Story Stocks^®

Dick's Sporting Goods (DKS) continued to distance itself from the field in 4Q25, delivering strong results and showing that it was once again a winning retailer during the holiday shopping season. The company's downside FY26 guidance, on the other hand, has the stock sporting some sizable losses, sparking concerns that demand for athletic footwear, equipment, and athleisurewear will soften as macroeconomic uncertainties rise.

In a show of confidence, DKS announced a new five-year share repurchase program for up to $3.0 bln and it increased its quarterly dividend by 10%. Indeed, the company remains quite bullish about its longer-term prospects, stating that its business has incredible momentum and that it sees tremendous strength in the U.S. sports industry. However, the shareholder-friendly capital allocation plans, and upbeat commentary aren't enough to take the focus off DKS's soft guidance amid a very skittish market.

• In terms of the Q4 results, there is very little to complain about. In fact, comps of +6.4% supported the company's largest sales quarter in its history and reflected an acceleration in growth from last quarter's +4.2% mark. The strong comps were driven by a 4.4% increase in average ticket and a 2% increase in transactions.
• Despite operating in a highly promotional retail environment, gross margin remained firm, expanding by 39 bps yr/yr to 34.96%. The solid margin performance is a testament to DKS's high-quality product assortment -- one of its key competitive advantages.
• Another competitive advantage rests in the company's real estate and store portfolio. In particular, DKS's large format "House of Sport" stores are providing a differentiated shopping experience that's enabling it to gain market share. Over the past year, DKS estimates that it picked up about 50 bps in market share to command total market share of just under 9%. After opening seven House of Sport locations in 2024, which offer batting cages, climbing walls, ice rinks, and other experiences, DKS is planning to open 16 more in 2025.
• Expanding its real estate footprint is only one piece of the investment puzzle. DKS also intends to focus on its footwear business by investing in new marketing initiatives and leaning on a dedicated focus on footwear across its in-store and digital channels. 

The main takeaway is that DKS's downside FY26 guidance is signaling that demand for sporting goods is poised to slow, which is not only weighing on shares of DKS, but it's also hitting shares of Foot Locker (FL), Academy Sports + Outdoors (ASO), NIKE (NKE), and Adidas (ADDYY),