Citi Downgrades Dicks
Citigroup has downgraded Dick’s Sporting Goods from buy to neutral with a $140 price target, causing the shares to initially take a dip. The downgrade was based on the fact that, like many retailers, Dick’s has paid a premium to unload its inventory, which will negatively impact its margins, leading to tough comparisons for both the most recent quarter and 2023.
However, Citigroup also points out that Dick’s is performing well compared to its competitors, outperforming the broader sporting goods sector. Credit card data analyzed by Citigroup shows that Dick’s has been outperforming other sporting goods retailers over the last two quarters.
Sporting goods retailers have been facing challenges in a promotional environment, and Dick’s is no exception. The company’s sales have been driven by promotions, which are weighing on its margins. Citigroup’s concern is that these promotions will continue to impact Dick’s sales, especially ahead of earnings on March 7th.
Despite these challenges, Dick’s Sporting Goods has seen a healthy 22% increase in its stock over the last 12 months. However, the company has seen a saturation in the world of pickleball, which is the fastest-growing sport in America. This saturation has caused sales in this sector to flatten, leading the company to target Moose Jaw, a company that specializes in the outdoor sector.
Citigroup’s downgrade of Dick’s Sporting Goods may have caused the shares to initially take a dip, the company is still outperforming its competitors in the broader sporting goods sector. However, the challenges posed by a promotional environment and the saturation of the pickleball market mean that the company needs to continue to adapt and target new markets to sustain its growth. Investors will be keeping a close eye on the company’s earnings report on March 7th to see how it performs in the face of these challenges.