Tuesday should have been a pretty good day for Dick's Sporting Goods (DKS) , which reported better-than-expected first-quarter earnings before the market opened. Earnings per share of $3.40 were 19 cents ahead of consensus estimates while sales grew 5.1% year over year to $2.84 billion, $40 million ahead of estimates. Dick's received a warm greeting from the market early in the trading day as its shares briefly eclipsed $130. However by end of day the stock was down about 1.5%, closing at $124.58.
What rained on Dick's parade? Likely the continuing debt ceiling talks. The market is a bit spooked by the prospects of default. That won't happen. There will be a deal and we'll be in the same boat once again within the next year.
It's all political theatre, which results in senior citizens believing their Social Security checks will be halted. We'll end up kicking the can down the road again as the national debt heads toward $32 trillion and beyond. The president will continue to claim that he reduced "the debt" by $1.7 trillion. Meanwhile, the real will to rein in spending before it's too late (it may already be) seems to be gone on both sides of the aisle. Enough on this; it is a depressing subject.
However, the retail party was not ruined for some of the smaller players, among them Fossil Group (FOSL) (up 10% on the day), Cato Corp. (CATO) (up 6%) and Big 5 Sporting Goods (BGFV) (up 4%). While it may not make sense at first that smaller, more distressed names fared well, there are compelling reasons.
First, the market already has exacted punishment on these names, perhaps more than what they deserved. Second, small-caps performed better on Tuesday than large-caps. While the Russell 1000 fell 1.11% on the day, the punishment was muted further down the market-cap scale. The Russell 2000 (down 0.42% Tuesday) and Russell Microcap (down 0.08%) have significantly underperformed large -caps year to date, so it was a day they picked up some of the lost ground. Through Tuesday the Russell 1000 (up 8.44% for the year to date) is well ahead of the Russell 2000 (up 2.08%) and Russell Microcap (down 1.26%).
Meanwhile, Dick's is trading at 9.3x and 9.1x 2024 and 2025 consensus earnings estimates, respectively. The $1.00 quarterly dividend equates to a 3.2% yield. Short interest stands at just below 14%.
(Please note that due to factors including low market capitalization and/or insufficient public float, we consider BGFV, CATO and FOSL to be micro-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.)
