DKS Eyes UK Sports MarketZacks Investmentupdated Apr 05, 2012TweetAt GET.com we maintain complete editorial integrity on our content & provide transparent & unbiased information. Companies don't pay us to include their products although we receive a compensation when you successfully apply to products from our partners. See how we make money here.At GET.com we maintain complete editorial integrity.In an effort to enhance its global footprint, Dick's Sporting Goods Inc. (DKS), a full-line sporting goods retailer, has recently announced its plan to make strategic investment in Britain-based sporting goods retailer, JJB Sports. As per its plan, Dick’s is going to invest 20 million pound ($31.75 million) initially in the loss making company by purchasing 18.75 million pounds ($29.76 million) worth of Junior Secured Convertible Notes and 1.25 million pounds ($1.98 million) of JJB’s ordinary shares. The investment is expected to benefit Dick’s Sporting in enhancing its footprints not only in the United Kingdom but also in whole Europe. The strategic move will give Dick’s Sporting the authority to appoint a maximum of two members in JJB’s board of directors. Moreover, the company also retains its right to invest in the loss making company and expects to invest 20 million pounds in first-quarter 2013. If Dick’s retains its investing right, the company’s stake in JJB will increase to 61%. In a separate story, Dick’s Sporting has purchased the intellectual property rights of Top-Flite brands from Callaway Golf Company (CLY) in an effort to increase its private brand portfolio. The transaction will add golf materials to the company’s brand portfolio while providing it with the golden opportunity to enter in the golf business.Our Recommendation Pittsburgh-based Dick's Sporting Goods remains the dominant player in the industry with significant store expansion and potential share gain opportunities in the U.S. We remain optimistic about the company’s competitive position and consistency of earnings growth. Further, we remain impressed by the company’s strategy of alternatively investing in key strategic areas including new stores, eCommerce, inventory management systems and private brands. In 2012, the company expects to spend a total of $241 million toward capital expenditures. We also remain impressed by the company’s solid balance sheet, which is characterized by strong cash position with no outstanding borrowing under its credit facility. On the other hand, investors remain encouraged by Dick’s practice of returning cash to shareholders in the form of dividend payouts and share repurchases. However, the sporting goods market is highly competitive in nature and Dick’s failure to compete effectively in terms of price, quality or product will thwart its growth potential. The company faces stiff competition from Foot Locker Inc. (FL) and Wal-Mart Stores Inc. (WMT). Moreover, a weak economy will likely weigh on the company’s profitability in the long term. Currently, Dick's Sporting Goods has a short-term Zacks #2 Rank (Buy). We maintain our long-term Neutral recommendation on the stock. DICKS SPRTG GDS (DKS): Free Stock Analysis Report To read this article on Zacks.com click here. Editorial Disclosure: Any personal views and opinions expressed by the author in this article are the author's own and do not necessarily reflect the viewpoint of GET.com. The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone, not those of the companies mentioned, and have not been reviewed, approved or otherwise endorsed by any of these entities.