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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am

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Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg

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Speaker 1: Business App. Listen on demand wherever you get your podcasts,

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Speaker 1: or watch us live on YouTube.

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Speaker 2: We had Dick's Sporting Goods reporting results. They forecast full

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Speaker 2: year sales growth across the company's namesake brand stores as

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Speaker 2: well as at the newly acquired Footlocker chain. With us

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Speaker 2: is Lindsay Dutch Bloomberg Intelligence Consumer Hardline Senior analyst on

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Speaker 2: earnings from Dix. Lindsay, can you just run us through

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Speaker 2: this report? What were the key takeaways?

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Speaker 3: Hi, thanks for having me. Yes, solid results coming out

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Speaker 3: of the Dick's legacy business in the fourth quarter despite

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Speaker 3: a highly promotional holiday environment. And I think even more importantly,

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Speaker 3: the turnaround at Footlocker is starting to show green shoots,

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Speaker 3: and Dix was really under a lot of pressure to

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Speaker 3: show that they can execute on their plan to turn

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Speaker 3: this business around. Guidance really is forecasting slight growth in

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Speaker 3: same sore sales for a foot locker, and I think

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Speaker 3: that's a positive sign that this turnaround is underway.

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Speaker 4: Lindsey, did they talk at all about tariffs and the

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Speaker 4: impact they've been having is if I remember correctly, they

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Speaker 4: were one of the companies early on to say that

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Speaker 4: tariffs could actually hit the bottom line.

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Speaker 3: So tariffs actually were not mentioned at all on the

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Speaker 3: call this morning. I don't think the impact to twenty

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Speaker 3: five results was significant.

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Speaker 5: A lot of what ended.

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Speaker 3: Up happening was the manufacturers that chose to raise prices

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Speaker 3: as an offset to the higher cost. Those higher prices

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Speaker 3: were mostly passed through to the consumer, and Dix really

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Speaker 3: didn't face a significant margin headwind in twenty five from

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Speaker 3: Tariff's a sort of a similar situation. Thinking about twenty twenty.

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Speaker 2: Six, Lindsay, it looks like Dix has pretty ambitious investment

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Speaker 2: plans for this year. I'm seeing one point seven billion

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Speaker 2: dollars in gross capex planned for fiscal twenty twenty six.

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Speaker 2: What is the breakdown between brick and mortar expansion, tech investments.

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Speaker 2: What is it spending this money on?

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Speaker 3: So I think the vast majority is actually going to

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Speaker 3: the physical footprint, and you have two pieces of that.

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Speaker 3: One is their House of Sport concept for the legacy

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Speaker 3: Dick's business. They're opening another fourteen of those House of

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Speaker 3: sports stores in this year. Those are higher capex to

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Speaker 3: open their experiential stores, but they have really been driving

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Speaker 3: strength in that core business, driving ticket and transaction growth simultaneously,

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Speaker 3: which is really quite impressive. The other piece is they're

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Speaker 3: redoing about two hundred and fifty foot locker stores. They

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Speaker 3: want those done before back to school season, which probably starts,

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Speaker 3: you know, in late June early a lie, depending on

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Speaker 3: where you're located. So the vast majority of that investment

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Speaker 3: is going to physical stores. They will continue to invest,

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Speaker 3: you know, in technology in AI. You know, they do

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Speaker 3: see some efficiencies both internally and you know, consumer facing

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Speaker 3: with tech investment, the priority is that physical storefront, you.

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Speaker 4: Know, lindsay and about the thirty seconds we have left,

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Speaker 4: what about online sales for Dix, What's what's looking like

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Speaker 4: for them?

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Speaker 3: So they continue to see growth in online sales. I

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Speaker 3: think a lot of that is supported by the fact

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Speaker 3: that they have a higher income consumer who likes to

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Speaker 3: shop across multiple channels. So we continue to see growth there.

