DKS

Nike’s Revenue Under Pressure

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Image: Nike’s shares have languished of late, and a comeback will take some time. By Brian Nelson, CFA On June 27, Nike (NKE) reported disappointing fourth quarter fiscal 2024 results and issued an outlook for fiscal 2025 that came up short relative to expectations. Revenue in the quarter fell 2%, missing the consensus estimate, but was flat on a currency-neutral basis. Revenue for its Nike brand advanced 1% on a currency-neutral basis, while Nike direct revenue fell 7% on a currency-neutral basis. Wholesale revenue was up 8% on a currency-neutral basis, while revenues for Converse dropped 17% on a currency-neutral basis. Nike’s guidance for 2025 wasn’t very encouraging. Here’s what the executive team said on the conference call: Now let … Read more

Dick’s Sporting Goods Puts Up Strong First Quarter, Raises Guidance

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Image: Dick’s Sporting Goods’ guidance pleased investors. Image Source: Dick’s Sporting Goods. By Brian Nelson, CFA On May 29, Dick’s Sporting Goods (DKS) reported excellent first quarter results that beat expectations on both the top and bottom lines. Net sales in the quarter advanced 6.2% on a year-over-year basis, while the company put up 5.2% in comparable store sales expansion (well above consensus expectations). Dick’s Sporting Goods delivered strong profitability in the quarter with a double-digit EBT (income before taxes) margin of 11.3%, as well as reported earnings per share of $3.30 on 4% EBT growth (above the Street forecast). The executive team was upbeat with their commentary in the press release: Our strong first quarter results continue to prove … Read more

Dick’s Sporting Goods Soars, Raises Dividend 10%

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Image: Dick’s Sporting Goods’ shares have soared since the doldrums of the COVID-19 meltdown. By Brian Nelson, CFA On March 14, Dividend Growth Newsletter portfolio holding Dick’s Sporting Goods (DKS) reported better-than-expected top and bottom-line performance for the fourth quarter and issued a solid outlook for fiscal 2024. Shares of Dick’s Sporting Goods have done fantastic since the worst of the COVID-19 meltdown years ago, and the momentum behind its business remains strong, as evidenced by a nice 10% increase in its quarterly dividend. We expect to raise our fair value estimate of Dick’s Sporting Goods upon our next valuation model update, and the company remains a key idea in the Dividend Growth Newsletter portfolio. Management’s commentary in the quarterly … Read more

5 Stocks to Consider Buying

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By Brian Nelson, CFA Stock prices and returns are a function of a company’s net cash on its books and future expectations of free cash flow. No matter what qualitative dynamic one considers in an investment, it must materialize within the discounted cash flow model to have any value. Maybe you love the management and corporate governance of a company? This may show up in a lower discount rate applied to future expected cash flows, as they may be more dependable. What about the brand of a firm? Well, the brand is implicitly valued within how much future free cash flows a company will generate. Pick another qualitative factor. Whatever it may be, it finds its way into the discounted … Read more

A Note on Valuation — Low P/E Stocks with High Dividend Yields

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“But carrying low valuation parameters is far from synonymous with “underpriced.” It’s easy to be seduced by the former, but a stock with a low p/e ratio, for example, is likely to be a bargain only if its current earnings and recent earnings growth are indicative of the future. Just pursuing low valuation metrics can lead you to so-called “value traps”: things that look cheap on the numbers but aren’t, because they have operating weaknesses or because the sales and earnings creating those valuations can’t be replicated in the future.” – Howard Marks, Something of Value (2021) By Brian Nelson, CFA I was reminded of Howard Marks’ 2021 memo, “Something of Value,” after a few readers expressed interest in low … Read more

Dick’s Sporting Goods Still Looks Really Cheap

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Image Source: Dick’s Sporting Goods By Brian Nelson, CFA On November 21, Dick’s Sporting Goods (DKS) reported solid third-quarter results with sales up 2.8% on a year-over-year basis thanks to comparable store sales growth of 1.7% that lapped an impressive 6.5% increase in the same period a year ago. Non-GAAP earnings per share came in at $2.85 in the quarter, up from $2.60 in last year’s period. The company also raised its 2023 comparable store sales growth guidance range to 0.5%-2% from flat to 2% previously, and it raised its 2023 non-GAAP earnings per share outlook to $12.00-$12.60 from its previous range of $11.50-$12.30. We liked the news and continue to believe that shares of Dick’s Sporting Goods are mispriced. … Read more

There Will Be Volatility

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By Brian Nelson, CFA Last year, 2022, was a big test for equity investors, and the downside volatility that we witnessed during the year wasn’t comfortable, to say the least. Following the COVID-19 crash and rebound during 2020, and then the market surge in 2021, it wouldn’t be a stretch to say many investors’ heads are probably still spinning from all the volatility witnessed to start this decade. That said, part of what we’ve been warning about the past few years with respect to the equity market, especially in Value Trap, is that the proliferation of price-agnostic trading (e.g. quant, machine/algorithmic trading, etc.) will only lead to more and more market volatility, so while we were somewhat surprised by last … Read more

In the News: McDonald’s, Costco, Target

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By Brian Nelson, CFA The market is once again worried about a potential government shutdown in the U.S., beginning on Sunday, as Congress works on a budget for fiscal 2024 through the rest of September. This recurring news has been a seasonal part of the market’s jitters every few years or so, however, and we’re not worried about what we would describe as an overhyped risk. A potential government shutdown in the U.S., if it happens, will inevitably be resolved, and while it tends to make for scary media headlines, it just doesn’t factor into the thesis of long-term investors. We don’t think readers should overreact. That said, it’s hard to know how the markets may continue to perform with … Read more

Dick’s Sporting Goods Down ~7% Year-to-Date; Sticking with It Long Term

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Image Source: Mike Mozart By Brian Nelson, CFA Dividend growth investing continues to face pressure during 2023 as investors have migrated to entities with strong net cash positions, solid free cash flow generation and secular growth prospects, many ideas of which can be found in the areas of big cap tech (XLK) and large cap growth (SCHG). The SPDR S&P Dividend ETF (SDY), which includes high-yielding Dividend Aristocrats, is down more than 4% so far in 2023 on a price-only basis and is off more than 6% over the past year, also on a price-only basis. With interest rates on the rise, the tradeoff between owning a certificate of deposit at the local bank yielding north of 5% and dividend … Read more

Theft Becoming a Huge Problem for Retailers

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Image Source: Ben Schuman Theft has always been a problem for retailers, but it has never been as big of a problem as it has been in recent quarters. Emboldened by the lack of police response and employees sometimes getting fired for confronting shoplifters, retail organized crime is on the rise. We’re not talking theft in the millions, or billions, but likely in the tens of billions per year or more across the U.S. Some attribute the rise of organized retail crime to the pandemic, which paved the way for shoplifters to post their loot online in order to make a quick buck. Some retailers are especially feeling the pinch, and recent commentary reveals just how bad retail theft (shrink) … Read more