Dive Brief:

• Dick's Sporting Goods on Tuesday announced the launch of two new store concepts, Overtime by Dick's Sporting Goods and Dick's Sporting Goods Warehouse, according to a company press release.

• Both concepts are centered in the clearance space. Overtime offers up to 75% off apparel, footwear and equipment from Nike, Adidas, Under Armour and other brands. Warehouse locations feature up to 90% off of "customer-favorite footwear and apparel brands."

• Dick's opened three Overtime locations on Wednesday, with plans to continue operating them "for the foreseeable future," but the five Warehouse locations it has opened are planned as a "temporary pop-up-style shopping experience" over the next six months. Three clearance centers launched last year will be part of the Overtime banner, bringing the retailer's outlet and clearance locations to 11.

Dive Insight:

Dick's new clearance-based store concepts come at a time when retail is beginning to open back up and retailers are faced with not only setting up new safety precautions in stores, but also dealing with the inventory that built up while doors were shut. 

By May 30, about 80% of Dick's store fleet had reopened, but the retailer recorded a $28 million inventory write-down in Q1 while stores were shuttered, even with e-commerce performing relatively well. According to executives speaking on a conference call at the time, curbside pickup increased 1,000% in the quarter and made up about 40% of the company's e-commerce sales. E-commerce itself grew 110% and made up 39% of the business, compared to 13% in the year prior, executives said.

While e-commerce couldn't make up for the closure of its brick-and-mortar stores, Susquehanna Financial Group analysts led by Sam Poser pointed to Dick's "best-in-class" omnichannel capabilities during the pandemic as a key to positioning Dick's ahead of its competitors.

"We are confident [Dick's] will be the sole surviving national sporting goods retailer post crisis," the analysts said in emailed comments Tuesday. "We expect [Dicks] to continue to gain significant market share from smaller, under-capitalized players, many of whom have struggled during the pandemic."

Indeed, just as the pandemic hit the U.S., Modell's Sporting Goods filed for bankruptcy with plans to liquidate its entire store base. Those plans to wind down had to be put on hold as stores shuttered around the country, preventing Modell's from effectively running liquidation sales at its locations. Modell's pointed to the growth of e-commerce and increased competition as reasons for its filing, but it had struggled for several years. Dick's Sporting Goods bought the IP and some store leases from its last big competitor, Sports Authority, when that retailer filed for bankruptcy in 2016.

In the immediate recovery period, the clearance-focused stores could help Dick's Sporting Goods shed excess inventory, though the company declined to comment on whether or not the pandemic influenced the decision to debut these concepts. Overtime, which Dick's says will operate for longer and promises new markdowns and fresh inventory throughout the year, also provides a new discount channel for Dick's Sporting Goods' brand partners.

"The outlets and warehouse stores remove the need for Dick's Sporting Goods stores or the Dick's website to aggressively discount product," Susquehanna analysts said in their note. "The outlets and warehouses also provide brand partners such as [Nike] an alternative to off-price channel boxes such as TJX and [Ross Stores]. We expect these concepts to further strengthen [Dick's] relationship with key brands and continue to grow."