DICK’S Sporting Goods, Inc. (NYSE:DKS)’s shares are down by roughly 40% over the past year. August has proven to be a horrible month for the stock. It tumbled by more than 30% on August 25th following the firm’s second quarter earnings report in the morning. After the earnings, Cramer discussed DICK’S Sporting Goods, Inc. (NYSE:DKS) in a series of tweets and pointed towards the firm’s ill-fated acquisition of Foot Locker:
“Dick’s gives us a nasty cut and worried about legacy shoes
“Dick’s lost twice the market value of Foot Locker, which it bought last year. Foot Locker was a poison pill… .”
Cramer’s remarks came after DICK’S Sporting Goods, Inc. (NYSE:DKS)’s second quarter earnings were split neatly across its core business and Foot Locker. During the quarter, the firm grew revenue by a strong 53.2% to $5.59 billion. At the same time, management maintained its fiscal year year comparable same store sales growth guidance of the DICK’S brand at 2.5% to 4%. The guidance came on top of the core brand growing comparable same store sales by 4.9% in the second quarter. Overall, DICK’S Sporting Goods, Inc. (NYSE:DKS)’s consolidated same store sales grew by 2.1% and indicated that the core brand remained resilient despite headwinds from Foot Locker.
Yet, the drag from Foot Locker was quite intense. Foot Locker comparable same store sales dropped by 3.6% during the quarter while DICK’S Sporting Goods, Inc. (NYSE:DKS) guided the full year sales to range between -2% to 0% and an operating loss ranging between $40 million to $80 million. The stock’s reaction was natural, given that previously DICK’S Sporting Goods, Inc. (NYSE:DKS) had guided Foot Locker’s operating profit to range between $100 million to $150 million. Other headwinds included high inventory to indicate a difficult turnaround.
During the second quarter, 52 out of the 1,006 hedge funds covered by Insider Monkey had held a stake in DICK’S Sporting Goods, Inc. (NYSE:DKS). This figure marked a slight jump over the 48 funds in Q1. Notable jumps came in the form of Maverick Capital bumping its stake by 42% to $334 million and Castle Hook Partners bumping its stake by 160% to $300 million. The share price dips have cut the valuation, with DICK’S Sporting Goods, Inc. (NYSE:DKS) trading at a forward P/E of 9, which is nevertheless higher than peer Academy Sports’ 7.89. Short interest as a percentage of float is 12.54%, also lower than Academy’s 18%.
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Disclosure: None.