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Speaker 3: But the penetration in sports is you know, on the

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Speaker 3: lower side, you always have that kid who forgets his

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Speaker 3: cleats and they're on a soccer tournament and they have

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Speaker 3: to run out and go get that piece of equipment.

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Speaker 3: So the stores are really important to the growth story

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Speaker 3: in general, and we will continue to see both store

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Speaker 3: and online growth.

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Speaker 5: Stay with us.

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Speaker 2: More from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

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Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube now.

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Speaker 2: Earlier this morning, we got earnings from Dollar General, a

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Speaker 2: bellweather of the US consumer. The company forecasts sales in

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Speaker 2: line with analyst estimates, slowing momentum for a company that

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Speaker 2: had been exceeding Wall Street expectations quarter after quarter. Joining

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Speaker 2: us to discuss the report is Jennifer Bartuccius, Bloomberg Intelligence,

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Speaker 2: Senior analysts for retail, staples and package Food. Jennifer. Dollar

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Speaker 2: General's earnings were solid, but it seems like the guidance

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Speaker 2: was kind of the point that disappointed investors. What exactly

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Speaker 2: is management seeing that is making them a little bit

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Speaker 2: more conservative in their outlook?

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Speaker 6: Good morning. It really comes down to a very tumultuous

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Speaker 6: backdrop you know, when you think about Dollar General and

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Speaker 6: you think about their core customer, it is the low

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Speaker 6: income customer. They're under a lot of stress. They continue

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Speaker 6: to be under stress, and I think that that, along

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Speaker 6: with policy shifts, is just keeping the company with a

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Speaker 6: very conservative outlook for twenty twenty six, even though they've

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Speaker 6: had really good momentum in their core business coming into

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Speaker 6: the year.

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Speaker 4: Now this stock though, Jennifer I was looking at the stock,

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Speaker 4: I mean, yes, it's getting hit today, but it had

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Speaker 4: surged more than eighty percent in the past twelve months.

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Speaker 4: So what was buttressing the stock.

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Speaker 6: Well, the company really looked last year, as I looked

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Speaker 6: at last years as an investment in a reset year,

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Speaker 6: and so they put into place a lot of strategies

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Speaker 6: to help reinforce the core business. And it was really

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Speaker 6: a story about getting back to retail basics, so things

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Speaker 6: like just having clean stores, you know, not having cluttered aisles,

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Speaker 6: enough people working in the store so that there's customer service,

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Speaker 6: you know, improving the assortment of what they are offering,

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Speaker 6: and increasing their value perception by lowering prices in some

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Speaker 6: areas and adding products that are in lower price point

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Speaker 6: ranges to appeal to their core demographic. So as those

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Speaker 6: changes started to gain traction and customers noticed it, that

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Speaker 6: was really what was driving performance last year and why

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Speaker 6: the stock then was rewarded with regards to its price appreciation.

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Speaker 2: Jennifer, this is a company whose core customer is the

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Speaker 2: lower income consumer. What are these results telling us about

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Speaker 2: the health of that income group right now?

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Speaker 6: Well, the results, you know, really show that that customer

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Speaker 6: is very, very value focused. You know. One of the

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Speaker 6: interesting things that the company called out on their earnings

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Speaker 6: call was that, you know, they have over five hundred

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Speaker 6: products that are at the one dollar price point or below,

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Speaker 6: and that category of products had seventeen percent increase in sales.

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Speaker 6: So that just shows how much value means to that

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Speaker 6: low income consumer. And as long as Dollar General can

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Speaker 6: continue to deliver on that need, there's no reason to

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Speaker 6: think that they can't continue some of the some of

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Speaker 6: the momentum that they've been able to establish.

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Speaker 4: Has Dollar General been a real competitor as of late,

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Speaker 4: for say, the Walmarts of the world or Family Dollar.

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Speaker 4: Who is I guess Dollar General's biggest competition.

