Opinions Stockchase Insights
Dick's Sporting GoodsDKSHOLDAug 25, 2023
Stockchase InsightsStock price when the opinion was issued
As of Oct 02, 2026. Market Open.
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He bought more. It cratered 20% after reporting, so he added more, then had a nice recovery. Then it traded at $122. He still felt DKS has the market to themselves and likes their partnerships with people like Meta. And the stock is not expensive. DKS is being hurt by the oil price and consumer trends. Eventually DKS will be a winner.
She bought more. It's 11% below highs. Their last numbers were really good with the core business humming, same-store sales +5% vs. 6.4% last year, and guided higher and increasing market share. One problem is Foot Locker, which is a disaster, but they took a charge and are right-sizing and improving inventory. They will turn around Foot Locker. It could take a while, but they will turn around.
It's insane that shares dropped 10% this morning after they reported. They reported 4.5% same-store sales growth, beating, net sales also beat as well as EPS. Margins also expanded and raised their guidance. Shares fell because they raised guidance to where the street already was looking for, and their full-year forecast implies a slowdown in the back half of the year (2.5-3.5% same-store sales growth vs. the just-posted 4.5% growth). Also, the company has been investing in long-term growth and will double-down on that investment, but that will eat into earnings. He thinks that's great, but no some investors. This pullback is a buying opportunity. Among tailwinds is their app which boasts over 6 million users.
DKS is very cheap now at 9X earnings. The dividend of 3.6% has shown good growth. While many retailers are experiencing consumer slowdowns, DKS has a 'theft' issue. Theft is the driving force behind Dick's Sporting Goods' 23% EPS drop in 2Q and lowered guidance for the full year, as sales trends were only slightly below expectations in the quarter. Management's revised outlook for fiscal 2023 non-GAAP EPS suggests growth of about 2.5% in 2H vs. 1H's 4% decline as the retailer remains focused on maintaining elevated gross margin, implements a cost-cutting plan and expands its store footprint. Gains in 2H may be more heavily weighted toward seasonally strong 4Q vs. 3Q. The company's unchanged projection for same-store sales to be flat to 2% higher this fiscal year suggests further deceleration in 2H from 2Q's 1.8%, which marked a four-quarter low, as year-over-year comparisons get tougher. Short sellers do often 'pick on' weakness, and it is likely also a short target just for its consumer exposure, as many short sellers expect a recession. Short interest is 12% now. The balance sheet is fine, and we do not think recent issues are fatal. It is priced well, but a recovery is going to take some patience. We would consider it a HOLD.
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