Dick’s Sporting Goods: Gross Margin Expansion Likely

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Canaccord Genuity consumer analyst Camilo Lyon reiterated his BUY rating and $50 price target on Dick’s Sporting Goods (DKS) says the company is poised for a solid 2012 as gross margin expansion opportunities abound.

Mr. Lyon estimated the net earnings per share benefit of gross margin expansion in 2012 could be $0.13

Mr. Lyon added that margin expansion was possible because:

(1) Changes in the buying patterns of competitors.

(2) Uncertainty among suppliers regarding the outlook for 2012 is creating buying opportunities by stronger retailers like DKS

(3) Supplier discounts.

He added, “Ultimately, we believe DKS is well positioned to drive solid gross margin expansion in 2012 above the modest 10bps (basis points) that we believe will come from increased private label penetration. In estimating the magnitude of potential gross margin improvement opportunity, we layout a set of outcomes based on the vendor discounts and the percent of purchases subjectto those discounts.”

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