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Coming to a Vacant Retail Space Near You: the Sports Superstore With a Better Revenue Growth Than Wal-Mart (Most of the Time)

If you don’t have a Dick’s Sporting Goods (DKS) store near you now, you might soon. The Pittsburgh company has 500 stores, plus 81 Golf Galaxy stores. But it wants to open another 400 stores.

This month it opened a store in Huntington Beach, California (impressing this enthusiastic columnist), among other places. And it’s a good time to be snapping up recently vacated space. It held another recent opening in a former Sportsman’s Warehouse in Las Cruces, New Mexico.

Dick’s is a onetime bait and tackle shop that went from a two-store chain to its current form run by the founder’s son. It now sells running, golfing, fishing and other outdoor or athletic gear. It’s like an outdoorsy or athletic department store that usually has with five specialty departments in each store. A typical Dick’s has a golf shop, footwear center, fitness center, hunting and fishing “lodge,” and team sports area. It’s into interactive shopping, as shoppers can take a test run, swing clubs in an indoor driving range, or shoot bows in an archery range. The cycle section has a work area for mechanics.

You might even call it a Lululemon (LULU) for people who would rather be fishing than doing yoga. It doesn’t have Lululemon’s sky-high PE ratio, but investors are still treating it like a growth stock. Dick’s earnings trade at a 50% premium to competitor Wal-Mart’s (WMT).

DKS PE Ratio TTM Chart

DKS PE Ratio TTM data by YCharts

Is it worth that lofty valuation? Dick’s has definitely delivered for long-term investors.

DKS Chart

DKS data by YCharts

And it has kept up well recently.

DKS Chart

DKS data by YCharts

The company likes to mention its gross profit margin, which has had trended upwards.

DKS Gross Profit Margin Chart

DKS Gross Profit Margin data by YCharts

But the key is revenue growth, and that’s driven by same-store sales and store openings. In terms of openings, it had 294 stores at the end of fiscal 2006, 392 stores in August 2007, and 571 total stores at the end of last quarter. It has started to ramp up openings after a few slower years during the recession. As for same-store sales, those have been volatile. Last quarter, same-store sales were up 3.8% last quarter vs 2.5% a year earlier. Customers spent 4% more, on average, but made 1.1% fewer transactions.

Same-store sales fell during 2008 and 2009, rebounded up 7.2% in 2010 and fell to 2% last year. In the first half of this year, they were up strongly (5.2%), with increases in golf, team sports and hunting. But they posted a decrease in fitness sales.

In short, revenue growth is chugging along -- better than Wal-Mart most of the time, but not all of the time.

DKS Revenue Quarterly YoY Growth Chart

DKS Revenue Quarterly YoY Growth data by YCharts

If that slows again, Dick’s investors might want to reconsider that generous PE.

From the editors of YCharts.YCharts Pro Investor Service includes professional stock charts, stock ratings and portfolio strategies.

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