Newton’s Third Law of motion says “for every action, there is an equal and opposite reaction”.
As I read reports from retailer Dick’s Sporting Goods’ recent participation in Goldman Sachs Retailing Conference, part if me wonders if Dick’s Chairman Ed Stack had fully considered that concept.
To have taken the kind of “virtue signaling” actions he’d taken regarding the company’s policies on gun sales, he would have needed to have been operating in a vacuum to have expected that not to have kicked off a firestorm.
A vacuum is a requirement for Newton’s laws to work as advertised.
Despite Stack’s continued insistence that Dick’s had considered the certainty of a pushback from outraged customers, he told Goldman attendees that their 3.9 percent drop in same-store sales this year was enough to put the company’s 25 Field & Stream stores across 18 states in jeopardy.
Yep, seems that while Stack doesn’t regret the decision, he’s realized fact that manufacturers and customers aren’t getting over their anger over his having not only changed the store’s policies on gun sales, but having hired gun-control lobbyists to push for stricter gun laws.
Outraged former customers have, indeed, taken their business elsewhere- including places where they can still buy guns Mossberg, Springfield Armory, Inland Manufacturing and others. They’re among several companies that severed relationships with both Dicks and Field & Stream last May, after Dick’s was expelled from the National Shooting Sports Foundation for “conduct detrimental to the best interests of the Foundation.”
According to reports from the Goldman conference, Dick’s will “assess the situation through the holiday season”. At that point, Stack says, “we will make a decision about what we’re going to do with Field & Stream.”
From a business standpoint, what Stack did should have been career suicide. But Stack’s in a unique position- he owns more than half of Dick’s voting stock. Essentially, he can make virtually any move he pleases. Otherwise, this single action would have landed most CEOs in the next day’s dumpster.
But anyone who underestimates Mr. Stack’s business acumen might be looking in the wrong direction. What if he’s seen the upside of the downside and is using guns as the scapegoat for dumping 25 Field & Stream stores he’s already admitted have dragged down overall performance?
In a 2017 earnings call, Stack seemed to be criticizing his decision to open the F&S stores, when he told analysts that “what’s been weighing on this industry has been the hunt business.”
Now, with overall sales lagging, he may once again be using the impact of “virtue signaling” as a way to use a turndown to his long-term advantage.
When he made the announcement to take AR-style rifles out of the stores, I wrote that his ideological decision might actually made good sense for a brick-and-mortar retailer whose survival depended on appealing to as many potential customers as possible.
Guns, from a P&L standpoint, are low-margin products, carrying the obligation of burdensome required paperwork and heavy security requirements. Retailers generally use them to attract shooters and hunters in hopes they’ll lead to more lucrative purchases, including shooting accessories. Guns were, in fact, one of the reasons cited by Mr. Stack for Dick’s success during the “boom” of the Obama years.
In a slower demand time, taking the space dedicated to guns and ammunition - while keeping some of the more broadly-popular accessories, would reduce record-keeping, lower potential liability - and free up space for higher margin products.
There’s very little liability attached to leotards and athletic shoes, and compared to firearms, profit margins are many times higher. Plus, these products don’t alienate “social justice warriors” who quickly take their perceived wrongs onto social media.
Guns, it seems, trigger those responses to near-hysterical levels.
What if you could “virtue signal” to those customers, endure some short-term pain, and turn them into a long-term customers?
After all, there are many more potential customers for yoga pants than rifles, pistols, or shotguns. And those same customers who aren’t the least bit reluctant about making their feelings known to anyone who will listen.
There’s little doubt- by Edward Stack’s own comments- that Dick’s is feeling the impact of their decisions regarding guns. But once you begin peeling away the layers of this business onion, it’s easy to see there may be a long-term game associated with what many have presumed to be a knee-jerk reaction.
Should the decline in sales continue, Stack, who apparently has some political aspirations- could make a compelling case that he’s a man who follows his conscience, despite the personal and processional costs. And he could also get rid of more than two-dozen locations that haven’t met expectations - along with their nettlesome customers.
He’s not talking- nor is anyone at Dick’s or Field and Stream, but we’re watching- and we’ll keep you posted.
—Jim Shepherd
