Dick's Sporting Goods (DKS) shares are putting in the green Tuesday morning after reporting a third-quarter earnings beat. The sports retailer raised its full-year outlook after putting up with retail theft concerns and profit pull-backs in 2023.

Wells Fargo Equity Research Analyst Will Gaertner calls this earnings report very important for the brand, pointing to its private label brands as a big margin driver for retail customers.

"Look, they clearly have momentum going into the holiday," Gaertner tells Yahoo Finance.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

SEANA SMITH: Retail theft concerns and heavy markdowns have caused a 23% drop in profits in the second quarter. Now, the company is excited about the holiday season following a strong back to school demand.

Our next guest is a bit wary of Dick's chances here going into this report. Let's see how he feels now following these results. We want to bring in Wells Fargo equities research analyst Will Gaertner. Will, it's great to see you here. So certainly, a quarter that maybe many in The Street had not been anticipating here. Pretty strong results comparatively for Dick's. How do you think this sets up this retailer for the current quarter and then looking ahead to 2024?

WILL GAERTNER: Yeah. Thanks for having me. Look, this was no doubt a very positive print for them. This is probably one of the first steps for investors to get re-engaged after that in 2Q. The stock got clobbered after they missed gross margin.

Look, they clearly have momentum going into the holiday. And interestingly, we cut numbers going into the print, given the weak data, credit card, and traffic data. So they bucked that trend in this quarter. So we'll see what happens in the holiday. Obviously, the most important quarter for them.

BRAD SMITH: Will, when you think across the Dick's sporting goods operation, and the number of storefronts and the inventory mix, what do they get right about this quarter with that inventory mix?

WILL GAERTNER: Yeah. Look, they've pivoted to more soft launch stuff. They've created these new footwear pads. So they're full service now. I think that's really helping driving their footwear offering. Their private label offering too is highly sought after too. And that's a big margin driver as well for them.

- Will, is it part of the reality here where Dick's sporting goods that there's really no other place to buy sporting goods? And this is a company that continues to capitalize on what is really darn near close to monopoly.

WILL GAERTNER: I would push back on that a little bit. You have people like Academy Sports, actually, which we prefer over Dick's, that are really starting to grow their store base. They have a lot more square footage opportunity than Dick's.

Dick's, arguably, you could call them saturated at this point. They have close to 800 plus stores across their banners. And I think their square footage opportunity is less so than a lot of these emerging sporting goods places like Academy.