Important disclosures appear on the last page of this report.

The Henry Fund Henry B. Tippie School of Management

Nihar Patel [nihar-patel@uiowa.edu] Dick’s Sporting Goods Inc. (DKS) March 31, 2016 Consumer Discretionary—Specialty Retail—Sports Stock Rating Sell

Investment Thesis Target Price $44.00-$45.00 The specialty retailer industry is subject to the same risks and trends as the retail industry at large, but certain sectors have shown more resilience. Clothing, shoes, and expensive equipment remain products that consumers tend to go into the store for, and those are Dick’s product categories. However, the internet is still taking share away from brick-and-mortar as e-commerce retailers try to change these consumer habits. Showrooming remains prevalent. The sports retail industry has been a difficult one, and while Dick’s remains the best in class the stock is fully valued, and in the long run may just be the final victim of a shift online. Free shipping and free returns is contributing to clothing and other sales moving online at a faster rate. Risks to Valuation Dick’s has continued expanding as a way to drive revenue. This topline growth with a fairly stable cost structure has not gone unnoticed and the current price includes future store openings. Same store sales for 2016 are projected to be flat to growing by 2%. In 2015 same store sales declined 2% due to a warmer than expected winter. The weak same store gains will become problematic if expansion stalls or is less than successful.1 Dick’s share price reacted positively, after an initial shock, to Sports Authority going bankrupt. One less competitor and the chance for Dick’s to pick up Sports Authority’s best locations. However, it is more likely to be the case that Sports Authority’s decline was due to industry trends and not due to being defeated by Dick’s. Vestis Retail Group, owner of Sport Chalet and other brands, has also declared bankruptcy2 and Big 5 Sporting Goods has been closing stores. Drivers to Valuation Dick’s has launched online stores for their brands. However, these remain small compared to physical store sales. If online sales rise dramatically it could shift the company into higher levels of growth. Cost of goods and Selling, General, and Administrative expenses have been edging up. We model as a percentage of revenues at the end of the forecast, COGS at 67.5% and SG&A at 23.5%. A decrease in these costs would drastically change the trajectory of profits and share price.

Henry Fund DCF $44.40 Henry Fund DDM $73.67 Relative PE (EPS15) $51.37 Price Data Current Price $47.09 52wk Range $33.42-59.64 Consensus 1yr Target $49.29 Key Statistics Market Cap (B) $5.13 Shares Outstanding (M) 114.9 Institutional Ownership 94% Five Year Beta (Bloomberg) 0.851 Dividend Yield 1.4 Est. 5yr Growth 12.0% Price/Earnings (TTM) 15.77 Price/Earnings (FY1) 15.1 Price/Book (mrq) 2.8 Profitability Operating Margin 7.47% Profit Margin 4.54% Return on Assets (TTM) 9.45% Return on Equity (TTM) 18.25%

Earnings Estimates

Year 2013 2014 2015 2016E 2017E 2018E EPS $2.69 $2.96 $2.83 $3.11 $3.22 $3.30

Growth 8.05% 10.03% -4.33% 9.95% 3.38% 2.70% 12 Month Performance Company Description

Dick’s Sporting Goods Inc. is a retailer of sporting equipment under its Dick’s Sporting Goods brand. It also owns Field & Stream, Golf Galaxy, and True Runner as specialized brands. Dick’s sells sporting equipment, footwear, and apparel in its main stores. Field & Stream has fishing gear and other outdoor sporting equipment. Golf Galaxy sells specialized golf products. True Runner sells running gear. The Dick’s Sporting Goods branded stores make up the vast majority of total stores of the company. Dick’s is primarily focused on the eastern United States.

15.818.3

7.5

15.4

7.82.6

18.0

10.48.1

11.17

18.25

11.88

0

25

P/E ROE Operating Margin

DKS BGFV CAB HIBB

Data Source: FactSet

-60%-50%-40%-30%-20%-10%

0%10%

A M J J A S O N D J F

DKS S&P 500 TR

Data Source: Factset

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EXECUTIVE SUMMARY We believe Dick’s Sporting Goods Inc. is currently a sell. Positive expectations are priced in, particularly after the bankruptcy of Sports Authority. Despite an initial negative reaction, the prospect of Dick’s receiving favorable terms in picking up the best locations of Sport’s Authority as well as less competition is seen as a positive. The current price encapsulates this expectation, and if it does not pan out the stock should decline. Specialty retailers are not immune from the shift away from brick-and-mortar stores. Shopping for clothes in physical stores has remained commonplace. The shipping expense of large and heavy equipment, such as weights, has also kept people coming to stores. However, ecommerce sites have been looking for ways to move people online. Shipping costs have fallen, and websites have been very detailed with their sizing information. With free returns on clothing items, many retailers are hoping to capture consumers looking for the convenience of shopping online. This industry trend works against Dick’s, whose e-commerce business is new and small. It is likely that Sports Authority was a victim of this trend, as opposed to being outplayed by a competitor. Dick’s has been driving growth by expanding, which we believe is priced in. Same store sales are fairly unimpressive, and if Dick’s runs out of prime locations to expand into growth would be dramatically reduced. This expansion comes with costs of its own. Dick’s may be expanding into a shrinking market. Sport Chalet’s owner is considering bankruptcy in the wake of Sports Authority. The positive trend in Dick’s individual performance and the expectations for the future are priced in, but the industry as a whole is showing weakness. Even the best companies eventually succumb to the industry trend if they do not change. For those reasons we are confident in our sell rating for Dick’s Sporting Goods.

COMPANY DESCRIPTION Dick’s Sporting Goods Inc. is a specialty retailer that sells sports equipment, footwear, and apparel. The main brand is Dick’s Sporting Goods of which there are 644 stores nationwide. The three other brands are Field & Stream an outdoor recreation store, True Runner for running gear, and Golf Galaxy for golf equipment. These three specialty brands comprise of 97 stores in total.3 Each segment comprises a small part of revenues compared to Dick’s

branded stores, and the company does not report these separately. Dick’s offers a higher-end shopping experience than competitors such as Sports Authority and Big 5 Sporting Goods. Graphic: Dick’s Store Locations

Source: Bank of America Merrill Lynch Consumer and Retail Conference Presentation – Dick’s Sporting Goods Investor Relations March 15, 2016 Revenue is broken into four buckets: hardlines, apparel, footwear, and other. Hardlines comprises equipment such as weights, workout machines, bats, and other equipment. This is the largest portion of revenues. Apparel covers all types of clothing sports, cold weather, workout, etc. Apparel is the second largest portion of revenues. Footwear covers the sneakers, running shoes, and other sports shows. Other is just the catch all for other items such as the impulse buy electrolyte gum and other products that do not fit the other categories. Other is not a significant part of the revenues, nor is the year-over-year growth notable.

44.89%

35.11%

19.30% 0.70%Dick's Revenue Breakdown 2015

Hardlines Apparel Footwear OtherSource: Dick's Sporting Goods 10-k 2015

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The highest concentration of stores is in the eastern United States, though considering the population density of the east compared to the Midwest and west coast it is not surprising. Dick’s started off as an eastern US brand, but now is in 47 states. The number of stores in California is 41 and more are planned. However, only one of the distribution centers is in the west, Arizona. Dick’s can be considered a nationwide business. In 2015, Dick’s opened 44 Dick’s branded stores and closed 3, and 11 new specialty stores with 8 closed down among the specialty brands.3 With same store sales declining around 2.5% in 2015, 100% of the revenue gains can be attributed to new stores. We model 36 stores being added in 2016. The company did indicate that it would open more specialty retailers in addition to those 36.12 However, we chose to assume a lower number this year on the assumption that the recent bankruptcies will give the company some pause. We will have to wait till the next conference call to verify this. In 2017 we model 45 stores based on integration of Sports Authority stores and some other new store openings. The auction will take place later in 2016, but we have those stores contributing to revenues in 2017. By the last year of our forecast period we are down to 5. The industry faces severe pressure and constant openings of new stores will give way to optimization of the existing store operations and locations.

RECENT DEVELOPMENTS

Bankruptcies The bankruptcy of Sports Authority,4 at one time the largest sports retailer, has been the biggest news for the industry. There is no guarantee that Sports Authority can

come out of bankruptcy due to its $1.1 billion debt.4 The current plan is to sell or close one third, about 140, of the stores.7 The company pointed out that losing sales to online stores and failing to react to the decline in popularity of golf as the reasons for its decline. Last year a smaller sports retailer called City Sports went out of business after expanding into the suburbs.5 In the wake of Sports Authority’s announcement, Vestis Retail Group the parent company of Sport Chalet and a few other brands announced that it sought bankruptcy protection.2

This is occurring against a backdrop of Dick’s expansion. Dick’s might be expanding in all the right places, but the trends in the industry are working against the long-term viability of the company. While bankruptcies present near-term opportunities to add high value stores, the long-term trends point to more business moving online. Chelsea Collective In 2015, Dick’s announced a new line of stores geared toward women called Chelsea Collective, of which there are 2. During the 4Q2015 earnings call the company did not mention any expansion planned for this line. An analyst asked about the line, and management gave no indication of plans to open more stores. The company does look to those stores to find successful brands for the mainline Dick’s stores.1 The initial idea was for a dedicated store for the fast growing female fitness segment. Dick’s seemed to want to capture some of the sales that Lululemon enjoyed, but the future of this line remains unknown. 2015 Earnings Highlights Dick’s saw revenue increase with all the new stores opened, but same store sales fell by 2.5% in FY2015. This was attributed to a warmer winter.1 Profits also declined due to increased SG&A expenses associated with special deals. Dick’s sought to drive volume to turnover inventory. The warm weather meant people desired less winter gear. The increase in SG&A does not appear to be a direct response to competitors. Dick’s ecommerce platform performed well growing by 19% and contributing $748 million to revenue.1 This is a significant but small portion, 10.29% of total revenues. It remains to be seen how much Dick’s can grow the online business. Established online retailers such as Amazon do

600650700750800850900

2013 2014 2015 2016 2017 2018 2019 2020

Number of Stores

Historical Data Source: Dick's Sporting Goods 2015 and 2014 10-K

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offer many of the same products, however the online platform of a store like Dick’s is more focused.

