Will more promos fix Dick’s Sporting Goods pricing challenge?
Dick’s Sporting Goods has a price perception problem. That’s the conclusion of Dick’s CEO Ed Stack who said that, going forward, the retailer would not shrink from the competition but take it head on with more promotions “to drive market share” to the chain’s stores.
Speaking on an earnings call to discuss the chain’s second quarter results, Mr. Stack said, “We’ve conducted extensive consumer research, and the customers have told us they feel our prices are not competitive in today’s environment.”
The perception of high prices was likely a contributing factor to the disappointing 0.1 percent gain Dick’s posted in same-store sales during the quarter, well below the two to three percent gain it had projected. Dick’s share price fell more than 23 percent in trading yesterday on the news.
Dick’s is competing in a marketplace that has been roiled by the closings of major chains such as Sports Authority. Vendors, searching for a means to drive sales, have amped up their own consumer direct efforts while looking for new retail partners such as Amazon.com and Kohl’s to increase points of distribution.
While expressing confidence that Dick’s would benefit in the long term from the disruption in the market, Mr. Stack said the current reality is that “pricing in the marketplace has become unpredictable and at times irrational.”
Last month, Dick’s extended its “best price guarantee” to competing websites as well as stores to curb shopper attrition. Mr. Stack said Dick’s planned to become more promotionally and price aggressive in key regions “where the fight for market share is more fierce.”
Dick’s also intends to push what it sees as its omnichannel advantage.
Stores are the foundation of Dick’s strategy, providing cash flow, which enables the chain to invest in other areas without having to raise capital, according to Mr. Stack. Including stores, Dick’s has over 700 distribution centers to serve customers, he said.
Mr. Stack called the relaunch of dicks.com on a proprietary platform “a great success.” He said Dick’s would continue to invest to offer “faster delivery, better pricing, more targeted marketing” and a better experience overall to its customers.
- Dick’s Sporting Goods’ CEO Ed Stack on Q2 2017 Results (Earnings Call Transcript) – Seeking Alpha
- Dick’s Sporting Goods Reports Second Quarter Results – Dick’s Sporting Goods, Inc.
- Dick’s Sporting Goods Inc. – MarketWatch
- Will Dick’s price match keep it on top of the sporting goods category? – RetailWire
DISCUSSION QUESTIONS: Will increased promotional activity and price matching enable Dick’s Sporting Goods to overcome the consumer perception that the chain’s prices are not competitive? Do you agree with management’s response or do you think there are alternative approaches that may benefit Dick’s more?