Ca$htag$: Dick’s Sporting Goods (DKS) Solid But Lagging Competitors

0:00Welcome back to Fast Mark here on the show of Network. I'm Diane King Hall, alongside Tom White and our Chicago studio. Time now for our cash check segment for that. Let's bring in our next guest and that is Landon Swan, co-founder of Lake Folio. We're taking a look at Dick's sporting goods today. All right, Landon, so I looked at your charts. I get it, obviously, on the sentiment versus stock, but these other companies, I was like, I don't even have it sports. Where is that? But let's get into it. What does the competitive landscape look like based on your latest data? Well, I tell you, it's tough. I mean, Dick's is such a dominant player that, you know, you got to pull in some competition to kind of see, you know, how they're doing relative to the space. Because when you just throw up, Dick's and say, you know, they're up 13% on the year of your basis, that sounds great. But the fact is that they've got a lot of tailwinds helping them out. And this is just a general strength in the sector. And of their competition, they're actually last, which is interesting, because you look at some of these like you talked about hybrid sports and some of the others, they're doing better.

1:01So it's kind of just a little side note that we have to talk about, because all of our data is fairly strong for Dick's. And when you look at, you can see the competition here in Hibits doing very well. Academies, you know, doing strong sports with warehouse, also doing well. And then Dick's, you know, plus 13, I think most companies would take plus 13, they'd be happy with that. But again, compare it to the landscape, and it's not so good. But they've got a big trend that we're seeing as youth sports. That is trending up significantly. And of course, that's going to help Dick's and all of these. And so that's just been kind of rising for like the last two or three years. Just continues to get stronger and stronger. And people are actually, you know, when we dig into the sentiment around youth sports, people are prioritizing that over some other things. Even people talking about, you know, vacations come after the youth sports fees. So debate that off air if you want, but that's the thing that we're seeing happening. And then, you know, when we talk about, you know, Dick's overall, obviously a lot of the eyes with investors go to the foot locker acquisition.

2:02And I think this is maybe the second report after they're, they're closing. And the stock has been fairly lackluster since that close in September. I mean, it's just been slowly drifting down. I think we're 195 now or so. We had highs up near 240. So this has, you know, been fairly disappointing for investors and they're just kind of waiting to see what happens. And, you know, I think that the strategy is pretty clear. I mean, they, they have to clear the margin, clear the, clear the inventory, which is going to cut margins significantly at foot locker. They just got a little pain, right? They got to rip the bandaid off and get that integration fully done by the summer. And that's what everyone's looking at. But that's going to take their exposure in number of stores from around 850 to around 3000. So they're going to have a huge exposure to clients. They're going to have vendor leverage. They're going to have some weaker margins because of the nature of the beast. They're going to have more dependence on Nike. But they also have some cost synergies that they'll be able to cut some costs between the two companies where they overlap. So there's a lot of pros and cons

3:04and I think everyone's trying to figure out exactly how powerful this, this acquisition is because, you know, you guys can recall when we talked about foot locker, it was, it was kind of ups and downs all the time. And it was always a threat of Nike going around them direct to consumer that didn't really pan out very well. If they look or got some strength and then they got bought out. And so we'll see how this plays out. But overall, the data that we have on Dix is strong as is most of our retail data, especially with this last holiday quarter. Looks like people were really prioritizing sports and sports as gifts for either, you know, their friends and family, but also for like nieces and nephews, things like that. So it was all about those youth sports and it was a very strong holiday quarter for most of retail, Dix included, but Dix isn't the strongest of the sector. So a little mixed bag from like folio on Dix. I think, you know, you look at Academy sports and Hibbit. Those are the smaller, you know, basically regional type of outlets here, land in. This is still the 800 pound gorilla in the room.