Source: Bank of America Merrill Lynch Consumer and Retail Conference Presentation – Dick’s Sporting Goods Investor Relations March 15, 2016

INDUSTRY TRENDS Even though Dick’s continues to expand into new markets with physical stores it has been investing in ecommerce, which is the main direction of the retail sector as a whole.

No Differentiation and Oversaturation Sports retailers do not have much in the way of differentiation. Dick’s offered a slightly higher end shopping experience, the cost of which is incorporated into SG&A, by having nicer interiors than Sport’s Authority.11 Most of the sports stores are very large. Big 5 has smaller locations in strip malls, but Sports Authority, Dick’s, Sport Chalet, and others tend to be larger. These large stores need to be stocked with inventory, and represent a substantial initial and ongoing expense. At the same time the internet is a competitor in every location. Offering different interiors, a better refund policy, or better customer service are limited differentiators. The products remain similar. Brands such as Nike and Under Armour are in most stores. There are not many ways to differentiate a 45lb weight plate between stores, when each store carries a variety. A store like REI that has a membership policy and functions as a co-op can differentiate itself, but this is not replicable. The membership model will also drive those members to REI’s online platform if they decide not to go into the store.

With a net margin of around 4.5% in 2015 for Dick’s a few sales lost to the internet in a locality can turn the location unprofitable. If a competitor comes to town this can happen even quicker. Credit Suisse recently noted that the sports retail industry was over-saturated.6 Many retailers have many stores, and Dick’s is still rapidly expanding. Retailer # of Stores # of States Dick’s Sporting Goods 644 47 Big 5 Sporting Goods 434 11 Cabela’s 60 31 + Canada Hibbett Sports 1025 32 Sportsman’s Warehouse Holdings 66 20 Sports Authority 460 45 Sport Chalet (All closed) 51 4 Eastern Mountain Sports 65 12

Source: Dick’s Sporting Goods 2015 10-k, Big 5 Sporting Goods Company website, Cabela’s company website, Hibbett Sports company website, Sportsman’s Warehouse Holdings 2015 10-k, Sports Authority Company website, Sport Chalet company website, and Eastern Mountain Sports company website

Source: Bank of America Merrill Lynch Consumer and Retail Conference Presentation – Dick’s Sporting Goods Investor Relations March 15, 2016 The number of potential stores that Dick’s thinks the US can support seems excessive given the inability of competitors to keep their doors open. No word is given on how that number was derived, though it seems like an estimate based on where it should fit into the list. The United States is large, but there are a lot of players in the sports retail industry. Dick’s is one of the most successful, but its drive to expand opens itself up to a lot of risk. Positive growth expectations are already priced

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into Dick’s stock, unless Dick’s bucks the industry trend and does even better than expected with its expansion plans there is no more upside to be had. Doing worse than expected on the other hand would see the share price decline further below our current negative target price. Keeping in mind that Dick’s leases all of its locations it would not have property sales to fall back on for liquidity like Kmart did.

(1) DICK’S market share includes FY2014 sales from Golf Galaxy and Field & Stream. (2) Estimated $67 billion U.S. sporting goods market based on 2013 NSGA Equipment, Footwear and Apparel sales and 2013 NBDA Bike sales. Source: Dick’s Sporting Goods Investor Relations – Company Information Shift to ecommerce Brick-and-mortar retailers have been struggling with the shift to the internet for years now. Specialty retailers have proven more resilient due to logistical issues and consumer habits. However, these have started to shift. Online retailers have tried to make shopping for clothing online better by offering detailed sizing information as well as free returns. Sports apparel is varied, but the aim is function with fashion coming second. The barrier to moving these sales online is probably lower than moving other types of clothing online. There also tends to be more innovation for sports apparel and online platforms are better for pushing these more experimental lines. For example, Columbia released a shirt

online that combined wicking technology with rubber polymers sewn in which made the shirt feel cooler than ambient temperature. The shipping charges associated with heavy sporting equipment also kept consumers coming to physical stores. These charges are still an impediment to ordering equipment online for cost conscious people, but more and more retailers are offering free shipping. Costs of shipping these items have also fallen dramatically due to the agreements that retailers have made with shippers. Amazon had implemented a way to schedule a specific day and time window to receive large shipments from specialized consignment shippers. These forms of shipments are slower, sometimes taking a few weeks, but the cost is far lower than traditional shippers like UPS. This trend is realized via lost sales not increasing costs. Dick’s does not have to offer better deals to compete with free shipping, but it is more difficult to get a customer in the store to make the sale. Dick’s will probably offer free shipping via its online store if it want to compete with the existing players. This will lead to pressure on margins if it involves the large and heavy hardline business. Apparel and footwear will not have massive shipping charges. The greater risk is from lost sales not declining gross margins, but if the company starts competing on price those shipping perks could severely damage the company’s finances. Differentiation will continue to be an issue when online retailers like Amazon and Walmart maintain a massive variety of options for most products. The trend in the industry is towards more ecommerce not less. Dick’s recognizes this with their launching of online platforms for their brands. The growth has also been strong. The online space is extremely crowded as well. Retailers like Amazon dominate the landscape. Walmart has physical stores, but it sells many items online including sports equipment that is not available in stores. Online platforms allow these companies to simply act as middlemen, processing the transaction between consumer and manufacturer. Amazon does this through the marketplace making it easy to order specific items through Amazon’s online platform. Dick’s is focused on opening new physical stores, and it has an uphill battle online. The current share price incorporates a rosier picture of the future than we believe is appropriate, hence our sell recommendation.

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Source: Bank of America Merrill Lynch Consumer and Retail Conference Presentation – Dick’s Sporting Goods Investor Relations March 15, 2016

MARKETS AND COMPETITION Sports retail is in a precarious position. Online retailers are extremely varied, but can compete just as effectively in the industry. Additionally, manufacturers like Nike also maintain their own stores to sell their products. The suppliers of some of the products at Dick’s compete with Dick’s directly for sales. The internet has also allowed manufacturers to transact directly with consumers. By cutting out the middlemen they can offer favorable terms in price and shipping costs, while potentially seeing more profit go directly to them. No new entrants in the physical retail market are likely to crop up, though that does not mean that existing retailers cannot expand their product line to compete with specialty stores like Dick’s. High competition among retailers and numerous channels for suppliers to make sales increases costs to the retailers. Dick’s is entirely in the United States and pays a 35%+ tax rate due to state taxes.3 When one considers how much power buyers have the industry looks perilous. Even if brick-and-mortar competitors fall away the power of suppliers and buyers in this industry is likely to keep a cap on margins. Dick’s appears to be growing successfully, but these broader trends are a serious risk into the future. The lack of

differentiation makes it hard to see how Dick’s will close the gap in the online retail space.

Peer Comparisons Dick’s is the largest of the sports retailers. Dick’s operates nationally like Sports Authority did. Many of the other companies focus regionally.

Revenue and Profitability Revenue ($M) Net Income ($M)

Net Margin Dick’s Sporting Goods 7,270.97 356.93 4.91% Big 5 Sporting Goods 1,029.10 13.84 1.34% Cabela’s 3,997.70 189.33 4.74% Hibbett Sports 943.10 73.04 7.74% Sportsman’s Warehouse Holdings 729.91 19.55 2.68% Sports Authority Est. 3,200

Source: Yahoo! Finance Margins as a whole for the industry are pretty low. Considering the number of stores Dick’s has its margin is impressive. For every store there are costs normally included in SG&A but also expenses associated with inventory management. In chasing topline growth Dick’s runs the risk of sacrificing profitability. The sports retail industry on the one hand looks saturated with a slew of bankruptcies, but Dick’s continues to have success with its expansion without compression margins drastically. Cabela’s has a similar net margin, but far fewer stores fittings its narrower focus. Hibbett operates smaller stores and in small and mid-sized markets not served by the other stores. That allows them to retain a little bit more margin, but limits growth.

Key Stats P/E Operating Margin ROE Dick’s Sporting Goods 15.77 7.47% 18.25% Big 5 Sporting Goods 15.43 2.64% 7.77% Cabela’s 18.03 8.11% 10.39% Hibbett Sports 11.17 11.88% 22.19% Sportsman’s Warehouse Holdings 18.58 8.25% N/A

Source: Factset

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Key statistics show that the companies in the space do not differ drastically from one another, except for Big 5. This is not surprising as Big 5 has been shrinking the number of its stores.10 As Dick’s continues to expand west it will likely place additional pressure on Big 5. Big 5 could be the next company to suffer due to the broader industry trends. Hibbett Sports has impressive net and operating margins, but the market ascribes a lower value to the company. This is likely due to the limited expansion opportunities for Hibbett. It can be seen as a guide for what can occur when a company reaches its saturation point. Hibbett aims for small and mid-sized markets that are underserved. With so many retailers expanding there may not be much growth for Hibbett to capture in the future.

ECONOMIC OUTLOOK The sports retail industry is subject to the same economic forces that the retail industry is affected by. Unemployment, wage growth, inflation, consumer sentiment, and the price of oil have an impact. Since Dick’s is focused only in the United States, it is the only market that needs to be considered. The US economy has been improving despite the turmoil in the stock market following every Federal Reserve meeting. The labor market is improving, though the headline unemployment rate can be misleading. Job growth can be significant, but the unemployment rate might stay high due to more people coming back into the work force. There are signs that the United States is showing real wage growth, which would be a dramatic shift from the previous decade. All that bodes well for retailers, and should bolster consumer sentiment. The low price of oil has a two-fold impact of increasing consumer discretionary income as well as lowering the transportation cost of goods. Oil is not likely to have a massive immediate effect with its fluctuations, but savings for the average consumer can translate into increased spending. We see the price of oil stabilizing at $40-$50, which should continue to gives consumers some extra money to spend. It would be difficult to predict the specific trends affecting sports retail. It would be pure speculation to assume that people will start playing more sports. While the long-term health issues plaguing the United States population

continue to be high on the agenda, there is no way to tell if this will have an impact on spending in the sports stores. One of the other economic indicators to keep an eye on is home purchases, construction, as well as square footage. The major hardlines business consists of sports equipment that would be used to create a home gym as well as equipment needed to play sports. People are not likely to spend substantially creating any kind of home gym in an apartment aside from an individual machine. However, if the trend among the next generation is smaller houses or condominiums it could be a sign of the consumer side of exercise equipment falling out of favor.

