DKS
#I think right now I would say it's probably not, as you launch a new platform like this you've got natural surge that needs to reset, we've got some things that we need to continue to do, improvement from a functionality of the site.
So in 2017 I would say probably no going forward.
After that, I think, or the back half of this, I think you'll start to see we're probably confident of what we can do from an e-commerce standpoint.
We are looking through that.
We're not ready to provide all of that as we're still going through some of these conversations with some brands.
We've had a number of brands that we've had these conversations with.
We've come to an agreement on where they're going to be from a strategic standpoint, a transactional standpoint, or there's some of them that are going to be eliminated.
But how that all flows through yet, we're still working through that.
But we've got a model that we are confident that we can meet or exceed.
Yes.
You've got less competition out there.
Yes, definitely.
What we're going to do from a, how enthusiastic we are about team sports headquarters and these technologies of Blue Sombrero, Affinity and GameChanger that we acquired, and we think this is, there is a big unlock here that we are working through.
Still the ---+ so what we expect is as we continue to grow the business that the shipping costs are going to become a bigger piece of the expense structure as the business becomes a bigger piece of the entire business.
We're looking at ways at how we might be able to slow those shipping costs, and we're working through those.
But to kind of call out the profitability of e-commerce versus the profitability of the store, we are not ready to do that.
But I will tell you that the e-commerce business is probably more profitable than you think.
I think a big piece of what we're doing are two things.
The vendor consolidation that we've implemented and re-looking at our vendor structure, and what segment a vendor is in, and then what rights or privileges those vendors have inside our business, the investments we're going to make, the investments they are going to make.
And then also, what we're going to be doing from a private brand standpoint.
We have gotten much more aggressive with private brand.
You can see what we've done with CALIA.
Field & Stream has been great from a private brand standpoint.
One of the biggest issues that we have going forward ---+ biggest opportunities ---+ is private brand, and we are investing very heavily in them.
From an infrastructure standpoint, you're going to see more marketing of these, and over the next few years you will see our private brand business grow pretty dramatically.
Yes, we are happy with that.
We think if some of this additional consolidation happens, we're in a great position to pick up a significant amount of that market share, whether it be at Dick's or Field & Stream, the same way as we were able to pick up, and we think we can pick up market share in the golf business when Golfsmith has gone out and both Golf Galaxy and in Dick's.
So we like the position we're in.
This industry is a bit more difficult right now.
We think it's going to continue to be that way on a macro basis, but we do expect some consolidation.
And if that happens, we are in a great position to pick up that market share.
I actually think toward the back half of the year that could be a good business for us.
But we're not planning on that right now.
Sure.
Shocking.
(laughter)
You won't see as many of them in the spring assortments as you will toward the back half of this year.
We've been talking about this for quite awhile.
And as we have talked about this, done this analysis of the business, and we decided we've got to pull the trigger and we've got to do this.
And it's difficult to do.
Is difficult to tell people that you've done business with for a long time that we're not going to do business going forward.
So this is something we've been talking about for awhile, and based on what's going on in the industry today, we felt this was the right time we had to do this.
So we're not going to guide to that right now.
We're still working through this.
We're still working through some vendor agreements, and how we're going to do this, and how we're going to either ---+ our private brand business, how we may come create with some brands product, but this has definitely been the right thing for us to do.
Every vendor is a little bit different and every category is a little bit different, but you should look at that we will get some combination of ---+ and this is a two-way street ---+ so we are also investing also.
We are providing them additional square footage.
We are investing with them to be a bigger part of our marketing campaign.
But you should look at this as it's around pricing, it's around discount, it's around marketing, it's around in-store presentation.
So this is not a one-size-fits-all, and every category and every vendor would be different.
We'd be looking for something different from, somebody in the golf business might be different than what we'd be looking for from someone in the baseball business.
But this has been pretty successful out of the gate, and as you can imagine, the vendors that are going into that strategic bucket are very excited about it.
Great, thank you.
Well, we're not going to get into the economics around this right now.
But the way this works is, leagues will sign up on our platform, whether it be a Blue Sombrero, the governing bodies sign up on our platform which is Affinity.
