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We had Dick's Sporting Goods reporting results. They forecast full year sales growth across the company's namesake brand stores as well as at the newly acquired Footlocker chain. With us is Lindsay Dutch Bloomberg Intelligence Consumer Hardline Senior analyst on earnings from Dix. Lindsay, can you just run us through this report? What were the key takeaways?
Hi, thanks for having me. Yes, solid results coming out of the Dick's legacy business in the fourth quarter despite a highly promotional holiday environment. And I think even more importantly, the turnaround at Footlocker is starting to show green shoots, and Dix was really under a lot of pressure to show that they can execute on their plan to turn
this business around. Guidance really is forecasting slight growth in same sore sales for a foot locker, and I think that's a positive sign that this turnaround is underway.
Lindsey, did they talk at all about tariffs and the impact they've been having is if I remember correctly, they were one of the companies early on to say that tariffs could actually hit the bottom line.
So tariffs actually were not mentioned at all on the call this morning. I don't think the impact to twenty five results was significant.
A lot of what ended.
Up happening was the manufacturers that chose to raise prices as an offset to the higher cost. Those higher prices were mostly passed through to the consumer, and Dix really didn't face a significant margin headwind in twenty five from Tariff's a sort of a similar situation. Thinking about twenty twenty.
Six, Lindsay, it looks like Dix has pretty ambitious investment plans for this year. I'm seeing one point seven billion dollars in gross capex planned for fiscal twenty twenty six. What is the breakdown between brick and mortar expansion, tech investments. What is it spending this money on?
So I think the vast majority is actually going to the physical footprint, and you have two pieces of that. One is their House of Sport concept for the legacy Dick's business. They're opening another fourteen of those House of sports stores in this year. Those are higher capex to open their experiential stores, but they have really been driving strength in that core business, driving ticket and transaction growth simultaneously, which is really quite impressive. The other piece is they're
redoing about two hundred and fifty foot locker stores. They want those done before back to school season, which probably starts, you know, in late June early a lie, depending on where you're located. So the vast majority of that investment is going to physical stores. They will continue to invest, you know, in technology in AI. You know, they do see some efficiencies both internally and you know, consumer facing with tech investment, the priority is that physical storefront, you.
Know, lindsay and about the thirty seconds we have left, what about online sales for Dix, What's what's looking like for them?
So they continue to see growth in online sales. I think a lot of that is supported by the fact that they have a higher income consumer who likes to shop across multiple channels. So we continue to see growth there. But the penetration in sports is you know, on the lower side, you always have that kid who forgets his cleats and they're on a soccer tournament and they have to run out and go get that piece of equipment.
So the stores are really important to the growth story in general, and we will continue to see both store and online growth.
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Earlier this morning, we got earnings from Dollar General, a bellweather of the US consumer. The company forecasts sales in line with analyst estimates, slowing momentum for a company that had been exceeding Wall Street expectations quarter after quarter. Joining us to discuss the report is Jennifer Bartuccius, Bloomberg Intelligence, Senior analysts for retail, staples and package Food. Jennifer. Dollar General's earnings were solid, but it seems like the guidance
was kind of the point that disappointed investors. What exactly is management seeing that is making them a little bit more conservative in their outlook?
Good morning. It really comes down to a very tumultuous backdrop you know, when you think about Dollar General and you think about their core customer, it is the low income customer. They're under a lot of stress. They continue to be under stress, and I think that that, along with policy shifts, is just keeping the company with a very conservative outlook for twenty twenty six, even though they've had really good momentum in their core business coming into the year.
Now this stock though, Jennifer I was looking at the stock, I mean, yes, it's getting hit today, but it had surged more than eighty percent in the past twelve months. So what was buttressing the stock.
Well, the company really looked last year, as I looked at last years as an investment in a reset year, and so they put into place a lot of strategies
to help reinforce the core business. And it was really a story about getting back to retail basics, so things like just having clean stores, you know, not having cluttered aisles, enough people working in the store so that there's customer service, you know, improving the assortment of what they are offering, and increasing their value perception by lowering prices in some areas and adding products that are in lower price point
ranges to appeal to their core demographic. So as those changes started to gain traction and customers noticed it, that was really what was driving performance last year and why the stock then was rewarded with regards to its price appreciation.
Jennifer, this is a company whose core customer is the lower income consumer. What are these results telling us about the health of that income group right now?
Well, the results, you know, really show that that customer is very, very value focused. You know. One of the interesting things that the company called out on their earnings call was that, you know, they have over five hundred products that are at the one dollar price point or below, and that category of products had seventeen percent increase in sales. So that just shows how much value means to that
low income consumer. And as long as Dollar General can continue to deliver on that need, there's no reason to think that they can't continue some of the some of the momentum that they've been able to establish.
Has Dollar General been a real competitor as of late, for say, the Walmarts of the world or Family Dollar. Who is I guess Dollar General's biggest competition.
