Stock Market Today, Aug. 25: Dick's Sporting Goods Crashes After Guidance Cut. Is It a Buy Right Now?
Dick's Sporting Goods (NYSE:DKS), an omni-channel sporting goods and athletic apparel retailer closed at $124.32, down 30.67%. On Tuesday, investors reacted to a second-quarter earnings miss, lower full-year guidance, and weaker demand for athletic footwear and apparel.
Trading volume reached 37.9 million shares, coming in about 1,807% above its three-month average of 2.0 million shares. Dick's Sporting Goods IPO'd in 2002 and has grown 3,679% since going public.
How the markets moved today
The S&P 500 (SNPINDEX:^GSPC) rose 0.32% to 7,677, and the Nasdaq Composite (NASDAQINDEX:^IXIC) gained 0.66% to 26,151. Among specialty retail peers, Academy Sports and Outdoors (NASDAQ:ASO) fell 5.80% to $43.48, as Dick's Sporting Goods highlighted strain across sporting goods, athletic apparel, footwear, and outdoor equipment.
What this means for investors
Dick's valuation was being repriced today. Investors are reassessing the potential of Dick's acquisition of Foot Locker. Foot Locker focuses on the more discretionary-lifestyle customer, whereas Dick's focuses on performance. Sales of Dick's core business products were strong, growing 4.9% year over year, while Foot Locker sales dropped 3.6%. Management blamed the decline on a challenging environment in the competitive footwear space.
But investors may have overreacted, too. The market cap loss of about $5 billion today was about twice what the company paid for all of Foot Locker a year ago.
Yet it still may not be a time to buy the dip. The risk is that Foot Locker's lifestyle segment may face a long-term trend issue that could take several quarters to address. Promotions will continue to hit margins, and cleaning up inventory will take time.
Should you buy stock in Dick's Sporting Goods right now?
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Howard Smith has no position in any of the stocks mentioned. The Motley Fool recommends Academy Sports And Outdoors. The Motley Fool has a disclosure policy.
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