Summary
- Dick's Sporting Goods revealed contracting sales and earnings in its fourth quarter.
- Even though full year 2019 expectations are not bad, I think rising pressure from falling consumer sentiment will continue to hurt sales.
- The stock should be avoided for the time being as the risk/reward ratio continues to be very unattractive.
Dick's Sporting Goods (DKS) is one of those companies that does not seem to be able to catch a break. In December, I wrote an article which covered the main threats to Dick's investors. Back then, the company was dealing with declining sales and pressure on margins. In addition, we started to see what I called 'peak consumer sentiment'. In this article, I once again do not have many positive things to say, unfortunately. The stock remains a case of 'stay as far away as you can'.
Source: Dick's Sporting Goods
The Trend Continues
All things considered, I am staying away from the stock. I think one might consider to go long once consumer sentiment starts gaining upside momentum again. At this point, I think the mix of weak retail sales, falling comps and peaking consumer sentiment are a reason to stay far away from the stock.
The fourth quarter continued what started in the third quarter. Sales were down 6% to $2.49 billion, which is more or less in line with expectations of $2.48 billion. Sales growth has been in a decline since the growth peak of Q4 in 2016 when sales growth hit 11%.
