This article was published by The McAlvany Intelligence Advisor on Monday, April 23, 2018:
Dick Stack opened his first store – a “bait and tackle” fishing supplies store – in Binghamton, New York in 1948. By the time his son Eddie was born in 1955, Dick had grown the business to include general sports merchandise, and by the early 1960s he built his first store, calling it “Dick’s Sporting Goods.” When son Eddie entered the business in 1977 they had two stores. Eddie had a knack, and the business grew. Dick let Eddie take over the business entirely in 1984 (Eddie was 29) and the two-store business became a chain operation by the early 1990s.
Today the business has 800 stores mostly in the Eastern United States, and owns and operates a golf specialty retailer, Golf Galaxy, True Runner and Field & Stream (no relation to the publication). Its Sports Authority and Golfsmith operations went bankrupt in 2016 and 2017, respectively. The business turned Eddie into a billionaire.
And, apparently, a liberal. When the Parkland, Florida massacre took place in February, Eddie issued a press release saying that one of his stores had sold a shotgun to the perp although he didn’t use it in the massacre. But Eddie used the incident as a reason to stop selling so-called “assault” rifles – semi-automatic (one squeeze, one shot) rifles at his primary outlets, numbering about 650 at the time. He said:
We support and respect the Second Amendment, and we recognize and appreciate that the vast majority of gun owners in this country are responsible, law-abiding citizens.
But we have to help solve the problem that’s in front of us. Gun violence is an epidemic that’s taking the lives of too many people, including the brightest hope for the future of America – our kids.
To most observers, the move didn’t make any sense. He had built an enormous base of loyal customers, many of them firearms owners. Why would he deliberately, intentionally disenfranchise them? Eddie knows the numbers: 40% of the 126 million households in American have at least one firearm. The NRA has five million members, with another 10 million claiming membership but not paying them dues. There are other pro-Second Amendment groups – Jews for the Preservation of Firearms Ownership (JPFO), Gun Owners of America (GOA), the Second Amendment Foundation (SAF), and the National Association of Gun Owners (NAGO) – with additional hundreds of thousands of members. Each of them has some purchasing power, which when added together totals into the billions of dollars. Why would Eddie offend them with his anti-gun stance?
Last week he went beyond, announcing that any of the now-forbidden “assault” rifles that his stores had in inventory would be destroyed and the remains sold for scrap. He could have redeemed himself a little if he had instead announced that he was going to give the hated objects away to local police departments or security agencies. That could have salved the wounds of some of his offended customers. Or he could have simply returned the firearms to the wholesalers or the manufacturers, paying a restocking fee.
But no. He had to rub salt into the wounds. Eddie’s spokesman told eager anti-gun media that “We are in the process of destroying all firearms and accessories that are no longer for sale as a result of our February 18th policy change.”
The closer one looks, the less sense such a move, or moves, makes. According to the FBI, rifles of all kinds – including bolt-action and semi-automatic – were used to commit 374 murders in 2016, while “knives or cutting instruments” were used to commit 1,604 murders that year. The FBI also noted that handguns were used to commit 7,105 murders in 2016, and Stack’s Field & Stream chain of stores continues to sell both “tactical knives” along with handguns.
It gets worse. In March, Eddie admitted that his move would cost his company dearly: he admitted that February’s decision was “not going to be positive from a traffic standpoint and a sales standpoint. There are going to be people who won’t shop us anymore for anything.”
He got that part right. Which raises still another question: why would Eddie pick this particular time to offend millions of his customers. His company’s stock has been under terrific pressure, dropping from the low $50s a year ago to just over $30 a share last week – a loss of 40 percent. Why, investors, had they known better, could simply have purchased the SPX a year ago at $2,374 and enjoyed the ride: on Friday the SPX closed at $2,670, a nice 12 percent gain.
The NRA thinks something is up with Eddie’s mental state, tweeting “DICKS decision isn’t focusing on the actual problem, what it is doing is punishing law-abiding citizens. What a waste, and what a strange business model.”
A strange business model indeed. What sensible, normal business owner would risk damaging, perhaps fatally, his business by deliberately, intentionally, and loudly proclaiming that he doesn’t want his customers’ business anymore? Eddie, by all accounts, is a billionaire. At least he was when his stock was in the 50s.
The next board meeting could be very interesting. There is talk of lawsuits against the company for destroying company property. There is likely talk of removing Eddie from the presidency, and putting someone with some common sense in charge. After all, Eddie has had a good go at it since 1984; he’s now 63: time to put this bad boy out to pasture, put someone with a brain in charge, and do what they can to resurrect the good feelings Eddie so caustically damaged among their customer base.
As for investment advisors, they have put a “hold” on DKS to see what happens next. A “sell,” or maybe in a “sell short,” might be more in order if the board allows Eddie to hang around and continue to destroy his company in order to make a point.