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NAT’L – RETAILERS – Did American Outdoor Brands Just Become a Better Buy Than Dick’s Sporting Goods?

The announcement by Sportsman’s Warehouse Holdings (NASDAQ:SPWH) that it has agreed to be acquired by the privately-held owner of Bass Pro Shops and Cabela’s should have investors taking a new, closer look at the sporting goods industry. The coronavirus pandemic changed the dynamic in the space, and as strong as Dick’s Sporting Goods (NYSE:DKS) has been in responding to the evolving needs of the market, American Outdoor Brands (NASDAQ:AOUT) may have just become the better buy. American Outdoor Brands is not to be confused with Great American Outdoors Group, which is buying Sportsman’s Warehouse for $18 a share, a 42% premium from where the outdoor retailer’s stock closed before the announcement. American Outdoor Brands was spun off from firearms maker Smith & Wesson Brands (NASDAQ:SWBI) this past August. With about half the market valuation of Sportsman’s Warehouse and a fifth of its sales, American Outdoor was tasked with making a mark in the $35 billion rugged-outdoors industry. While Smith & Wesson likely made a mistake by diversifying into the space in the first place, the decision to spin it off and become a pure-play gun stock again was smart. That still meant American Outdoor faced some high hurdles to break into the industry. Although it possesses some well-known and respected brands in its portfolio, it’s obviously a bit player (and a relative new one at that) taking on some industry stalwarts. The pandemic, however, has changed the equation. Because one of the few activities open to people during the lockdowns was physical outdoor recreation, American Outdoor was given a big kick-start as an independent company. Sales in its fiscal 2021 second quarter surged 65% from the prior year as e-commerce sales tripled, allowing gross margins to widen by 690 basis points. Dick’s Sporting Goods, which is orders of magnitude larger than American Outdoor, saw sales rise 23% on a 95% increase in online sales. That doesn’t necessarily make Dick’s performance worse, since it’s harder for a significantly larger company to post dramatic growth rates. But it also highlights the opportunities that will be missed after Dick’s decision to abandon a core market that has been ascendant, especially this year.  [full article]

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