And then GameChanger is an interactive application that, primarily baseball right now, but is going to be broadened out to other sports.
And they interact with this, we're able to understand who is doing what, who is playing what sport, and be able to market to them.
I thought there was a great comment when we were looking to buy GameChanger with their CEO, who said, I don't remember exactly the number of teams, but they've got an awful lot of teams, and said, I know everybody in Little League that bats cleanup.
I know in high school baseball almost everyone who plays the position of catcher.
So we can market to them that particular way.
And it's a great database that we have only begun to mine.
So there's still a lot to do.
But we can get to that level of detail with people, and these young athletes that I think we will be able to serve them better, and we will be able to provide them what they really need.
Who are you using.
They're both terrific companies.
As you can imagine, the closer our store was to a TSA store, the better it did.
And the further away, then not as good as the one that was close.
We've got a transaction data for all of their business down to the SKU level.
So we can target by store from a marketing standpoint and we can target by store from an assortment standpoint to better serve those athletes.
Well, as we have taken a look at that, we've done a deep dive into not only our business, but some of the businesses that have consolidated.
And we took a hard look at this and said, we've got to make sure that we don't have symptoms of the disease that these other companies atrophied from and died.
And some of the things that we looked at that they had issues with is they had extremely high debt, private equity owned, high debt.
They didn't invest in their e-commerce business the way that we've invested from an e-commerce standpoint.
They did not invest from a product development standpoint the way that we have across, not only good, better, and best categories of product.
They also did not invest in their stores, and they also had a constant revolving door from a leadership standpoint.
And as we looked at these, we don't have any symptoms of those disease.
We have no debt, we continue to invest in our e-commerce business pretty aggressively, and you've seeing the growth there.
This past year our e-commerce business was almost $1 billion.
As we take a look at what we're doing from a PD standpoint, our PD business is going to be roughly $1 billion.
We expect margin rates to expand.
We've developed great partnerships and relationships with the vendors that the others didn't.
So is this a great industry right now.
I think it really is a very good industry that there were some weak links and some companies that couldn't survive.
And I think you're seeing this in some other retail industries too.
So I don't think this is something that we get caught up in.
As long as we continue to run and manage our business, which is why when this whole thing happened, we didn't take a lot of time to ---+ we didn't take time to celebrate, we said, okay, let's do a thorough review of our business and make sure we don't have symptoms of this disease, which is why we've gone back and we did ---+ we've redone the vendor structure and took some of these charges to clean out a little bit of the issues to make sure that we don't have these issues going forward.
Thank you.
No.
It's all behind us.
At some point it would just depend, from a fulfillment standpoint if we developed our own fulfillment center, but other than that, I don't think so.
And we've got a terrific fulfillment partner right now in Radial and we're very happy with them.
This year, we anticipate putting an additional $50 million into that building.
I don't think we're going to guide specifically on those basis points right now, but we do think it will be up somewhat in total for the year.
We do expect merchandise margins to expand.
Actually, I don't think we get there this year, but we are very agnostic as to where they shop.
We just want to make sure they shop with us, whether it be in the store or online.
But the store right now is still a bit more profitable than the e-commerce business, and we expect that to continue throughout the year as we continue to heavily marked this because of the new site.
With a new site, you've got to treat it with some tender loving care.
And we've got some investments that we're going to make there from a marketing standpoint, infrastructure to make sure that we do that.
It would be safe to make that assumption.
We don't think it's gone either.
We think there are still opportunities.
As I said, we've got the data that we were mining in the third and fourth quarter, we're much better at it going forward.
We think that there is still more market share to get.
And, as we said, we think there's still more consolidation to happen in this industry.
The consolidation is not done.
Sure.
Thank you, you too.
Not a lot of difference.
We are a destination retailer.
We don't need the mall traffic to drive our business.
We are a destination.
We actually help the mall traffic, so there's no real difference.
Not MC.
Yes, too small.
No, nothing there.
I would like to thank everyone for joining us on our fourth quarter earnings call, and we'll look forward to seeing everyone when we report the first quarter.
Thank you very much.
