Analyst: Dick's might scoop up 180 Sports Authority stores

Dive Brief:

Dick’s Sporting Goods could come away with as many as 180 new stores when bankrupt rival Sports Authority auctions its leases and remaining assets on May 16, according to a forecast issued Monday by investment bank Canaccord Genuity, MarketWatch reports.
Canaccord estimates that one auction would likely garner Dick’s 80 stores right off the bat while the other could yield another 100.
Canaccord says that if Dick's acquires the 80 Sports Authority stores that do not have competitors within a 10-to 25-mile radius, Dick's could gain $500 million in incremental sales. That estimate blows away earlier forecasts that suggested Dick’s could gain some $370 million in sales.

Dive Insight:

At first glance, the bankruptcy and possible liquidation of Sports Authority could be a windfall for Dick’s Sporting Goods, which has many of the advantages in the current sporting goods retail environment that Sports Authority lacked, like a handle on athleisure trends, a more manageable debt load and more nimble e-commerce and omnichannel operations.

But a takeover of so many Sports Authority stores by Dick’s won’t solve another, larger problem—that there are too many sportswear stores in the U.S., according to a note earlier this month from Credit Suisse. The bank looked at of 50 U.S. retail chains and found some 13,400 sports-related chain stores were open last year, up 11% from 2011. There's also competition from Amazon and the big box stores that helped fell Sports Authority.

“Excess store growth has been one of our key concerns, with growth accelerating over the last couple of years,” Credit Suisse analysts wrote in an April 6 note.

In the time since that note, other sporting goods stores have also exited the marketplace. Finish Line is closing stores and regional chain Sport Chalet has closed all stores as its parent reorganizes under bankruptcy protection—which also included closings of some Eastern Mountain Sports and Bob’s Stores.

Still, Dick’s itself is suffering someone from the market saturation, and may not do itself too many favors if it bites off more Sports Authority stores than it can chew.

Details of Sports Authority's struggles emerged earlier this year. News of missing payments to suppliers and a failure to make a $20 million interest payment soon followed, culminating in store closings and employee layoffs.