The past five months have not been kind to retail. In the course of the coronavirus pandemic, dozens of well-known retailers have filed for bankruptcy, and that list could grow as the year drags on. Of course, some of these retailers won't be gone for good; they'll simply reorganize. But there's one thing we can expect to come out of these bankruptcies: store closures.
It's estimated that more than 13,800 stores are closing in 2020, and some of those include big names like J.C. Penney (OTC:JCPNQ), which plans to close 154 stores in the near future. In fact, not only are big names closing up shop, but they're taking large spaces with them. J.C. Penney is just one of several department stores looking at closures.
All of this is very troubling news for real estate investors -- particularly those who invest in retail REITs as well as the physical locations of retailers. In fact, shopping malls in particular stand to get battered as the result of all these closures, especially as department stores, which traditionally anchor malls, start to become increasingly obsolete.
It's for this reason that many real estate investors are looking to Dick's Sporting Goods (NYSE:DKS) as a ray of hope amidst the darkness of a retail apocalypse that may be upon us sooner than expected.
Some positive news from a solid retailer
Dick's Sporting Goods had a killer second quarter this year, defying Wall Street's expectations. Despite the fact that many consumers have been cutting back during the COVID-19 pandemic, Dick's crushed it on revenue, reporting $2.71 billion versus the $2.46 billion Wall Street anticipated. And net income for the quarter ending Aug. 1 grew a whopping 148% to $276.8 million, compared with $112.5 million a year prior. Earnings per share also came in at $3.21, well exceeding the $1.30 analysts were initially predicting.
What's also encouraging is that Dick's Sporting Goods managed to reopen all of its stores during 2020's second quarter and that it saw same-store sales increase 20.7%. Of course, it wasn't just store-based sales that blew Wall Street away. The retailer said second-quarter online sales jumped a whopping 194%.
Of course, when we take a deeper dive, it's easy to see how Dick's did so well despite the ongoing pandemic. Being a sporting goods retailer, it was able to capitalize on the fitness trends that have been prevalent throughout the COVID-19 crisis. Let's also remember that youth sports are still going strong in many parts of the country and that Dick's Sporting Goods carries an extensive line of apparel and equipment for kids. And more adults have been pursuing outdoor athletic activities since the pandemic began, since that's a safer way to stay fit than working out in a shared indoor space.
As such, Dick's Sporting Goods might be somewhat of an outlier, and it may not represent the future of the typical retailer. But right now, its positive second-quarter earnings and store reopenings are a good sign for real estate investors. Dick's is a larger store with a substantial mall presence, and the fact that consumers are still flocking to it gives hope that the retail apocalypse may still be a ways off.