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Sporting Goods. Valuation & Analysis by Wilbur Benitez, Taylor Blaney , Se Kim, & Kevin Pribil. Agenda. Background & Relevant Information Cabelas Footlocker Hibbett Walmart Valuation Cabelas Footlocker Hibbett Walmart Industry Analysis. 1. Background & Relevant Information.

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sporting goods

Sporting Goods

Valuation & Analysis by

Wilbur Benitez, Taylor Blaney, Se Kim, & Kevin Pribil

agenda
Agenda
  • Background & Relevant Information
    • Cabelas
    • Footlocker
    • Hibbett
    • Walmart
  • Valuation
    • Cabelas
    • Footlocker
    • Hibbett
    • Walmart
  • Industry Analysis
cabela s overview
Cabela’s Overview
  • Was founded in 1961 and has been a leader in outdoor gear since
  • Leading retailer in hunting, fishing and outdoor gear
  • Went public in June 2004
  • Market Cap of 4.6B
  • Total revenues of 3.6M in 2013
  • Two main segments
    • Merchandise sales and financial services
  • Currently seeking to expand with smaller stores
    • Traditionally has operated using large “Legacy” stores
footlocker overview
Footlocker Overview
  • Largest retailer of athletic shoes in the U.S.
  • Located primarily in North America, Europe, Australia, and New Zealand
  • 11% market share
  • $6.5 billion in sales in 2013 (73% within U.S.)
  • Develops few products, mostly supplied by a few top-end product manufacturers
  • Operate in two ways:
    • Athletic Stores
    • Direct to Customers
hibbett overview
Hibbett Overview
  • Est. 1945 in the marine & small aircraft market- switched to sporting goods in ’60s
  • HIBB publicly offered in 1996 with 79 stores
    • Currently 873 stores with 4 formats (full service, footwear/headwear, superstore, and customized apparel)
  • Market Cap. $2.2 Billion
    • 2014 Revenue- $852 Million
    • 2014 Net Income- $112 Million
  • Strategy:
    • Close underperforming stores
    • Strengthen high-performing stores
    • Expand U.S. market reach
walmart stores inc
WalmartStores, Inc.
  • World’s largest retailer - $469.2 BN in total revenue
    • Walmart U.S.
    • Walmart International
    • Sam’s Club
  • Business model -> “Everyday Low Prices” (EDLP)
  • 6 strategic merchandise units:
    • Grocery (55%)
    • Entertainment(11%)
    • Heath & Wellness (11%)
    • Hardlines (9%) – Sporting Goods
    • Apparel (7%)
    • Home (7%)
cabela s sensitivity analysis
Cabela’s Sensitivity Analysis
  • Conservative forecast
    • Still an attractive investment
    • Potential for significant returns if sales continue to grow at recent rates
industry facts
Industry Facts
  • Revenue - $42.3 BN
    • Highest expense – Wages at $4.4BN
    • Profit of $1.1BN
  • Split into three sections:
    • Sporting Equipment (46%)
    • Athletic Footwear (34%)
    • Athletic Apparel (20%)
  • Mature industry – yet, expected to grow at 2.3% next 5 years
  • As disposable income rises, the industry is becoming more specialized on a spectrum of sports with an increasing emphasis on fashion
key revenue drivers
Key Revenue Drivers
  • New markets
    • Expansion into emerging & exclusive markets
      • Cabela’s is currently expanding into new markets with “next generation” stores
      • Footlocker is hoping to increase online sales
  • Participation in sports
    • Increased health awareness –> boost sporting goods revenue
  • Customer retention
    • Retaining customers& building a strong brand
  • Consumer Confidence Index
    • Positive financial security; more likely to spend on sporting goods
new markets
New Markets
  • Cabela’s
    • Plan to continue increase of retail space in the next few years
  • Footlocker
    • Trend will continue and we will see additional store closings
  • Hibbett Sports
    • Harder to predict due to size
      • Will be based on company performance
      • Less customer loyalty
participation in sports
Participation in Sports
  • Professional athletes
    • 5% of the market
  • Households
    • American culture promotes sporting activities
selected universe revenue growth
Selected Universe Revenue Growth
  • Cabela’s
    • Higher growth due to expansion plans
  • Footlocker
    • More mature company
  • Hibbett Sports
    • Harder to predict due to size and potential for growth
operating leases
Operating Leases
  • Hibbett Sports and Foot Locker, Inc. both have significant operating leases that are off balance sheet transactions
  • These leases significantly effect the valuation when included in enterprise assets
  • Including leases significantly lowers EATO