the market challenging. But, if you’re going to make a public statement, you’d better be able to make it happen. We’ll be watching!!!

Jane Biddle
Guest
Jane Biddle
13 years 11 months ago
While Dick’s plans to add stores during tough economic times may seem counter intuitive, I would applaud its strategy. This is be an opportune time to price aggressively ala the competition; a simultaneous strategy for expanding private label merchandise should help to preserve revenue, decrease costs, and improve margins. A well executed private label strategy should drive supply chain visibility, supplier performance, and more innovation throughout various product categories. One consideration should be where Dick’s can sell more high margin, low cost store brand products that distinguish them from competing retailers. To do this, they need to ask themselves: How much control and visibility do we have over our sourcing processes and supplier network? How are our lead cycles? How well are our buying teams collaborating with suppliers to develop innovative merchandise? Are our supplier relationships supportive of delivering value (quality products at affordable products) to our customers? How concerned are we about the Dick’s brand tarnishing from an unsafe product recall or unethical factory charges facing a supplier? Making sure Dick’s has systems in… Read more »
M. Jericho Banks PhD
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M. Jericho Banks PhD
13 years 11 months ago
At the risk of profiling myself (see my comments on the Zappos topic today), I’m a heavy Dick’s online shopper. Anything Yankees or KU Jayhawks. I love the company and they love me. Just ordered five pairs of Champion-brand jersey workout shorts from them. My laundry tends to pile up. However, I’m online retailer agnostic. I buy stuff from Champ’s, New Era, Lids, and others. Ian Percy expressed Dick’s challenge best, I believe. They need to think and operate in new ways to gain share. The definition of insanity is doing the same thing over and over and expecting a different outcome. I recently viewed a Dick’s TV commercial that featured the Yankees’ Alex Rodriguez hawking his shoe line. In the commercial A-Rod was wearing a Nike workout shirt that I absolutely had to have. To find the shirt I unsuccessfully searched for it online and then called both Dick’s and Nike with no joy. Their stupid customer service folks had no knowledge of my shirt. A week later I found the shirt on the… Read more »
Ted Hurlbut
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Ted Hurlbut
13 years 11 months ago

A weak economic environment is an outstanding time for a well financed category leader to create even greater distance between itself and its competition. That is when the relative difference in financial strength is often greatest, and the competition is less able to respond. Whether the initiative is in marketing or store design, IT development or in some other area, the result is usually a gain in share that pays off when the customer returns in full force.

George Whalin
Guest
George Whalin
13 years 11 months ago

Expanding during a market downturn is a sound business strategy for a company like Dick’s that’s trying to become the nation’s dominant sporting goods retailer. It’s all about market share. As smaller sporting goods retailers struggle Dick’s can either force them to retreat or go out of business. The question becomes does the industry and the consumer benefit when there are just two major sporting goods chains left in the US?

Cathy Hotka
Guest
13 years 11 months ago

There has never been a national sporting goods chain–and Dick’s might be blazing a trail. They’ll realize benefits of scale in hiring, advertising, and marketing, and their enhanced name recognition will be a huge plus. Kudos to their CEO for thinking ahead.

Alison Chaltas
Guest
Alison Chaltas
13 years 11 months ago

The strategy feels as much a real estate investment strategy as a retailing one. Slow economic times can provide smart windows for retailers with strong cash positions to benefit from other retailers weakness and gain real estate as tag sale prices. We’re now seeing the price of commercial and retail space start to drop. If Dick’s buys in to prime locations over the next 18 months AND if can handle the cash flow implications during this recessionary environment, they will gain share.

Dan Nelson
Guest
Dan Nelson
13 years 11 months ago

This is not a new strategy. Mega retailers like Wal-Mart have focused on growth during tough times by concentrating on reinforcing whatever they can do to best deliver shopper needs. The first thing Dick’s needs to do is assess their existing stores to understand how well they exceed shopper expectations, location by location. Reinforcing to their employees that they are in a growth plan mode is reassuring and will help employees focus on serving their shoppers.

You can grow top line and profits but only by selling more stuff to less shoppers or by attracting more shoppers. It goes back to understanding each market they serve and maximizing their value to sporting goods shoppers, location by location. It is better to fight to win, than to lay back and wait to lose a shrinking customer base in tough economic times.

Lee Peterson
Guest
13 years 11 months ago

Sam Walton once said, “If you see your opponent drowning, don’t throw him a life line, go over there and stick a hose down his throat!” Another expression I’ve heard lately for those fortunate enough to be able to take advantage of slow downs is, “a recession is a terrible thing to waste.”

There’s a lot to either thought in that if you have the wherewithal, down times to everyone else is THE time to push your competitors to the brink. Be it store openings or aggressive pricing, it’s a spot-on blue ocean strategy to be aggressive when all else are retreating.

Dick Seesel
Guest
13 years 11 months ago

There is definitely an opportunity to pick up locations, even at regional malls, if the “box” is big enough for Dick’s and the site is cost-effective. As other panelists have mentioned, Dick’s appears to be in a financial position to take advantage of this growth opportunity, but it must also keep an eye on the ball as far as comp-sales trends are concerned. If sales can be stimulated with new product initiatives, a stronger value message, more national brand advertising and so on–this is a good time to make sure it’s not just about picking up real estate.

Ian Percy
Guest
13 years 11 months ago

When the going gets tough, the tough start thinking in new ways. The worse thing Dick’s could do is simply do more of what they’ve always done. Any time there’s an ‘interruption’ to a system you have the chance to implement new insights and take control of the new situation. This is the time for them to examine assumptions, change how they think, get the energy of their people in alignment…and the results will change accordingly.

I am always amazed at how many retailers actually whine in the media when business is tough. All that does is reinforce the misery and repels potential customers. Dick’s looks at tough times and says “This is our moment!” Makes me think that maybe I should go ahead and get that new putter.

Matthew Spahn
Guest
Matthew Spahn
13 years 11 months ago

I don’t think there is ever a bad time to pursue market share gains, especially in the ultra competitive world of retail. Gaining market share is not necessarily all about reducing margins. Location strategies, competitive blunting, differentiated events and in-store promotions and natural growth momentum are just a few of the waves to ride.

One may argue what better time to capture market share and lean forward when others are sitting back. Most retailers have narrow windows of dramatic growth when they are the darlings of the industry and then they peak either because of store/market saturation or new competitors. Dick’s is on that wave and should capitalize on it, albeit while being fiscally responsible.

Mark Lilien
Guest
13 years 11 months ago

In the past 2 years Dick’s profit and equity have doubled. The stock price rose from about $19 to $22 today. Five years ago Dick’s stock price was $8.30. So they know how to grow profitably.

The more new stores they open, the more their comps will suffer though, since they’re already in more than 30 states with 300 stores. Allegedly the company started as a bait shop with $300 in capital.

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