CATALYSTS Purchase of Sports Authority stores could lead to increased costs for Dick’s as it remakes the stores to fit its image. Though this would primarily involve assumption of the lease so Dick’s can take over the location, and possibly the inventory. More information about the auction will be available as it gets closer. Dick’s does not own its stores or build new buildings to suit its needs and there is no reason to assume it would start now. Promotions to drive traffic to these newly branded stores could also eat into profits. If costs continue to increase, and same store sales growth remains lax the company could see increased pressure on its margins. Dick’s present price has no upside given its fundamentals, and interest rate policy will not change that. The risks highlighted here might be realized and send the share price falling. The current price incorporates positive trends as if they had already happened, unless the reality outpaces the expectation there is only downside to be had. We believe that expectations are on the mark or below, which supports a sell recommendation. The Summer Olympics are in 2016, and this may see a renewed interest in sports and exercise that could present a windfall for Dick’s. As the major sports retailer it could capture significant revenue from a population entranced by the games. However, there is no way to project the impact that the games would have. The last games were in 2012, and nothing about the revenue seems out of the trend compared to the year before and the year after. We will not go out on a limb and think that the Olympic Games will create so much additional revenue as to transform Dick’s into a

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monstrously profitable firm. The likelihood is that it will create a strong quarter of revenue, but the annual trend will remain intact. INVESTMENT POSITIVES

Dick’s continues to expand aggressively compared to its competition, and has seen revenue grow with each new store. Margin has not been sacrificed to achieve this. The expansion strategy has been successful at consistently growing revenues despite same store sales being flat. That points to a solid process in evaluating new locations. Competitors are facing many difficulties, and the recent bankruptcies have removed competitors. Dick’s may have to offer fewer and lesser promotions in the future removing one of the largest costs for the company. At the same time Dick’s can pick up the best locations of previous competitors at lower cost.8 The ecommerce platform is growing strongly. The shift online is critical as the internet presents the greatest existential threat to the brick-and-mortar stores. A strong online presence is needed if the company is to survive. However, the flexibility of online platforms means that competitors in that space are varied and already entrenched.

INVESTMENT NEGATIVES A slew of bankruptcies are driven by shifts of sales online as well as changes in underlying trend. Online platforms have the benefit of carrying less inventory, but Dick’s big box stores cannot remain empty in case the trend changes. This presents a risk to physical stores not shared by online retailers. Fewer competitors might make the industry easier to navigate for the remaining players, but the likelihood is that the pie is shrinking as the internet sales pie grows. Margins in the industry are extremely thin. The power of sellers and buyers is significant. Dick’s cost of goods sold has been edging up. Suppliers present competitors as well. Many have their own physical stores, and most have online stores. This overlap keeps a lid on how much margin Dick’s can squeeze out, as does the ability of buyers to shop at different outlets. Promotions are very common and necessary in retail. Every holiday presents the chance for a sale to try and drive profits by volume instead of margin. However if that volume fails to materialize it can create problems. In apparel and

footwear excess inventory can quickly become out of date inventory that takes up space on clearance racks generating almost not profit for the company, while cannibalizing higher margin sales. The industry as a whole is overloaded with stores. Dick’s has done well with opening new stores, but the recent slew of bankruptcies raise concerns about the viability of continued expansion. Some companies like Big 5 have almost as many stores as Dick’s but in a narrower region. Others like Hibbett capture consumers from smaller markets where a big retailer like Dick’s cannot be located in. If Dick’s continues expanding beyond the saturation point it could see significant declines in profitability. The current share price has priced in a rosy picture of the future where Dick’s continues expanding with less competition, while picking up stores from defeated rivals. There is still a chance of failure from these endeavors. Continued expansion may compress margins further as Dick’s meets with less success. The market seems positive on Dick’s and the stock market as a whole after the Fed’s policy shift. We believe the upside is priced in, therefore our recommendation is a sell to benefit from this expectation even if it fails to materialize.

VALUATION Revenue Growth Dick’s revenue growth tends to fluctuate. This can be due to many different factors. In 4Q2015 a warm winter was blamed for declining same store sales. New store revenue helped boost the growth rate for the year. The model reflects opportunities and threats from the recent slew of bankruptcies by having less stores open as time moves forward. We also forecast revenue per store staying very close to current levels. New growth from expansion tapers off and same store sales do not increase significantly. Some of the store expansion can be seen as a stand in for the growth of the online business. Given how Dick’s currently reports its revenue it would be difficult to add online revenue as a part of the existing revenue forecast.

Dick’s Revenue Growth 2013 6.46% 2014 9.67% 2015 6.71%

Source: Dick’s Sporting Goods 2015 10-K

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The irregular pattern makes forecasting a trend a little difficult, but we have taken an approach of assuming a revenue growth rate that declines steadily. The bankruptcies in the industry point to limited expansion in the future, and same store sales are weak. We projected a 5.65% growth rate in 2016.

Revenue growth rates are based on the number of new stores, as well as product segment revenue per store. This method treats all stores as equal, and gives new stores revenue attributed to existing stores. To compensate for this we limit same store sales. Management has signaled that same store sales are expected to be 0% to 2%. We assume a very modest rise in product segment per store. It is the store number that is the key to revenue growth, as explained in an earlier section. Note that inventory is also a function of new stores and inventory per store, about $2 million inventory per store.

Revenue by Product Segment per Store ($M) 2016 (Beg Forecast) 2020 (End Forecast) Hardlines 4.45 4.50 Apparel 3.45 3.50 Footwear 1.91 2.00 Other 0.07 0.08

Historical Data Source: Dick’s Sporting Goods 2015 10-K Key to Revenues: Growth in hardlines has been strong, and that revenue bucket is the largest. For 2015, the growth rate was 9.09% and for 2016 we project 5.93%.

Apparel has been a strong driver of revenue growth and is the second largest bucket. However, in 2015 growth declined to 3.74% from 12.68% in 2014. We project 2016 growth at 5.0% due to the number of stores opened and the sales per store in apparel. This number tapers to 2% by the end of the forecasting period. Apparel might be considered an opportunity by some analysts, but we do not feel it will stand out. We may be giving too much weight to the most recent results and the warmer than expected winter in 2015. However, while the winter was on average slightly warmer it was one of heavy snow in the northeast. It was cold enough to require winter weather gear. It was not a winter of above freezing temperature throughout. Considering that future growth is taking place in the West and Southwest winter is likely to play a smaller role. If Dicks relies on winter gear sales that heavily it will likely not see such large percentages in the future now that its exposure to states with real winters is lessened. Footwear growth is projected to be 6% in 2016, down from 6.61%% in 2015. This is in and around the trend set previously, and we project a slowly declining growth rate at first to a larger decline later. Footwear is rapidly shifting online, and companies like Nike are offering a whole suite of tools to choose and customize shoes online. This trend is only likely to intensify going forward. Other revenues were not significant as a percentage of the total and we simply had the rate decline to fall in line with our long term growth rate over the 5-year forecasting period. Store growth is based on the company’s own projections, modified to meet our expectations. 2016 is shaking out to be a more conservative year for store growth due to the bankruptcies. Dick’s expects to acquire some Sports Authority stores, but we do not expect these stores to become relevant until 2017, since the auction is happening later in the year and it will take some time to make it a Dick’s branded store. For 2016, we expect 36 stores, and 2017 we expect 45. Since we assume that each store makes revenue like a veteran store as soon as its opened we have to be careful in how we space out the expansion. Cost of Goods Sold Unlike revenue growth, cost of goods sold as a percentage of revenues has a more stable trend. In 2015, COGS were

-10.00%-5.00%0.00%5.00%

10.00%15.00%20.00%25.00%30.00%

2013 2014 2015 2016E 2017E 2018E 2019E 2020E

Revenue Growth Rates

Hardlines Apparel FootwearSource of Historical Data: Dick's Sporting Goods 10-k 2015, 2014, 2013

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67.32% of revenues up from 66.71% in 2014 and 66.26% in 2013. That slow uptick in COGS as a percentage of revenues appears small, but sensitivity analysis shows that profit and target share price are changed if we alter the number slightly. This is especially true of the assumed continuing COGS/Revenue percentage. A 0.1% change in this rate changes the target share price by about $1. We project COGS increasing to 67.5% for our forecasting horizon. Notice that these assumptions show no increases in the rate contrary to the historical year to year increases. We have created the model under the assumption that Dick’s will start to manage costs more carefully. In the wake of the recent bankruptcies the company cannot simply pursue expansion across the country as the only way to drive performance. Selling, General, and Administrative Expense SG&A is a major expense for the company. All promotions that are not encompassed in cost of goods sold are accounted for here. All of Dick’s stores are also under long-term operating leases, and SG&A includes these costs as well. When Dick’s wants to relocate or close a store it must wait for the lease to expire, sublease, or assign the lease to another party. Their lease contracts may have buyout clauses as well. The absence of significant cost related information regarding relocated or closed stores signals that it is not a significant impediment to the company’s efforts to optimize. SG&A expense as a percentage of revenue in 2013 was 22.61%, 22.44% in 2014, and 22.66% in 2015. Our projections only increase this number slightly to 22.75% in 2016. Sensitivity analysis shows that small changes do have a significant impact. In just the final year a 0.25% change in SG&A expense has an impact of over $2 on the target share price. We are comfortable with a small increase due to the weak growth in 4Q2015. The company is likely to do more promotions in 2016 to avoid having such an issue again. Also, the Olympics are likely to see some additional promotions over the summer to capitalize on the games. In 2017 and beyond, we project a 23% rate for SG&A/Revenue. This is to incorporate an increasingly difficult environment as sales shift to the internet. Dick’s will have to do more to drive people to their stores. The SG&A forecast makes small but significant assumptions. We keep projecting a worsening cost structure, though one managed by the company. We also

