Golf and hunting might be part of America’s DNA, but U.S. consumers seem to be spending a lot less money on those activities now.
Just ask Dick’s Sporting Goods (DKS).
The sports equipment retailer reported on Tuesday that comparable sales last quarter would have risen 7.8% instead of 3.2% had it not been for these two shrinking categories, which generate nearly a third of its revenue.
Sales of hunting equipment, which includes rifles, ammo, and semi-automatic rifles (but not automatic weapons), fell by a “high-single digit” percentage, but the retailer expects that part of its business to stabilize by the end of the year.
The bigger problem is golf, which the company believes is on a permanent downward spiral. Comparable sales at its Golf Galaxy chain of stores fell 9.3% in a decline that is accelerating. (They fell 7.1% in 2013, after healthy growth in 2012.)
“Golf continues to be our most challenging business,” Dick’s CEO Ed Stack told analysts on a call.
No kidding. According to the National Golf Foundation (NGF), golf course closings outpaced golf course openings in 2013 for the eighth straight year, hurt by young people’s lack of interest in the sport and the absence of a winner with the superstar wattage of a Tiger Woods. Other brands are feeling the same pain: Nike (NKE) recently reported sales of golf gear were flat last year, after rising 9% a year before. And Dick’s sees no relief in sight.
“Golf from a participation standpoint, and how it translates to retail, is in a structural decline. And we don’t see that changing,” Stack said.
What has hurt Dick’s has been golfers’ slow embrace of improvements to equipment, its declining popularity and a glut of inventory in the market after retailers over ordered even as industry sales fell apart.
So Dick’s announced some major steps to adjust its business: it is cutting jobs in the golf sections of its stores (it staffs PGA and LPGA pros at its stores), reducing the space it allocates to the sport on its selling floors and cutting golf-related jobs at its headquarters. Stack said Dick’s will stay in the golf business, but it will have a much smaller presence in the future.
Any heat Dick’s got from golf last quarter was obtained at the expense of its profit margin. This spring, for instance, Dick’s was selling drivers that were priced at $299 two years ago for $99. Executives said Dick’s simply can’t afford to sacrifice its profit that way over the long term.
It’s a stunning turn of events for a retailer that has long put golf at the center of its business. And it also comes at a time Dick’s has been spending money to roll out bigger, glitzier Golf Galaxy stores. (There are about 558 Dick’s stores and 84 Golf Galaxy stores.)
As for hunting gear, the decline is more arithmetic than anything permanent. After the Sandy Hook elementary school mass shooting in 2012 and other similar sprees in 2013, gun sales soared for nearly two years over concerns among gun owners about the prospect of stricter gun laws. The company expects sales trends to be back to normal in the fourth quarter.