4:04One of the interesting things that I saw was the fact that, you know, the data that you guys have, the stock price has been kind of moving to the downside. We're at levels we haven't seen since last June, basically. And I don't know. It seemed like you guys always had pretty positive data on Dix. Has that turned recently in the last couple quarters or is this maybe a bad trend? And that's why the stock's kind of been in the doldrums. Yeah, I mean, you can see it, if you bring up that chart of our data versus the stock price, it was kind of weakening for quite a while until this last quarter. I mean, if you look at that, it's lower highs and mostly lower lows. And then all of a sudden, this last holiday quarter was just a huge spike. And so that's kind of, you know, caught our eye, obviously this is what they're reporting on now. And obviously that's going to be fairly bullish. I don't know how much of that is priced in. I think that, you know, a lot of retail has done well so far. And so I think probably investors are expecting something good coming out of Dix sporting goods

5:06on this earnings report. But I think they may be surprised at how well the holiday quarter went. But again, it could be overshadowed by questions about footlocker integration and all of that. And, you know, how are they doing compared to their competition? Nobody's, you know, actively going to, you know, sell Dix sporting goods to go by Hibbit, for example. I mean, it's the big one, right? Everybody else is sort of regional. They're the main player. But we throw them into as sort of a bellweather to just give you an idea, because there's just nobody that can really compare to them. But yeah, I think that the data has been trending lower for a little while. And then all of a sudden, snap. This last holiday quarter was just off the charts positive. And I want to ask you this, because I'm one of those households that's definitely, you know, for over the holidays. I went to Dix for my nephew. I have to buy lots of sports stuff or get sports stuff for my son. And to your point about sports trips basically come before vacation. That's true. We got that coming up. The sports market's growing, right? It's growing at about 10 per-use sports market,

6:07about 10% per year, topping 40 billion. And now I know on this, we're just comparing what will be, I guess, like for like. But I'm curious to know if you have thoughts on where Amazon fits into this equation. Because sports, sports stuff, I went to Dix and Amazon. What's your thought on that? I know it's not an apples to apples, but I'm curious to know if you have any insight. Sure, yeah, so it's fairly tough for us to break out visits to Amazon and what exactly people are purchasing. But we can go qualitative and we dig into that kind of what people are saying. And a lot of the times when it comes to something that's easy to replicate, you go to Amazon, but if you're not sure and you want to look around, touch and feel, and see what maybe, you know, maybe try something on or swing the golf club or pick up the weight or hold the basketball or whatever, that's where people are talking about going to Dix. And a lot of people, they, a lot of the gift buyers went there because they weren't sure. They say, well, you know, my nephew plays baseball. I want to go get something for baseball.

7:07So they go, they go to the baseball section, they're clueless, they wave somebody down. They describe the nephew, next thing you know, they're walking out with whatever, new glove, a new bat. And so I think that a lot of it is discovery, which obviously you can't do at Amazon, you can't walk the aisles. And so I think that's the strength for them is that they have such an impressive experience when you walk in that you can see all the different options. You can talk to somebody that knows what they're talking about. Whereas if, you know, Amazon, if you know exactly what you want, you know, that's where you go, you price shop, you get it delivered tomorrow. So I think that's the big difference that the Dix has an advantage on. Hey, Landon, real quick here, you know, this stock hit all time highs at the, you know, started 2025 at 254 bucks a share. I mean, we're about 60 bucks below that right now. Are you, do you guys have a good earning score going into this one because it seems like the bar is relatively low right now? Yeah, the bar is fairly low. And I think that's super important for investors to realize is, you know, even if you just go back to September, October, we're 240 or 237. And now we're drifting down to what do we 197 right now?

8:09So it is definitely lowered. The earning score on this one is a plus 44. So I would say that we're bullish kind of cautiously bullish in that they've got these other, you know, you got the footlocker stuff weighing in. If it was just a pure play, where footlocker wasn't involved, that'd be a lot more bullish because we don't know how that's going to go, that are that call and those questions. But overall, they've got the momentum behind them. You know, they've got all kinds of different things that they're getting into with the golf galaxies doing well, game changer app for youth sports, the Dix Media Network, they've got the house of sport. Those locations are launching. They're going to have up to 100 in the next two years. So they're doing a lot of cool things, they're getting a lot of good buzz. But overall, just the core business is producing a plus 44 on our earning score, especially when you compare it to that drifting stock price to the lower. So yeah, we're definitely bullish heading into this one. All right, thank you, Landon. That's Landon Swan, co-founder of Lake Folio with the Lookcross Dix Sporting Goods.