negate any benefits on the side of costs associated with fewer competitors. It is our belief that the other companies were damaged by the industry trend, and not due to aggressive tactics by players such as Dick’s. Property, Plant and Equipment Dick’s Net PPE number if calculated by taking the 2015 Net PPE number and dividing it by stores at the end of 2015. This amounts to $1.82 million per store. We increase this to $1.85 and peg balance sheet Net PPE to number of stores. This number has been edging up from about $1.60 million per store in 2013 to $1.70 million per store in 2014, but much like the COGS assumption we assume that this number will flatten out as Dick’s manages costs better. For Net PPE for each new store to increase indefinitely is not a realistic assumption. Continuing Growth Assumptions Using the McKinsey approach to valuation, net operating profit less adjusted taxes (NOPLAT) feeds into the discounted cash flow model that is used to derive the target price. After the forecast period we estimate a continuing NOPLAT growth amount. We estimate NOPLAT growth at 1% due to the pressures on the company, and the likelihood that it would grow below the US GDP rate. Competition from its own suppliers and the shift to the internet will continue to weigh on Dick’s. Sensitivity analysis shows us that raising the rate to 2% gives us a target price of $52.48. If the rate is 0%, assuming no growth, the target price falls to $39.32. The continuing growth rate is absolutely critical. The projection for same store sales in 2016 is 0% to 2% growth. By the end of our forecast period, there will be limited to no expansion that same stores sales number will be critical. It should be noted that in the company’s results the same store growth rate does include online platforms. We feel that the 1.75% growth rate is a realistic one. However, if pressed to choose if it was optimistic or pessimistic the likelihood that the rate is too high is greater than the likelihood of it being too low. We feel comfortable with that statement due to the difficulties facing the industry. Consensus According to Factset’s aggregation of analyst estimates, the target price is $49.29. Our model has a lower target than this due to our incorporating more pessimistic

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assumptions about the future, though we argue these are more realistic. Our valuation model’s sales forecast is below the consensus estimates, and the divergence increases the further into the forecast. This is also true for EPS, though that can be affected by forecasted buybacks. Analyst consensus estimates seem to project improving margins further into the forecast, contrary to the historical trend. We feel it is more realistic to flatten them out, since there is no evidence that they can decline or to what level. An assumption that management will try to boost margins must be balanced against the likelihood that it can be done. Given the difficulties facing the industries if margins can be boosted by simple desire many would have done so. The rapid expansion of Dick’s will also make it hard to boost margins without lowering the costs of goods sold. Dick’s avoids overlapping their store territories. Expansion without cannibalization is the goal. Once leases are signed the company will have little ability to reduce these expenses. The company has to pressure suppliers or charge more, and nothing about the industry suggests that it has the clout to do either. Alternative Valuations The dividend discount model gives us a price target of $73.67, which suggests a lot of upside Due to the forecasting of EPS being shifted by buybacks and options, the DDM model must be taken with some salt. We assume that the dividend will grow 10% in 2016 just like 2015, which is a significant assumption since the 10% increase was the first of its kind. Many prior years had no such increase. For the three years stretching from 2017-2019 we assume a 5% increase per year. The final year has a 3% growth rate and this is the continuing value we assume. There is no reason to assume greater growth rates given the difficulties facing the industry. The 3% continuing growth rate was chosen as an ideal nominal GDP growth rate for the country, which the dividend would try to keep pace with. The dividend payout ratio in 2015 was 19.59%, and by the end of the forecasting period in 2020 the ratio increased slightly to 21.12%. Relative valuation can offer some insight. The comparison companies were Best Buy, Staples, Bed Bath & Beyond, Office Depot, Big 5, Barnes & Noble, Cabela, and Hibbett Sports using Factset consensus data for EPS growth and 5 year growth for those companies. There are some issues when using these estimates, particularly the shifts in EPS

due to buybacks. Dick’s announced a $1 billion buyback plan during the 2015 earnings to be completed over the next 5 years. There is also about $187 million remaining on the last buyback plan, which must be completed by the end of the current year.9

Implied Value: Relative P/E (EPS15) $ 49.93 Relative P/E (EPS16) $ 41.81 PEG Ratio (EPS15) $ 32.17 PEG Ratio (EPS16) $ 29.10

Data for Estimates: FactSet The DCF method is the best method to value Dick’s. Relative valuation gives a price fairly close to the current price, and not so far above our DCF target price. Relative valuation presents some issues, but it is useful to note that it does not suggest that Dick’s is extremely over- or under- valued.

KEYS TO MONITOR More bankruptcies would be the most significant news in the near term. While investors and traders may have eventually seen the positive side in Sports Authority’s chapter 11 if more companies follow suit it might signal a deeper issue. We believe that deeper issue is already playing itself out, and Dick’s is currently outpacing this trend. Eventually it will fall in line with it unless something changes. Keeping an eye on revenue growth and costs is important. The model shows that Dick’s share price is very sensitive to changes in these. If costs continue to rise as a percentage of revenues it would present massive problems for the company. Margins are already low and rising costs could start bleeding away profits. We have not extensively looked at inventory levels, since they appear to be managed well. However, a significant increase in inventory levels coupled with falling profit could pose a significant problem. The balance sheet does not show a lot of liquid assets to cover costs if inventory starts turning over slower. Dick’s is not a company that can take significant hits to cash flow on a regular basis. Should it misstep in its expansion or find itself on the wrong end of another winter it would raise a small warning flag. However, a liquidity crisis is not imminent. The company does have a $1 billion revolving line of credit it can tap.3

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A decaying US economy would also be a major cause for concern, though if the economy starts growing even more rapidly it is an open question whether Dick’s would benefit at the same rate. When it comes to macroeconomics it is likely that Dick’s experiences an asymmetrical effect. Bad news is always felt, but good news may not lead to windfalls. It is not certain what would cause Dick’s to become a buy. This story is not one of failure. Instead, Dick’s has done well and the market has recognized this. The future is priced into the stock, so there is no more upside to be gained by holding the stock. If expectations regarding new stores, revenue, and costs are exceeded it would suggest a higher target price. We find this unlikely.

REFERENCES 1. Dick’s Sporting Goods Q4 2015 Results - Earnings Call Transcript: http://seekingalpha.com/article/3956792-dicks-sporting-goods-dks-edward-w-stack-q4-2015-results-earnings-call-transcript?part=single 2. Vestis Retail Group Initiates Chapter 11 Proceedings by Lillian Rizzo and Jacqueline Palank – The Wall Street Journal – Apr 18, 2016: http://www.wsj.com/articles/vestis-retail-group-initiates-chapter-11-proceedings-1460981518 3. Dick’s Sporting Goods 10-k for 2015: http://api40.10kwizard.com/cgi/convert/pdf/DKS-20160325-10K-20160130.pdf?ipage=10837204&xml=1&quest=1&rid=23&section=1&sequence=-1&pdf=1&dn=1 4. Sports Authority files for bankruptcy protection – USA Today – March 2, 2016: http://www.usatoday.com/story/money/2016/03/02/sports-authority-files-chapter-11-bankruptcy/81199502/ 5. City Sports’ move into suburbs to blame for bankruptcy, CEO says – Boston Globe – November 5, 2015: https://www.bostonglobe.com/business/2015/11/05/city-sports-move-into-suburbs-blame-for-million-bankruptcy-sale-ceo-says/hMauRBO0VHLzZPBnsJYoMO/story.html 6. There are too many sporting goods stores and not enough customers – MarketWatch – April 7, 2016: http://www.marketwatch.com/story/how-much-does-dicks-sporting-goods-benefit-when-rivals-shut-stores-2016-04-06?siteid=yhoof2

7. Sports Authority is bankrupt and closing 140 stores – CNN Money – March 2, 2016: http://money.cnn.com/2016/03/02/news/companies/sports-authority-bankruptcy/ 8. Dick's Considers Buying Sports Authority Stores - March 8, 2016: http://www.foxbusiness.com/features/2016/03/08/dicks-considers-buying-sports-authority-stores.html 9. Bank of America Merrill Lynch Consumer and Retail Conference Presentation – Dick’s Sporting Goods Investor Relations March 15, 2016: http://investors.dicks.com/~/media/Files/D/Dicks-Sports-IR/reports-and-presentations/baml-2016-presentation.pdf 10. Why Shares of Big 5 Sporting Goods Corp. Slumped Today – Motley Fool – March 2, 2016: http://www.fool.com/investing/general/2016/03/02/why-shares-of-big-5-sporting-goods-corp-slumped-to.aspx 11. Why the Sports Authority Bankruptcy Is Good News – Fortune – March 2, 2016: http://fortune.com/2016/03/02/bankruptcy-sports-authority/ 12. Dick’s Sporting Goods touts omnichannel success and new store growth by Mike Troy – Chain Store Age – Mar 8, 2016: http://www.chainstoreage.com/article/dicks-sporting-goods-touts-omnichannel-success-and-new-store-growth IMPORTANT DISCLAIMER

Henry Fund reports are created by student enrolled in the Applied Securities Management (Henry Fund) program at the University of Iowa’s Tippie School of Management. These reports are intended to provide potential employers and other interested parties an example of the analytical skills, investment knowledge, and communication abilities of Henry Fund students. Henry Fund analysts are not registered investment advisors, brokers or officially licensed financial professionals. The investment opinion contained in this report does not represent an offer or solicitation to buy or sell any of the aforementioned securities. Unless otherwise noted, facts and figures included in this report are from publicly available sources. This report is not a complete compilation of data, and its accuracy is not guaranteed. From time to time, the University of Iowa, its faculty, staff, students, or the Henry

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Fund may hold a financial interest in the companies mentioned in this report.

