Is Dick’s Sporting Goods smart to wait on more retail failures before opening new stores?
Believing lease costs are heading south, Dick’s Sporting Goods earlier this week said it was “significantly” reducing new store openings in the years ahead.
“What we see with so many stores that are closing or purported to close or you expect will close, there is going to be just a flood of real estate in the market,” said Ed Stack, CEO, on the company’s first-quarter conference call. “Our view is that we should not be opening a whole lot of stores right now because we’re going to pay a higher rent today than we would two or three years from now.”
In 2017, the company expects to open approximately 43 Dick’s locations, of which 19 are former Sports Authority locations. In 2018, Dick’s will open between 15 to 20 as leases for most have already been signed. In 2019, Stack expects “as few as five to 10.”
He said the company is already starting to see prices come down and “we believe this trend will only accelerate in all true A malls.”
Mr. Stack stressed that its new stores “continue to perform very well” with first-year store productivity in excess of 90 percent. The company is not planning to close any within its fleet of more than 690 stores, which he said are “in great shape from a profitability standpoint.”
Mr. Stack also said Dick’s has a “tremendous amount of flexibility“ within its existing real estate portfolio to rework leases in the years ahead.
The move to slow its store growth — along with efforts to streamline its vendor base and reduce its use of traditional advertising — enabled the company to reduce 160 positions in the quarter, primarily from its store support center. The savings will be reinvested in digital, e-commerce, marketing, its Team Sports HQ high-school outreach initiative, and in further developing its private brands.
Mr. Stack remarked on the company’s slowed expansion decisions. “We’re very patient about our business; we’re very investment minded. And Wall Street doesn’t necessarily like this, but we’re really making investments and taking strategies; putting strategies in place for the long-term benefit of the company, not necessarily for the next quarter or two.”
- Dick’s Sporting Goods Reports First Quarter Results – Dick’s Sporting Goods
- Dick’s Sporting Goods First Quarter 2017 Conference Call – Seeking Alpha
DISCUSSION QUESTIONS: How should retailers alter their real estate strategies to adjust to rampant store closings in the near and long term? Should retailers hold off on expansion for the time being?