Retail

Dick's Sporting Goods is turning to women to fuel its turnaround

Key Points
  • Shares of Dick's Sporting Goods are up more than 30% this year, with more investors betting on a successful turnaround.
  • The company has been strengthening its relationships with top brands such as Nike and Adidas, and also growing its private labels, which is where women are becoming a bigger focus.
  • Dick's Sporting Goods last month launched a new brand, DSG, and its Calia women's brand is about to celebrate five years in business.
  • The company expects its private brands to reach $2 billion in sales "over time."
Nike athletic wear is seen on mannequins displayed at a Dick's Sporting Goods store in Daly City, California.
David Paul Morris | Bloomberg | Getty Images

CORAOPOLIS, Pa. — Dick's Sporting Goods might be best known as the place for a Little League Baseball coach to stop in for new gloves, a high-school basketball player to buy sneakers or an amateur golfer to pick up a new putter.

But the sporting goods retailer, now the last national player left standing and so a category killer in its industry, wants more women to shop there, realizing it's always placed a bigger emphasis on men. To do this, it is making sure it has the products women are looking for.

"We've been somewhat maniacal with the brands about a lack of product assortment for girls and women. ... We get a lot of complaints, understandably, from either girls or parents of girls who don't feel like when they go into the store there's enough product at all levels ... and product for them," President Lauren Hobart said at the Goldman Sachs Global Retailing Conference earlier this month.

"We've got our own private brands that we're trying to [use to] address the issue ... and we're doing everything we can to get the [national] brands to meet it," she said.

The effort comes as Dick's Sporting Goods is beginning to pull itself out of a sales slump. Sales at stores open for at least 12 months were up 3.2% in the latest quarter, following seven consecutive quarters of either flat growth or losses. A successful attempt to woo more female customers could help boost the business overall, and keep it growing.

Shares of Dick's Sporting Goods are up more than 30% this year, with more investors betting on a successful turnaround. The company has been strengthening its relationships with top brands such as Nike and Adidas and adding more touch-and-feel opportunities in stores. It's also growing its private labels for apparel and accessories, which is where women are becoming a bigger focus.

The company has said it expects its private brands to reach $2 billion in sales "over time." Overall, Dick's Sporting Goods brought in sales of $8.4 billion in 2018, down about 1.8% from the prior year.

A portion of that growth stems from Calia, a women's brand Dick's Sporting Goods launched nearly five years ago. It is now the No. 2 women's apparel brand in stores, based on sales. And then there's DSG, an in-house brand it launched last month, that includes an expanded women's line.

"I think we've always had women in mind ... but within the last two years it has been an overt conversation about women being at the forefront," Carrie Guffey, vice president and general merchandise manager of footwear and women's athletic apparel, said in an interview. "I think the national brands certainly are acknowledging there is a level of sophistication right now trending in the marketplace."

Calia, one of Dick's Sporting Goods top-performing brands for women, is approaching five years in business.
Source: Dick's Sporting Goods

Female customers, and especially female athletes, are more "sophisticated" because they like to shop across a variety of brands, rather than sticking with one favorite, she explained. The landscape is also nothing short of crowded, giving women plenty to choose from.

So as Nike, Under Armour and Adidas are making their own investments to improve their women's products — promising better fit and speaking directly to them in marketing campaigns — Dick's Sporting Goods is doing more of the same. It's also competing with the likes of Lululemon, Outdoor Voices, Alo Yoga, Bandier and Gap's Athleta — all of which are targeting the health-conscious woman who wants something chic to wear to the gym, a workout class with friends or just around town.

Activewear, for both men and women, represents a roughly $57.6 billion market in the U.S., according to NPD Group's Consumer Tracking Service. And activewear has been one of the fastest-growing segments in apparel over the past few years, NPD Group says.

Wooing women with in-house brands

As Dick's Sporting Goods leans more heavily into its in-house brands, customers will start to notice some changes in stores.

After an apparel contract with Reebok came to an end, that portion of each store is being replaced with Dick's Sporting Goods' own DSG products. In addition to options for men and kids, DSG also sells women's athletic wear, such as leggings, tank tops, pullover jackets and sports bras, and in plus sizes.

Following a better-than-expected August launch, the company says it plans to expand upon the brand and potentially devote even more space to it in stores.

Within the DSG line, a pair of women's fleece jogger pants retails for $35 and a printed compression sports bra for $25. The brand is a slightly more affordable option than Calia, where a pair of leggings can go for upwards of $70, putting that brand more in line with Lululemon and Athleta on pricing.

This spring, the Calia brand, designed in part by singer-songwriter Carrie Underwood, will celebrate five years in business. And Guffey explained the company no longer thinks of Calia as a "secondary" brand, but that now it's just as important to each Dick's Sporting Goods store as the Nike and Adidas merchandise sitting on shelves.

"The fitness category is massive," Guffey said. "Calia ... is the umbrella to the story around how we see our fitness business growing. Our confidence heading into the five-year anniversary is growing."

Calia is in all Dick's Sporting Goods stores today. And the company says it's been increasingly devoting more square footage in stores to Calia, which it says is lifting the entire women's athletic apparel business, creating a "halo effect" for even the brands around it.

Dick's Sporting Goods launched its new DSG brand, which includes a women's line, in August.
Source: Dick's Sporting Goods

The success of Calia's rapid growth, and constant evolution, is owed in large part to Nina Barjesteh, who joined Dick's Sporting Goods from Target, where she spent more than two decades, most recently helping the big-box retailer grow its in-house clothing brands for women. And Target's private labels, such as C9 Champion and Xhilaration, have been successful in cementing the company as more of a fashion destination than its peers.

With private brands, "we control our own destiny, we own the supply chain, we are adding newness more often in Calia ... we can do whatever we want," said Barjesteh, senior vice president of product development and global sourcing at Dick's Sporting Goods.

"In women's, you have to be agile," she added. "To be able to say: This is up-trending, this is down-trending."

Promises of more to come

Analysts are taking notice of Dick's Sporting Goods' bigger private label ambitions, with some applauding these efforts.

"Private-label products give Dick's Sporting Goods an extra degree of control when it comes to pricing decisions," Susquehanna analyst Sam Poser said, adding that margins for private brands are 600 to 800 basis points higher than Dick's Sporting Goods selling branded merchandise.

Part of the push internally has come from Dick's Sporting Goods admittedly filling gaps within its business. Part of it is because some national brands are pivoting to sell more directly to consumers, bypassing wholesale channels.

CEO Ed Stack said Dick's Sporting Goods' private brands as a group outperformed the company average during the latest quarter. And CFO Lee Belitsky said on a call with analysts in August that about 14% of sales came from private labels in 2018, "and it continues to improve a little bit." The company doesn't break out sales of private labels, or its private brands penetration rate, on a quarterly basis.

For Dick's Sporting Goods' ambitions with women, Calia offers a good barometer for what the company can accomplish. It's managed to scale Calia to all of the company's stores in less than five years, and Calia is now one of the retailer's top private brands.

Internally, Guffey said about three months ago Dick's Sporting Goods formed what it calls a "women's attack team," which is dedicated to brainstorming ways to reach more women.

According to Barjesteh, more in-house brands are in the works.

Guffey also said to expect a bigger marketing push, highlighting women, in 2020. The company hasn't broken out how much it plans to spend on these efforts.

"The plan is to next year really focus on her — lead with her," Guffey said. "It's about us staying with her throughout her life. ... That really kicks off next year."

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