Dicks Sporting GoodsRevenue DecompositionFiscal Years Ending Jan. 30 2013 2014 2015 2016E 2017E 2018E 2019E 2020EHardlines 2,763.00 2,992.00 3,264.00 3,457.65 3,657.90 3,834.00 3,901.50 3,924.00 % of Revenues 44.47% 43.91% 44.89% 45.01% 44.86% 45.05% 45.00% 44.65%YoY Growth -6.78% 8.29% 9.09% 5.93% 5.79% 4.81% 1.76% 0.58%Apparel 2,184.00 2,461.00 2,553.00 2,680.65 2,835.90 2,939.40 2,991.15 3,052.00 % of Revenues 35.15% 36.12% 35.11% 34.89% 34.78% 34.54% 34.50% 34.73%YoY Growth 29.61% 12.68% 3.74% 5.00% 5.79% 3.65% 1.76% 2.03%Footwear 1,222.00 1,316.00 1,403.00 1,487.18 1,598.14 1,670.96 1,710.28 1,744.00 % of Revenues 19.67% 19.31% 19.30% 19.36% 19.60% 19.63% 19.72% 19.84%YoY Growth 6.26% 7.69% 6.61% 6.00% 7.46% 4.56% 2.35% 1.97%Other 44.00 45.00 51.00 56.61 62.56 66.36 67.92 68.87 % of Revenues 0.71% 0.66% 0.70% 0.74% 0.77% 0.78% 0.78% 0.78%YoY Growth 19% 2% 13% 11.00% 10.52% 6.06% 2.35% 1.40%Total Revenues 6,213.00 6,814.00 7,271.00 7,682.09 8,154.50 8,510.72 8,670.84 8,788.87 YoY Growth Revenue 6.46% 9.67% 6.71% 5.65% 6.15% 4.37% 1.88% 1.36%Cogs % 66.26% 66.71% 67.32% 67.50% 67.50% 67.50% 67.50% 67.50%SG&A % 22.61% 22.44% 22.66% 22.75% 23.00% 23.25% 23.50% 23.50%Number of Stores 642 694 741 777 822 852 867 872# of Stores Opened 52 47 36 45 30 15 5 Growth of Stores 8.1% 6.8% 4.9% 5.8% 3.6% 1.8% 0.6%Hardlines Rev per Store 4.30$ 4.31$ 4.40$ 4.45$ 4.45$ 4.50$ 4.50$ 4.50$ Apparel Rev per Store 3.40$ 3.55$ 3.45$ 3.45$ 3.45$ 3.45$ 3.45$ 3.50$ Footwaer Rev per Store 1.90$ 1.90$ 1.89$ 1.91$ 1.94$ 1.96$ 1.97$ 2.00$ Other Rev Per Store 0.07$ 0.06$ 0.07$ 0.07$ 0.08$ 0.08$ 0.08$ 0.08$ PV of Operating Leases 2,815.61 2,894.16 3,072.84 3,185.70 3,370.20 3,493.20 3,554.70 3,575.20 +PV of Interest on Op Leases 602.81 609.73 661.59 685.89 725.61 752.09 765.34 769.75 PV of Operating Leases/Stores 4.39 4.17 4.15 4.10 4.10 4.10 4.10 4.10 PV of Interest on Op Leases/PV of Op Leases 21.41% 21.07% 21.53% 21.53% 21.53% 21.53% 21.53% 21.53%

Dicks Sporting GoodsIncome StatementFiscal Years Ending Jan. 30 2013 2014 2015 2016E 2017E 2018E 2019E 2020EIncome StatementSales 6,213.17 6,814.48 7,270.97 7,682.09 8,154.50 8,510.72 8,670.84 8,788.87 COGS excluding D&A 4,116.60 4,545.98 4,894.48 5,185.41 5,504.29 5,744.73 5,852.82 5,932.49 Depreciation & Amortization 154.93 179.43 193.59 216.84 231.25 244.64 253.57 258.04Gross Income 1,941.65 2,089.07 2,182.89 2,279.84 2,418.96 2,521.34 2,564.45 2,598.35 SG&A Expense 1,404.84 1,529.04 1,647.70 1,747.68 1,875.54 1,978.74 2,037.65 2,065.38 EBIT (Operating Income) 536.81 560.03 535.19 532.16 543.43 542.60 526.80 532.96 Other Income (Expense) 12.22 19.60 -0.31 - - - - - Interest Expense 2.93 3.22 4.01 - - - - - Unusual Expense - Net 0.00 20.40 0.00 - - - - - Pretax Income 546.11 556.01 530.88 532.16 543.43 542.60 526.80 532.96 Income Taxes 208.51 211.82 200.48 200.97 205.22 204.91 198.95 201.27 Net Income 337.60 344.20 330.39 331.19 338.20 337.69 327.86 331.69 EPS (recurring) 2.69 2.96 2.83 3.11 3.22 3.30 3.29 3.42 Total Shares Outstanding 120.97 118.11 111.80 106.48 105.18 102.26 99.58 97.12Dividends per Share 0.50 0.50 0.55 0.61 0.64 0.67 0.70 0.72

Dicks Sporting GoodsBalance SheetFiscal Years Ending Jan. 30 2013 2014 2015 2016E 2017E 2018E 2019E 2020EAssetsCash & Short-Term Investments 181.73 221.68 118.94 189.95 389.00 478.77 575.69 712.97 Short-Term Receivables 68.05 94.59 66.83 70.68 75.02 78.30 79.77 80.86 Inventories 1,232.07 1,390.77 1,527.19 1,554.00 1,644.00 1,704.00 1,734.00 1,744.00 Other Current Assets 138.22 143.35 99.74 99.74 105.38 111.86 116.75 118.94 Total Current Assets 1,620.07 1,850.38 1,812.69 1,914.37 2,213.41 2,372.92 2,506.21 2,656.77 Net Property, Plant & Equipment 1,084.53 1,203.38 1,347.89 1,437.45 1,520.70 1,576.20 1,603.95 1,613.20Net Goodwill 200.59 200.59 200.59 200.59 200.59 200.59 200.59 200.59Net Other Intangibles 98.26 110.16 109.44 87.55 65.66 43.78 21.89 0.00Deferred Tax Assets 2.48 1.86 6.17 4.93 3.70 2.47 1.23 - Other Assets 65.56 69.81 82.56 87.23 92.59 96.64 98.46 99.80 Total Assets 3,071.49 3,436.20 3,559.34 3,732.13 4,096.66 4,292.60 4,432.33 4,570.36 Liabilities & Shareholders' EquityST Debt & Curr. Portion LT Debt 0.90 0.54 0.59 0.00 0.00 0.00 0.00 0.00Accounts Payable 562.44 614.51 677.86 729.80 774.68 808.52 823.73 834.94Income Tax Payable 19.83 73.85 39.84 39.93 40.78 40.71 39.53 39.99 Other Current Liabilities 419.42 429.93 473.39 500.15 530.91 554.10 564.53 572.21 Total Current Liabilities 1,002.59 1,118.83 1,191.68 1,269.88 1,346.37 1,403.34 1,427.79 1,447.15 Long-Term Debt* 6.48 5.91 5.32 0.00 0.00 0.00 0.00 0.00Deferred Tax Liabilities 38.62 44.49 6.45 5.16 3.87 2.58 1.29 - Other Liabilities 331.63 426.16 566.70 598.74 635.56 663.32 675.80 685.00 Total Liabilities 1,379.31 1,603.97 1,770.15 1,873.79 1,985.80 2,069.24 2,104.88 2,132.15 Common Equity 960.15 1,016.59 1,064.82 1,254.15 1,435.28 1,478.30 1,524.28 1,573.41Retained Earnings 1,187.51 1,471.18 1,737.21 2,003.98 2,275.37 2,544.85 2,802.97 3,064.59 Other Appropriated Reserves 0.02 -0.07 -0.18 - - - - - Treasury Stock -455.51 -655.47 -1,012.67 -1,399.79 -1,599.79 -1,799.79 -1,999.79 -2,199.79Total Shareholders' Equity 1,692.18 1,832.23 1,789.19 1,858.34 2,110.86 2,223.36 2,327.45 2,438.21 Total Liabilities & Shareholders' Equity 3,071.49 3,436.20 3,559.34 3,732.13 4,096.66 4,292.60 4,432.33 4,570.36 *Assume Debt is paid off due to small amount to make forecasting simpler, since these are not bonds nor line of credit

Dicks Sporting GoodsHistorical Cash Flow StatementFiscal Years Ending Jan. 30 2013 2014 2015 2016E 2017E 2018E 2019E 2020EOperating ActivitiesNet Income / Starting Line 337.60 344.20 330.39 331.19 338.20 337.69 327.86 331.69Depreciation, Depletion & Amortization 154.93 179.43 193.59 216.84 231.25 244.64 253.57 258.04Deferred Taxes & Investment Tax Credit 24.56 -6.26 9.24 -0.06 -0.06 -0.06 -0.06 -0.06Receivables -9.69 1.80 -6.41 -3.85 -4.35 -3.28 -1.47 -1.09Inventories -135.88 -158.70 -136.42 -26.81 -90.00 -60.00 -30.00 -10.00Accounts Payable 11.68 81.33 34.23 51.93 44.88 33.84 15.21 11.21Income Taxes Payable -13.36 32.48 7.16 0.10 0.85 -0.06 -1.19 0.46Other Assets/Liabilities 40.35 115.08 183.45 54.14 56.57 40.43 16.20 13.35Net Operating Cash Flow 403.87 605.98 643.51 623.49 577.35 593.20 580.13 603.60Investing ActivitiesCapital Expenditures -285.67 -349.01 -370.03 -284.52 -292.61 -278.25 -259.43 -245.40Net Investing Cash Flow -339.18 -305.02 -372.43 -284.52 -292.61 -278.25 -259.43 -245.40Financing ActivitiesCash Dividends Paid -64.43 -61.26 -64.72 -64.42 -66.82 -68.21 -69.74 -70.06Change in Capital Stock -212.12 -173.88 -336.66 -197.62 -18.87 -156.98 -154.02 -150.87Issuance/Reduction of Debt, Net 34.52 -30.18 28.58 -5.91 0.00 0.00 0.00 0.00Net Financing Cash Flow -228.09 -260.91 -373.72 -267.95 -85.68 -225.19 -223.77 -220.93

