Dick’s Projects Sales Growth at Namesake Stores, Foot Locker

0:02Lindsay Dutch:Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. 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 Foot Locker 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?

0:41Lindsay Dutch:What were the key takeaways?

0:43Alexandra Semenova:Hi, thanks for having me. Yes, solid results coming out of the Dix legacy business in the fourth quarter, despite a highly promotional holiday environment. And I think even more importantly, the turnaround at Foot Locker is starting to show green shoots. And Dick's 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-store sales for Foot Locker. And I think that's a positive sign that this turnaround is underway.

1:18Alexis Christoforous:Lindsay, did they talk at all about tariffs and the impact they've been having? Because if I remember correctly, they were one of the companies early on to say that tariffs could actually hit the bottom line.

1:29Alexandra Semenova:So tariffs actually were not mentioned at all on the call this morning. I don't think the impact to 25 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 25 from tariffs, a sort of a similar situation thinking about 2026.

2:01Lindsay Dutch:Lindsay, it looks like Dix has pretty ambitious investment plans for this year. I'm seeing$1.7 billion in gross CapEx planned for fiscal 2026. What is the breakdown between brick and mortar expansion, tech investments? What is it spending this money on?

2:16Alexandra Semenova: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 14 of those House of Sport stores in this year. Those are higher capex to open their experiential stores. But they have really been driving the strength in that core business, driving ticket and transaction growth simultaneously, which is really quite impressive. The other piece is they're redoing about 250 Foot Locker stores. They want those done before back to school season, which probably starts, you know, in late June, early July, depending on where you're located.

3:02Alexandra Semenova: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.

3:21Alexis Christoforous:You know, Lindsay, in about the 30 seconds we have left, what about online sales for Dix? What's it looking like for them?

3:28Alexandra Semenova: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 at 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.

4:01Lindsay Dutch:Stay with us. More from Bloomberg Intelligence coming up after this.

4:07Lindsay Dutch:You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Now, earlier this morning, we got earnings from Dollar General, a bellwether of the U.S. consumer. the company forecast 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 Bartouchis, Bloomberg Intelligence Senior Analyst for Retail Staples and Packaged Food.

4:45Lindsay Dutch: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?

4:58Alexis Christoforous:Good morning. It really comes down to a very tumultuous backdrop. 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 2026, 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 80 percent in the past 12 months.

5:36Alexis Christoforous:What was buttressing the stock? Well, the company really looked at last year as an investment and 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, not having cluttered aisles, having enough people working in the store so that there's customer service, 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.

6:16Alexis Christoforous: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.

6:28Lindsay Dutch: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?

6:37Alexis Christoforous:Well, the results 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 they have over 500 products that are at the$1 price point or below. And that category of products had 17 % 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 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?

7:23Alexis Christoforous:Who is, I guess, Dollar General's biggest competition? That's a great question. You know, they compete. Obviously, they disposed of Family Dollar because they owned it. 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 main competitors. But what's really unique about Dollar General is that they are positioned in rural communities.

8:04Alexis Christoforous:And so while Walmart is a big competitor, the Walmart might be a 10 or 15 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. Stay with us. More from Bloomberg Intelligence coming up after this.

8:27Lindsay Dutch:You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. 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 friends to find a way in. And we have the reporter on this big take with us today, Bailey Lipschultz.

9:06Lindsay Dutch:He is senior equities reporter here at Bloomberg and deputy ECM czar. 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?

9:22Jennifer Bartashus: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 of 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 or 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.

10:05Jennifer Bartashus:And by definition, it's totally legal. It is murky. People should do diligence. But there's no real restriction around those executed deals.

10:13Alexis Christoforous:So these SPVs, I guess, because 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 in just that short amount of time?

10:23Jennifer Bartashus: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 11x. 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 and were able to 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, Elon SpaceX now wants to go public at one point seven five trillion dollars.

11:01Jennifer Bartashus:That's a breathtaking number to even try to think through, especially when you look not too long ago, a decade or so, it was closer to$20 billion. 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 if you're raising a fund and say, oh, I have access to Anderil. 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?

11:29Lindsay Dutch:Let's say, Bailey, 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,

11:42Jennifer Bartashus: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 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, $2 trillion value investing in SpaceX because you thought there was an IPO and you thought it would pop and go trade at$3 trillion, and now there's no market for that, you have to probably sell it at a steep discount.

12:15Jennifer Bartashus:That gets back to the whole issue around private markets.

12:17Alexis Christoforous:What should investors know, though, if they want to make use of these special purpose vehicles? They want to go in eyes wide open.

12:23Jennifer Bartashus:Do your research understand, A, that the core investment exists, B, that it's preferably on the cap table, so it's recognized by SpaceX, and C, ask the questions of what fees am I paying? What management fees are going out the door no matter what? 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 2 % management fee, 10 % fee, easy, done. Well, that's on top of a 20 % carry on top of a 20 % carry, where all of a sudden you say, OK, well, I'm up 100x.

13:02Jennifer Bartashus: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.

13:10Lindsay Dutch:Does it vary by fund how much these fees weigh into returns?

13:14Jennifer Bartashus: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 paint 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$25 ,000 and congrats. At some point you'll get shares.

13:35Lindsay Dutch:This is the Bloomberg intelligence podcast available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, 10 AM to noon Eastern on Bloomberg.com, the iHeartRadio app, tune in and the Bloomberg business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal.