Dick's Sporting Goods has a sneaker problem and footwear stocks are feeling the pinch. Shares of the sporting goods retailer fell more than 25% after reporting second-quarter earnings, its largest percentage decrease on record, according to Dow Jones Market Data, and its lowest close since late 2023. The retailer's bad day sent footwear stocks tumbling.
Dick's earnings per share, revenue, and same-store sales were all below expectations. Both its Dick's and recently acquired Foot Locker disappointed, with the latter now an "albatross," as Quo Vadis Capital President John Zolidis says. Competition is fierce too. Companies are using tariff refunds to cut prices, and management cited an "increasingly promotional" athletic apparel and footwear environment. Legacy styles were a problem, with discounts and fewer launches.
Dick's Executive Chairman Ed Stack called it a footwear cycle "hangover." Companies like Adidas, Nike, On Holding, and Deckers Outdoor's Hoka are in the middle of resets. There's a "newness drought," notes Stifel analyst Peter McGoldrick. His back-to-school shopping research shows Nike is the most mentioned brand, but its popularity is bouncing off all-time lows and is a shadow of its 2021 peak. Its top spot is due to "the Air Force 1, a Hoops Classic that has been in the popular domain for eight consecutive years, and far longer than a reasonable product cycle."
On Holding has deeper woes, says Jefferies analyst Randal Konik. "Our checks found core On SKUs [stock keeping units] up to 50% off at run specialty and Nordstrom Rack," Konik writes. That's running on empty.
Write to Teresa Rivas at teresa.rivas@barrons.com
Last Week
Markets
On Monday, investors waited for "economic D-Day" against Iran and a reaction to President Trump's 50% tariffs on Canadian goods. Treasury Secretary Scott Bessent warned of U.S. sanctions for countries dealing with Iran but set no deadlines. Canada retaliated, with up to 50% tariffs on 700 products. Unfazed, investors focused on earnings for Nvidia, which beat expectations on Wednesday, forecasting a 70% rise in 2027 sales and reviving the AI trade. At Jackson Hole on Friday, Federal Reserve chief Kevin Warsh reiterated the Fed's commitment to tame inflation. On the week, the Dow industrials rose 0.5%; the S&P 500, 0.5%; and the Nasdaq Composite, 0.9%.
Companies
Meta Platforms reached an up to $18 billion settlement with states over social-media harm to?teens. Shein cut back what's now looking like a $27 billion valuation for its Hong Kong initial public offering; it was $100 billion in 2022. Nvidia partnered with AI start-up Poolside to build a $6 billion open-weight model. A U.S. bankruptcy court rejected a restructuring plan for First Brands and ordered it liquidated. In a Wall Street Journal column, Stanley Druckenmiller attacked Treasury bond buybacks. KKR agreed to pay $250 million to settle allegations that it failed to report buyouts properly.
Deals
California canceled talks on a?settlement with Paramount Skydance over the Warner Bros. Discovery deal, accusing the company of?leaking...Vanguard agreed to buy fintech Altruist for $4 billion.
Next Week
Tuesday 9/1
Dell Technologies, Medtronic, and?Palo Alto Networks report quarterly results on Tuesday, followed by Broadcom, Hewlett Packard Enterprise, and Snowflake on Wednesday.
The Bureau of Labor Statistics releases the Job Openings and Labor Turnover Survey. Economists forecast 7.3 million job openings on the last business day of July, slightly less than in?June. There are currently 1.04 job openings for every unemployed person, down from a peak of two in April 2022.
The Institute for Supply Management releases both its Manufacturing and Services Purchasing Managers' Indexes for August. Consensus estimate for the Manufacturing PMI, released on Tuesday, is a 55.2 reading, while the Services PMI, released on Thursday, is expected to print a 54.1 reading. This compares with readings of 55.6 and 54.1, respectively, in July.
Friday 9/4
The BLS releases the jobs report for August. The consensus call is for a?58,000 increase in nonfarm payrolls, after a 23,000 decline in July. The unemployment rate is expected to remain unchanged at 4.1%. Job growth has averaged 60,857 a month this year, up from just 9,667 a month last year.
The Numbers
$1.1 T
U.S. life insurance assets owned by private-equity firms last year, up?from nearly none in 2012.
45
Gigawatts of U.S. clean energy expected to be added this year, a?record, up 25% from 2024.
70deg
Average ocean sea surface temperature hit on Aug. 22, a new high, topping the previous record in 2024.
$285 B
Estimate of the maintenance backlog at the Department of Defense's 736,000 facilities around the world.
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