By Sam Boughedda
Jefferies initiated sports retailers Dick's Sporting Goods (NYSE:DKS) and Hibbett Sports (NASDAQ:HIBB) with Hold ratings and Academy Sports + Outdoors (NASDAQ:ASO) with a Buy rating in a note to clients on Tuesday.
Jefferies analysts assigned a price target of $155 to DKS, $69 to HIBB, and $73 to ASO.
"Sporting goods retail sales have held up better than expected. In spite of the 'post-COVID' / return to work headwind (in addition to inflation/macro), ASO/DKS/HIBB sales average ~40% over 2019 levels," they said.
They added that sports equipment sales have "rebaselined meaningfully" above post-COVID levels, and they expect low-single-digit percent comp growth for the group in 2023.
"Looking through the noise; power is shifting back to retailers from vendors," argued the analysts. "Toward mid-year 2022, vendors began noting shrinking open to buys, and end-of-summer saw more aggressive inventory adjustments in outdoor categories -- which now are broadly healthy, with overages concentrated to apparel/footwear. Despite this, ASO and DKS have eked out pos. EPS revisions over the past year (+3% and +1.6%, resp.)."
ASO is the firm's top pick in the sporting goods retail sector due to its value-oriented market positioning, best-in-class unit economics, longest unit growth runway, and attractive valuation. Meanwhile, DKS is "best-in-class," but the firm sees few upside catalysts on the horizon, while HIBB is "most at-risk from a rising promotional tide."