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Sporting goods retailer Dick's Sporting Goods (NYSE: DKS) is having a tough year. As of Oct. 16, the stock is down 35% over the last six months. August's third-quarter report played a leading role in the drama, as the company posted weak results across the board with a side of gloomy near-term guidance.
Warehouses are bulging with unsold footwear despite aggressive promotions. The Foot Locker acquisition proved to be a difficult integration story, especially amid a footwear slowdown. Soaring fuel prices are weighing on Dick's margins and consumers are nervous in North America and Europe.
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So I get why the stock is down, trading at the bargain-bin valuation of 0.6 times sales and 16 times trailing earnings. But I also see one robust reason to believe in the company's turnaround efforts.
The strongest long-term advantage for Dick's is its transition toward the "House of Sport" retail destination model.
By turning stores into massive hubs equipped with batting cages, climbing walls, and specialized service areas, the company has built a highly premium, interactive experience. You can't get this vibe online.
Because dedicated athletes want to physically test their gear before writing a check, the "House of Sport" concept gives Dick's a structural moat that mass-market retailers and e-commerce giants like Amazon and Walmart cannot easily replicate.
I'm not saying the "House of Sport" makes Dick's stock a no-brainer buy today. The company still has work to do with the Foot Locker integration and macroeconomic challenges. But the stock deserves a second look when you pair the promising physical experience hub with modest valuation multiples.
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Anders Bylund has positions in Amazon and Walmart. The Motley Fool has positions in and recommends Amazon and Walmart. The Motley Fool has a disclosure policy.
1 Reason Dick's Sporting Goods Is Worth a Second Look This Month was originally published by The Motley Fool