Net Change in Cash -163.48 39.95 -102.74 71.02 199.05 89.76 96.93 137.27Cash Beg. Year 345.21 181.73 221.68 118.94 189.95 389.00 478.77 575.69Change in BS Cash -163.48 39.95 -102.74 71.02 199.05 89.76 96.93 137.27Cash End. Year 181.73 221.68 118.94 189.95 389.00 478.77 575.69 712.97

Dicks Sporting GoodsCommon Size Income StatementFiscal Years Ending Jan. 30 2013 2014 2015 2016E 2017E 2018E 2019E 2020EIncome StatementSales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%COGS excluding D&A 66.26% 66.71% 67.32% 67.50% 67.50% 67.50% 67.50% 67.50%Depreciation & Amortization 2.49% 2.63% 2.66% 2.82% 2.84% 2.87% 2.92% 2.94%Gross Income 31.25% 30.66% 30.02% 29.68% 29.66% 29.63% 29.58% 29.56%SG&A Expense 22.61% 22.44% 22.66% 22.75% 23.00% 23.25% 23.50% 23.50%Other Operating Expense 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%EBIT (Operating Income) 8.64% 8.22% 7.36% 6.93% 6.66% 6.38% 6.08% 6.06%Nonoperating Interest Income 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Other Income (Expense) 0.20% 0.29% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Interest Expense 0.05% 0.05% 0.06% 0.00% 0.00% 0.00% 0.00% 0.00%Unusual Expense - Net 0.00% 0.30% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Pretax Income 8.79% 8.16% 7.30% 6.93% 6.66% 6.38% 6.08% 6.06%Income Taxes 3.36% 3.11% 2.76% 2.62% 2.52% 2.41% 2.29% 2.29%Net Income 5.43% 5.05% 4.54% 4.31% 4.15% 3.97% 3.78% 3.77%

Dicks Sporting GoodsBalance SheetFiscal Years Ending Jan. 30 2013 2014 2015 2016E 2017E 2018E 2019E 2020EAssetsCash & Short-Term Investments 2.92% 3.25% 1.64% 2.47% 4.77% 5.63% 6.64% 8.11%Short-Term Receivables 1.10% 1.39% 0.92% 0.92% 0.92% 0.92% 0.92% 0.92%Inventories 19.83% 20.41% 21.00% 20.23% 20.16% 20.02% 20.00% 19.84%Other Current Assets 2.22% 2.10% 1.37% 1.30% 1.29% 1.31% 1.35% 1.35%Total Current Assets 26.07% 27.15% 24.93% 24.92% 27.14% 27.88% 28.90% 30.23%Net Property, Plant & Equipment 17.46% 17.66% 18.54% 18.71% 18.65% 18.52% 18.50% 18.36%Net Goodwill 3.23% 2.94% 2.76% 2.61% 2.46% 2.36% 2.31% 2.28%Net Other Intangibles 1.58% 1.62% 1.51% 1.14% 0.81% 0.51% 0.25% 0.00%Deferred Tax Assets 0.04% 0.03% 0.08% 0.06% 0.05% 0.03% 0.01% 0.00%Other Assets 1.06% 1.02% 1.14% 1.14% 1.14% 1.14% 1.14% 1.14%Total Assets 49.44% 50.42% 48.95% 48.58% 50.24% 50.44% 51.12% 52.00%Liabilities & Shareholders' EquityST Debt & Curr. Portion LT Debt 0.01% 0.01% 0.01% 0.00% 0.00% 0.00% 0.00% 0.00%Accounts Payable 9.05% 9.02% 9.32% 9.50% 9.50% 9.50% 9.50% 9.50%Income Tax Payable 0.32% 1.08% 0.55% 0.52% 0.50% 0.48% 0.46% 0.46%Other Current Liabilities 6.75% 6.31% 6.51% 6.51% 6.51% 6.51% 6.51% 6.51%Total Current Liabilities 16.14% 16.42% 16.39% 16.53% 16.51% 16.49% 16.47% 16.47%Long-Term Debt 0.10% 0.09% 0.07% 0.00% 0.00% 0.00% 0.00% 0.00%Deferred Tax Liabilities 0.62% 0.65% 0.09% 0.07% 0.05% 0.03% 0.01% 0.00%Other Liabilities 5.34% 6.25% 7.79% 7.79% 7.79% 7.79% 7.79% 7.79%Total Liabilities 22.20% 23.54% 24.35% 24.39% 24.35% 24.31% 24.28% 24.26%CS Par + Addl Paid-in Cap 15.45% 14.92% 14.64% 16.33% 17.60% 17.37% 17.58% 17.90%Retained Earnings 19.11% 21.59% 23.89% 26.09% 27.90% 29.90% 32.33% 34.87%Other Appropriated Reserves 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Treasury Stock -7.33% -9.62% -13.93% -18.22% -19.62% -21.15% -23.06% -25.03%Total Shareholders' Equity 27.24% 26.89% 24.61% 24.19% 25.89% 26.12% 26.84% 27.74%Total Liabilities & Shareholders' Equity 49.44% 50.42% 48.95% 48.58% 50.24% 50.44% 51.12% 52.00%

Dicks Sporting GoodsValue Driver EstimationFiscal Years Ending Jan. 30 2013 2014 2015 2016E 2017E 2018E 2019E 2020E CVSales 6,213.17 6,814.48 7,270.97 7,682.09 8,154.50 8,510.72 8,670.84 8,788.87 COGS excluding D&A 4,116.60 4,545.98 4,894.48 5,185.41 5,504.29 5,744.73 5,852.82 5,932.49 Depreciation & Amortization 154.93 179.43 193.59 216.84 231.25 244.64 253.57 258.04 SG&A 1,404.84 1,529.04 1,647.70 1,747.68 1,875.54 1,978.74 2,037.65 2,065.38 +PV of Interest on Op Leases 125.71 129.80 133.42 141.66 146.86 155.37 161.04 163.87 EBITA 662.52 689.83 668.61 673.82 690.29 697.96 687.84 696.83

-40.89% 4.12% -3.08% 0.78% 2.44% 1.11% -1.45% 1.31%Pre Tax Income 546.11 556.01 530.88 532.16 543.43 542.60 526.80 532.96 Total Income Tax Provision (inc. tax) 208.51 211.82 200.48 200.97 205.22 204.91 198.95 201.27 Tax Rate = Pre Tax/Total Inc. Provision. 38.18% 38.10% 37.76% 37.76% 37.76% 37.76% 37.76% 37.76%Plus Tax Shield on Interest Expense 1.12 1.22 1.52 - - - - - Plus Tax on Lease Interest 48.00 49.45 50.39 53.50 55.46 58.67 60.82 61.89 Plus Tax Shield on Amortized Goodwill - 7.77 - - - - - - Minus Tax on Non-Operating Income (Plus in this formula) (Nonop Int. Income+Other Inc)

4.67 7.47 (0.12) - - - - - Less Adjusted Taxes 262.29 277.73 252.27 254.47 260.69 263.59 259.76 263.16 Plus Change in Deferred Taxes 33.11 6.49 (42.34) (0.06) (0.06) (0.06) (0.06) (0.06)Equals NOPLAT 433.33691 418.59678 374.00 419.30 429.54 434.32 428.02 433.62 NOPLAT Growth % -36.00% -3.40% -10.65% 12.11% 2.44% 1.11% -1.45% 1.31%Normal Cash (2% * Sales) 124.26 136.29 145.42 153.64 163.09 170.21 173.42 175.78 Short-Term Receivables 68.05 94.59 66.83 70.68 75.02 78.30 79.77 80.86 Inventory 1,232.07 1,390.77 1,527.19 1,554.00 1,644.00 1,704.00 1,734.00 1,744.00 Operating Current Assets 1,424.38 1,621.64 1,739.43 1,778.32 1,882.11 1,952.51 1,987.19 2,000.63 Accounts Payable 562.44 614.51 677.86 729.80 774.68 808.52 823.73 834.94 Income Tax Payable 19.83 73.85 39.84 39.93 40.78 40.71 39.53 39.99 Non Interest-Bearing Current Liabilities 582.26 688.36 717.70 769.73 815.45 849.23 863.26 874.93 Net Operating Working Capital 842.12 933.28 1,021.73 1,008.59 1,066.66 1,103.28 1,123.93 1,125.70 Plus Net PPE 1,084.53 1,203.38 1,347.89 1,437.45 1,520.70 1,576.20 1,603.95 1,613.20 PV of Operating Leases 2,815.61 2,894.16 3,072.84 3,185.70 3,370.20 3,493.20 3,554.70 3,575.20 Net Other Intangibles 98.26 110.16 109.44 87.55 65.66 43.78 21.89 - Other Current Assets 138.22 143.35 99.74 99.74 105.38 111.86 116.75 118.94 Other Assets 65.56 69.81 82.56 87.23 92.59 96.64 98.46 99.80 Plus Net Other Operating Assets 4,202.18 4,420.87 4,712.47 4,897.67 5,154.54 5,321.68 5,395.74 5,407.14 Less other Liab. (BS line items) 751.05 856.09 1,040.08 1,098.89 1,166.47 1,217.42 1,240.33 1,257.21 Invested Capital 4,293.25 4,498.06 4,694.12 4,807.37 5,054.73 5,207.53 5,279.34 5,275.63 WACC 12.48% 11.24% 5.39% 5.39% 5.39% 5.39% 5.39% 5.39% 5.39%NOPLAT 433.34 418.60 374.00 419.30 429.54 434.32 428.02 433.62 437.95 Beg Invested Capital 3,936.87 4,293.25 4,498.06 4,694.12 4,807.37 5,054.73 5,207.53 5,279.34 5,275.63 End Invested Capital 4,293.25 4,498.06 4,694.12 4,807.37 5,054.73 5,207.53 5,279.34 5,275.63 ROIC (NOPLAT/Beg IC) 11.01% 9.75% 8.31% 8.93% 8.94% 8.59% 8.22% 8.21% 8.30%FCF (NOPLAT - Change in IC) 76.97 213.78 177.94 306.05 182.19 281.52 356.21 437.33 EP (Beg IC * (ROIC-WACC)) (57.98) (63.96) 131.53 166.26 170.40 161.85 147.31 149.04 153.57