It's a great question. You know, they they compete. Obviously, they disposed of Family Dollar because they owned it or sorry sorry. They compete with Family Dollar, which was disposed of by Dollar Tree last year. But they do compete with Walmart. You know. They strive to have their prices within three to four percent of the bigger box retailers. And it's with the it's with grocery stores, it's with the mass merchants, and to some extent with convenience stores
are really their their main competitors. But what's really unique about Dollar General is that they are positioned in rural communities, and so while Walmart is a big competitor, the Walmart might be a ten or fifteen mile a minute drive away from where you live, versus a Dollar General that could be on the corner. So that's the competitive advantage that they've been building off of and that they continue to see as a competitive advantage.
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It's interesting, Alexis to hear people talking about SpaceX and IPOs at a time when there's so much volatility in the market, but yet everyone wants in on SpaceX, from Silicon Valley to Wall Street to the City of London. Financial elites are hitting up their wealth managers and plugged in a front to find a way. And we have the reporter on this big take with us today, Bailey Lipschultz. He is senior equities reporter here at Bloomberg and Deputy Ecmsar Bailey, Can you tell us a little bit more
about this? I think something so interesting is that these deals are increasingly being marketed to smaller investors through private funds and platforms. Should regulators be paying closer attention?
Regulators are, and they should be, And I think the big question comes back to how are these deals being marketed. We've seen cases where there was outright fraud or allegations ab outright fraud, and obviously the government is moving to restrict that. But I think anyone with a social media account can say that they've been on X or on Instagram and someone's DM them saying, hey, I have access to SpaceX or the elon averse that you should just wire money.
Granted, those are outright scams.
But there's also this this world as it relates to SPV special purpose vehicles where investors, people who are allocating these, are creating these are full within their fully within their rights to email people who can check the box that they're accredited investors and offer terms to these investments, and by definition it's totally legal.
It is murky.
People should do diligence, but there's no real restriction around those executed deals.
So these SPVs, I guess Wall Street likes acronyms. They're fairly new, and weren't they just they came to market just a couple of years ago. How much of the market are they now and just that short amount of time.
So we aggregated our data through caplite. They see about a third of the flow. They say that SPV volumes over the last few years has gone up eleven x. We've seen these layered SPVs that are even more opaque and more convoluted. We've seen them go basically from a nothing market to well north of a quarter million dollars, but probably even far larger than that if you looked
on the whole unrabled access all of the data. It's something that is a factor of or is emblematic of just where we are, because these are companies that have stayed private for so long. Elon SpaceX now wants to go public. At one point seven five trillion dollars. That's a breath taking number to even try to think through, especially when you look not too long ago a decade
or so, its closer to twenty billion dollars. So there's a lot of money and there's a lot of appetite, and even just talking to people on Wall Street and people who run investment portfolios, family offices or late stage growth.
You need to be able to go to clients that if you're raising a fund and.
Say, oh I have access today Andro, oh I have SpaceX, I have XAI. Otherwise it's like why are you going to give someone your money to invest in companies that you could access.
Let's say, Baley, that economic and geopolitical risks get bad enough to freeze the IPO market and SpaceX doesn't go public, how do investors in these vehicles get their money back?
Well, like anything, as long as the market is liquid, you can sell it to someone else. So if there were to be a prolonged downturn or the market was frozen, or if Elon woke up more one morning and said, you know what, I actually don't want to go public.
Which is not unlikely, which is not out of.
Question, out of the question, there still probably will be a market. The question comes back to if you paid on face value two trillion dollar value investing in SpaceX because you thought there was an IPO and you thought it would pop and go trade it three trillion dollars and now there's no market for that, you have to probably sell it at a steep discount.
That gets back to the whole issue around private markets.
What should investors know though, if they want to make use of these special purpose vehicles sort of they want to go in eyes wide open.
Do your research understand a that the core investment exists, be that it's preferably on the cap table so it's recognized by a SpaceX and see ask the questions of what fees am I paying? What management fees are going out the door, no matter what is being paid in the form of carry because the issues and speaking to people in the industry, the issues are that you can be pitched an SPV or a fraction of a multi layered SPV where you say two percent management fee, ten
percent fee, easy done. Well that's on top of a twenty percent carry, on top of a twenty percent carry. Where all of the sudden you say, okay, well I'm up one hundred x. When these shares, if they do get delivered, you say, oh, well, I actually doubled my money in five years with risk and illiquidity, and it's not worth it.
Does it vary by fun how much these fees weigh and two returns.
Every deal is different.
And I think that's the tough part with reporting and writing about this story is just like you can't hate in broad strokes saying this is how every vehicle is structured. Because there are very well structured, clean SPVs that are on the cap table, and then there are deals that you get a cold email and you say, okay, wire me twenty five thousand dollars and congrats.
At some point you'll get shares.
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