Dicks Sporting GoodsWeighted Average Cost of Capital (WACC) Estimation

2015Risk Free Rate (30yr T-Bond as of 3/31/16) 2.61%Market Risk Premium (Henry Fund Team Choice) 5.00%Beta (Bloomberg) 0.851 Cost of Equity (Risk Free + (Beta * Mkt Risk) 6.87%Cost of Debt (From the longest maturity USD Bond) 4.61%Cost of Preferred Shares 0Marginal Tax Rate (Effective) 37.76%Total Shares Outstanding 111.80 Price 47.09$ Mkt Value of Equity ( E ) 5,264.66$ FMV of Debt 6$ Operating Leases (PV) 3,072.84$ Mkt Value of Debt ( D ) 3,079$ Mkt Value of Preferred (Pfd) -$

Mkt Value of Firm (E+D+PfD) (V) 8,343.41$ Equity Portion of WACC (Cost of Equity * E/V) 4.33%Debt Portion of WACC (cost of Debt* (1-t) * D/V) 1.06%Preferred Portion of WACC (Cost of Preferred * Pfd/V) -$ WACC 5.39%

Dicks Sporting GoodsDiscounted Cash Flow (DCF) and Economic Profit (EP) Valuation ModelsKey Inputs: CV NOPLAT Growth 1.00% Beg IC 2016 4,694.12 CV ROIC 8.50% Shares Outstanding 111.80 WACC 5.39% Cost of Equity 6.87%Fiscal Years Ending Jan. 30 2016E 2017E 2018E 2019E 2020E CV (Beg 2021)DCF ModelNOPLAT 419.30 429.54 434.32 428.02 433.62 437.95 Beg IC 4,694.12 4,807.37 5,054.73 5,207.53 5,279.34 5,275.63 End IC 4,807.37 5,054.73 5,207.53 5,279.34 5,275.63 ROIC 8.93% 8.94% 8.59% 8.22% 8.21% 8.50%DCF CV (NOPLAT*(1- g/ROIC)/(WACC-g)) 8,801.56 FCF (NOPLAT - Change in IC) 306.05 182.19 281.52 356.21 437.33 PV of FCF 290.39 164.03 240.49 288.74 336.36 6,769.44 V of Oper (Sum of PV of FCF) 8,089.45 Cash 118.94 Normal Cash (Sales * Normal Cash %) (2%) 145.42 Excess Cash (Cash-Normal Cash) - V of Non-Oper - -V of Debt = FMV of Debt (From WACC sheet) 3,078.75 -PV of ESOP 89.51 V of Equity 4,921.19 Shares Outstanding 111.80 Target Price (V of Equity/Shares) 44.02$ To Today's Value 44.60$ EP ModelNOPLAT 419.30 429.54 434.32 428.02 433.62 437.95 Beg IC 4,694.12 4,807.37 5,054.73 5,207.53 5,279.34 5,275.63 End IC 4,807.37 5,054.73 5,207.53 5,279.34 5,275.63 ROIC 9% 9% 9% 8% 8% 8%EP CV 3,497.87 EP (Beg IC * (ROIC-WACC)) 166.26 170.40 161.85 147.31 149.04 153.57 Discounted EP 157.76 153.42 138.26 119.41 114.63 2,690.28 V of Oper (Beg IC 2015 + Sum of PV of EP) 8,067.87 V of Non-Oper - -V of Debt = FMV of Debt (From WACC sheet) 3,078.75 -PV of ESOP 89.51 V of Equity 4,899.60$ Shares Outstanding 111.80 Target Price (V of Equity/Shares) 43.82$ To Today's Value 44.40$ For Discounting:Number of Periods 1 2 3 4 5Today 3/31/2016Elapsed Year Fraction 0.249

Dicks Sporting GoodsDividend Discount Model (DDM) or Fundamental P/E Valuation Model

1 2 3 4 5Fiscal Years Ending Jan. 30 2016E 2017E 2018E 2019E 2020EEPS 3.11$ 3.22$ 3.30$ 3.29$ 3.42$ Key AssumptionsGrowth 9.95% 3.38% 2.70% -0.30% 3.73%CV Growth 3.25%ROE 17.78% 15.69% 15.21% 14.51% 13.45%Cost of Equity 6.87% 6.87% 6.87% 6.87% 6.87%Future Cash FlowsP/E Multiple (CV Year) 23.04 EPS (CV Year) 3.53$ Future Stock Price 97.54$ Dividends Per Share 0.61$ 0.64$ 0.67$ 0.70$ 0.72$ Discounted Cash Flows 0.57$ 0.56$ 0.55$ 0.54$ 70.50$ Intrinsic Value 72.71$ To Today's Price 73.67$

Dicks Sporting GoodsRelative Valuation ModelsDirect Competitors

EPS EPS Est. 5yrTicker Company Price 2016E 2017E P/E 16 P/E 17 EPS gr. PEG 16 PEG 17BBY Best Buy $32.44 $2.87 $3.09 11.3 10.5 10.2 1.11 1.03 BBBY Bed Bath & Beyond $49.64 $5.00 $5.12 9.9 9.7 6.2 1.60 1.56 ODP Office Depot $7.10 $0.47 $0.51 15.1 13.9 26.0 0.58 0.54 BGFV Big 5 Sporting Goods $11.11 $0.71 $0.75 15.6 14.8 12.5 1.25 1.19 BKS Barnes & Noble $12.36 $0.33 $0.62 37.5 19.9 10.0 3.75 1.99 CAB Cabela $48.69 $3.18 $3.56 15.3 13.7 12.7 1.21 1.08 HIBB Hibbett Sports Inc. $32.61 $3.00 $3.19 10.9 10.2 9.7 1.12 1.05

Average 16.5 13.3 1.5 1.2 DKS Dicks Sporting Goods $47.09 3.11 3.22 15.1 14.6 3.8 3.9 3.8

Implied Value: Relative P/E (EPS16) $ 51.37 Relative P/E (EPS17) 42.61$ PEG Ratio (EPS16) 18.10$ PEG Ratio (EPS17) 14.88$

Dicks Sporting GoodsSensitivity Analysis

DCF Target Price 44.40$ As of 3/31/2016

0.451 0.551 0.651 0.751 0.851 0.951 1.051 1.151 1.251 2.50% 3.00% 3.50% 4.00% 4.61% 5.00% 5.50% 6.00% 6.50%2.00% 89.40 77.03 66.98 58.64 51.62 45.61 40.43 35.90 31.92 38.00% 46.12 45.74 45.45 45.24 45.08 45.02 45.00 45.02 45.08 2.15% 85.40 73.80 64.32 56.41 49.72 43.98 39.00 34.65 30.81 39.00% 45.89 45.51 45.22 45.01 44.85 44.79 44.77 44.79 44.86 2.30% 81.66 70.76 61.79 54.28 47.90 42.41 37.64 33.45 29.74 40.00% 45.65 45.27 44.99 44.78 44.62 44.56 44.54 44.57 44.63 2.45% 78.15 67.89 59.40 52.26 46.17 40.91 36.32 32.29 28.71 41.00% 45.49 45.11 44.83 44.62 44.47 44.41 44.39 44.41 44.48 2.60% 74.64 65.00 56.99 50.21 44.40 39.37 34.97 31.09 27.65 42.00% 45.42 45.04 44.76 44.56 44.40 44.35 44.33 44.35 44.42 2.75% 71.75 62.61 54.97 48.49 42.92 38.08 33.84 30.09 26.75 43.00% 45.34 44.97 44.69 44.49 44.34 44.28 44.26 44.29 44.36 2.90% 68.82 60.18 52.92 46.73 41.40 36.75 32.66 29.04 25.81 44.00% 45.27 44.90 44.62 44.42 44.27 44.22 44.20 44.23 44.30 3.05% 66.06 57.87 50.96 45.05 39.93 35.47 31.53 28.03 24.91 45.00% 45.20 44.83 44.56 44.36 44.20 44.15 44.14 44.17 44.24 3.20% 63.45 55.67 49.09 43.43 38.53 34.23 30.43 27.06 24.03 46.00% 45.13 44.76 44.49 44.29 44.14 44.09 44.07 44.10 44.18

30.00% 32.00% 35.00% 36.00% 37.76% 38.00% 39.00% 40.00% 41.00% 0.00% 0.25% 0.50% 0.75% 1.00% 1.25% 1.50% 1.75% 2.00%4.00% 63.76 61.52 58.09 56.93 54.85 54.57 53.38 52.17 50.95 22.50% 46.82 48.27 49.87 51.64 53.61 55.82 58.31 61.15 64.41 4.25% 60.69 58.50 55.14 54.01 51.97 51.70 50.53 49.36 48.17 22.75% 44.94 46.30 47.80 49.46 51.31 53.38 55.72 58.37 61.43 4.50% 57.81 55.67 52.38 51.27 49.29 49.02 47.88 46.73 45.57 23.00% 43.07 44.33 45.73 47.28 49.00 50.94 53.12 55.60 58.44 4.75% 55.11 53.01 49.80 48.71 46.77 46.51 45.39 44.27 43.14 23.25% 41.19 42.37 43.67 45.10 46.70 48.50 50.52 52.82 55.46 5.00% 52.57 50.51 47.36 46.30 44.40 44.15 43.06 41.96 40.85 23.50% 39.32 40.40 41.60 42.92 44.40 46.06 47.92 50.05 52.48 5.25% 50.17 48.16 45.08 44.03 42.18 41.93 40.86 39.79 38.70 23.75% 37.44 38.44 39.53 40.75 42.10 43.61 45.32 47.27 49.50 5.50% 47.91 45.93 42.92 41.90 40.08 39.83 38.79 37.74 36.68 24.00% 35.57 36.47 37.47 38.57 39.80 41.17 42.73 44.49 46.52 5.75% 45.77 43.83 40.88 39.88 38.10 37.86 36.84 35.81 34.78 24.25% 33.69 34.50 35.40 36.39 37.49 38.73 40.13 41.72 43.54 6.00% 43.74 41.85 38.95 37.97 36.22 35.99 34.99 33.99 32.97 24.50% 31.82 32.54 33.33 34.21 35.19 36.29 37.53 38.94 40.56

1.00 1.25 1.50 1.75 2.00 2.25 2.50 2.75 3.00 0.00% 0.50% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00%67.10% 56.89 54.69 52.49 50.29 48.08 45.88 43.68 41.48 39.27 67.10% 41.31 44.54 48.33 58.24 73.28 98.82 151.75 327.05 (2,094.69) 67.20% 55.97 53.77 51.57 49.37 47.16 44.96 42.76 40.56 38.35 67.20% 40.71 43.90 47.63 57.38 72.19 97.33 149.44 322.03 (2,062.24) 67.30% 55.05 52.85 50.65 48.44 46.24 44.04 41.84 39.63 37.43 67.30% 40.11 43.25 46.92 56.53 71.10 95.85 147.14 317.01 (2,029.80) 67.40% 54.13 51.93 49.73 47.52 45.32 43.12 40.92 38.71 36.51 67.40% 39.52 42.60 46.22 55.67 70.01 94.36 144.83 312.00 (1,997.35) 67.50% 53.21 51.01 48.81 46.60 44.40 42.20 40.00 37.79 35.59 67.50% 38.92 41.96 45.51 54.81 68.92 92.88 142.53 306.98 (1,964.90) 67.60% 52.29 50.09 47.88 45.68 43.48 41.28 39.07 36.87 34.67 67.60% 38.33 41.31 44.81 53.95 67.83 91.39 140.22 301.96 (1,932.45) 67.70% 51.37 49.17 46.96 44.76 42.56 40.36 38.15 35.95 33.75 67.70% 37.73 40.66 44.10 53.09 66.74 89.90 137.92 296.95 (1,900.00) 67.80% 50.45 48.25 46.04 43.84 41.64 39.44 37.23 35.03 32.83 67.80% 37.13 40.02 43.40 52.23 65.65 88.42 135.61 291.93 (1,867.56) 67.90% 49.53 47.32 45.12 42.92 40.72 38.52 36.31 34.11 31.91 67.90% 36.54 39.37 42.69 51.38 64.55 86.93 133.31 286.91 (1,835.11)

73.67$ As of 3/31/2016

SG&A Expense/Revenue

(Final Year)

Terminal Cogs/Rev

Pre-Tax Cost of Debt

Normal Cash %

Beta

Inventory to Rev (Last year)

Risk Free Rate

Tax Rate

Market Risk Rate

NOPLAT CV Growth

CV Div Growth

Terminal Cogs/Rev

DDM Target Price

Dicks Sporting GoodsKey Management Ratios

Fiscal Years Ending Jan. 30 2013 2014 2015 2016E 2017E 2018E 2019E 2020ELiquidity RatiosCurrent Ratio = Current Assets/Current Liabilities 1.62 1.65 1.52 1.51 1.64 1.69 1.76 1.84 Current Ratio ex Cash = Curr Assets ex Cash/Curr Liab 1.43 1.46 1.42 1.36 1.36 1.35 1.35 1.34 Quick Ratio = (Cash+Marketable Securities+Accounts Receivables)/Current Liabilities 0.39 0.41 0.24 0.28 0.42 0.48 0.54 0.63 Quick Ratio ex Cash 0.21 0.21 0.14 0.13 0.13 0.14 0.14 0.14 Operating Cash Flow Ratio = Cash Flow From Operations/Current Liabilities 0.40 0.54 0.54 0.49 0.43 0.42 0.41 0.42 Activity or Asset-Management RatiosTotal Assets Turnover = Sales/Total Assets 2.02 1.98 2.04 2.06 1.99 1.98 1.96 1.92 Total Assets Turnover ex Cash 2.15 2.12 2.11 2.17 2.20 2.23 2.25 2.28 Inventory Turnover 3.34 3.27 3.20 3.34 3.35 3.37 3.38 3.40 Financial Leverage RatiosDebt Ratio = Total Liab/Total Assets 44.91% 46.68% 49.73% 50.21% 48.47% 48.20% 47.49% 46.65%Debt Ratio ex Cash 47.73% 49.90% 51.45% 52.90% 53.56% 54.26% 54.58% 55.27%Equity Ratio = Total Equity/Total Assets 55.09% 53.32% 50.27% 49.79% 51.53% 51.80% 52.51% 53.35%Equity Ratio ex Cash 58.56% 57.00% 52.01% 52.46% 56.93% 58.30% 60.35% 63.21%Profitability RatiosGross Margin Ratio= (Sales-COGS-SG&A)/Sales 11.13% 10.85% 10.02% 9.75% 9.50% 9.25% 9.00% 9.00%Profit Margin Ratio = Net Income/Sales 5.43% 5.05% 4.54% 4.31% 4.15% 3.97% 3.78% 3.77%ROA = Net Income/Avg Total Assets 11.33% 10.58% 9.45% 9.08% 8.64% 8.05% 7.52% 7.37%ROE= Net Income/Shareholder Equity 19.95% 18.79% 18.47% 17.82% 16.02% 15.19% 14.09% 13.60%

Payout Policy RatiosDividend Payout Ratio 19.09% 17.80% 19.59% 19.45% 19.76% 20.20% 21.27% 21.12%Payout Ratio = Div+Repurchase/Net Income 94.78% 75.89% 127.70% 136.34% 78.89% 79.43% 82.27% 81.42%

Effects of ESOP Exercise and Share Repurchases on Common Stock Balance Sheet Account and Number of Shares OutstandingNumber of Options Outstanding (shares): 3.97Average Time to Maturity (years): 1.89Expected Annual Number of Options Exercised: 2.10Current Average Strike Price: 24.99$ Cost of Equity: 6.87%Current Stock Price: $47.09

2016E 2017E 2018E 2019E 2020E 2021E 2022EIncrease in Shares Outstanding: 2.10 1.87 0.00 0.00 0.00Average Strike Price: 24.99$ 24.99$ 24.99$ 24.99$ 24.99$ Increase in Common Stock Account: 53 47 - - - Change in Treasury Stock 387 200 200 200 200Expected Price of Repurchased Shares: $47.09 50.32$ 53.78$ 57.47$ 61.41$ Number of Shares Repurchased: 8.22 3.97 3.72 3.48 3.26 Shares Outstanding (beginning of the year) 111.80 106 105 102 100Plus: Shares Issued Through ESOP 2.10 1.87 0.00 0.00 0.00Plus Estimated New Grants 0.80 0.80 0.80 0.80 0.80Less: Shares Repurchased in Treasury 8.22 3.97 3.72 3.48 3.26 Shares Outstanding (end of the year) 106.48 105.18 102.26 99.58 97.12

Dicks Sporting GoodsValuing LeasesPresent Value of Operating Lease Obligations 2015 Present Value of Operating Lease Obligations 2014 Present Value of Operating Lease Obligations 2013 Present Value of Operating Lease Obligations 2012

Operating Operating Operating OperatingFiscal Years Ending Jan. 30 Leases Fiscal Years Ending Jan. 30 Leases Fiscal Years Ending Jan. 30 Leases Fiscal Years Ending Jan. 30 Leases2016 536.011 2015 505.519 2014 469.583 2013 432.3292017 532.823 2016 511.223 2015 479.56 2014 442.8612018 482.351 2017 470.053 2016 456.977 2015 430.2192019 430.619 2018 416.897 2017 415.395 2016 407.2432020 382.222 2019 363.854 2018 362.633 2017 365.614Thereafter 1370.404 Thereafter 1236.347 Thereafter 1234.277 Thereafter 1245.643Total Minimum Payments 3734.430 Total Minimum Payments 3503.893 Total Minimum Payments 3418.425 Total Minimum Payments 3323.909Less: Interest 661.59 Less: Interest 609.73 Less: Interest 603 Less: Interest 597PV of Minimum Payments 3072.84 PV of Minimum Payments 2894.16 PV of Minimum Payments 2816 PV of Minimum Payments 2727

Capitalization of Operating Leases Capitalization of Operating Leases Capitalization of Operating Leases Capitalization of Operating LeasesPre-Tax Cost of Debt 4.61% Pre-Tax Cost of Debt 4.61% Pre-Tax Cost of Debt 4.61% Pre-Tax Cost of Debt 4.61%Number Years Implied by Year 6 Payment 3.6 Number Years Implied by Year 6 Payment 3.4 Number Years Implied by Year 6 Payment 3.4 Number Years Implied by Year 6 Payment 3.4

Lease PV Lease Lease PV Lease Lease PV Lease Lease PV LeaseYear Commitment Payment Year Commitment Payment Year Commitment Payment Year Commitment Payment1 536.011 512.4 1 505.519 483.2 1 469.583 448.9 1 432.329 413.32 532.823 486.9 2 511.223 467.2 2 479.56 438.2 2 442.861 404.73 482.351 421.4 3 470.053 410.6 3 456.977 399.2 3 430.219 375.84 430.619 359.6 4 416.897 348.1 4 415.395 346.9 4 407.243 340.15 382.222 305.1 5 363.854 290.4 5 362.633 289.5 5 365.614 291.86 & beyond 382.222 987.5 6 & beyond 363.854 894.6 6 & beyond 362.633 893.0 6 & beyond 365.614 901.1PV of Minimum Payments 3072.84 PV of Minimum Payments 2894.16 PV of Minimum Payments 2815.6 PV of Minimum Payments 2726.8

Final calcs in (Millions)

VALUATION OF OPTIONS GRANTED IN ESOP

Ticker Symbol DKSCurrent Stock Price $47.09Risk Free Rate 2.61%Current Dividend Yield 1.21%Annualized St. Dev. of Stock Returns 29.55%

Average Average B-S ValueRange of Number Exercise Remaining Option of OptionsOutstanding Options of Shares Price Life (yrs) Price GrantedUnvested 1,421,208 17.03 2.57 29.78$ 42,323,828$ Vested/Exercisable 2,553,304 29.42 1.51 18.48$ 47,187,788$ Total 3,974,512 24.99$ 1.89 23.56$ 89,511,616$

89.51$