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Speaker 6: It's a great question. You know, they they compete. Obviously,

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Speaker 6: they disposed of Family Dollar because they owned it or

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Speaker 6: sorry sorry. They compete with Family Dollar, which was disposed

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Speaker 6: of by Dollar Tree last year. But they do compete

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Speaker 6: with Walmart. You know. They strive to have their prices

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Speaker 6: within three to four percent of the bigger box retailers.

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Speaker 6: And it's with the it's with grocery stores, it's with

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Speaker 6: the mass merchants, and to some extent with convenience stores

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Speaker 6: are really their their main competitors. But what's really unique

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Speaker 6: about Dollar General is that they are positioned in rural communities,

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Speaker 6: and so while Walmart is a big competitor, the Walmart

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Speaker 6: might be a ten or fifteen mile a minute drive

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Speaker 6: away from where you live, versus a Dollar General that

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Speaker 6: could be on the corner. So that's the competitive advantage

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Speaker 6: that they've been building off of and that they continue

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Speaker 6: to see as a competitive advantage.

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Speaker 1: Stay with us.

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Speaker 5: More from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

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Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 2: It's interesting, Alexis to hear people talking about SpaceX and

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Speaker 2: IPOs at a time when there's so much volatility in

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Speaker 2: the market, but yet everyone wants in on SpaceX, from

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Speaker 2: Silicon Valley to Wall Street to the City of London.

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Speaker 2: Financial elites are hitting up their wealth managers and plugged

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Speaker 2: in a front to find a way. And we have

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Speaker 2: the reporter on this big take with us today, Bailey Lipschultz.

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Speaker 2: He is senior equities reporter here at Bloomberg and Deputy

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Speaker 2: Ecmsar Bailey, Can you tell us a little bit more

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Speaker 2: about this? I think something so interesting is that these

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Speaker 2: deals are increasingly being marketed to smaller investors through private

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Speaker 2: funds and platforms. Should regulators be paying closer attention?

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Speaker 7: Regulators are, and they should be, And I think the

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Speaker 7: big question comes back to how are these deals being marketed.

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Speaker 7: We've seen cases where there was outright fraud or allegations

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Speaker 7: ab outright fraud, and obviously the government is moving to

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Speaker 7: restrict that. But I think anyone with a social media

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Speaker 7: account can say that they've been on X or on

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Speaker 7: Instagram and someone's DM them saying, hey, I have access

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Speaker 7: to SpaceX or the elon averse that you should just

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Speaker 7: wire money.

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Speaker 5: Granted, those are outright scams.

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Speaker 7: But there's also this this world as it relates to

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Speaker 7: SPV special purpose vehicles where investors, people who are allocating these,

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Speaker 7: are creating these are full within their fully within their

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Speaker 7: rights to email people who can check the box that

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Speaker 7: they're accredited investors and offer terms to these investments, and

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Speaker 7: by definition it's totally legal.

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Speaker 5: It is murky.

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Speaker 7: People should do diligence, but there's no real restriction around

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Speaker 7: those executed deals.

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Speaker 4: So these SPVs, I guess Wall Street likes acronyms. They're

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Speaker 4: fairly new, and weren't they just they came to market

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Speaker 4: just a couple of years ago. How much of the

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Speaker 4: market are they now and just that short amount of time.

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Speaker 7: So we aggregated our data through caplite. They see about

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Speaker 7: a third of the flow. They say that SPV volumes

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Speaker 7: over the last few years has gone up eleven x.

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Speaker 7: We've seen these layered SPVs that are even more opaque

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Speaker 7: and more convoluted. We've seen them go basically from a

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Speaker 7: nothing market to well north of a quarter million dollars,

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Speaker 7: but probably even far larger than that if you looked

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Speaker 7: on the whole unrabled access all of the data. It's

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Speaker 7: something that is a factor of or is emblematic of

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Speaker 7: just where we are, because these are companies that have

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Speaker 7: stayed private for so long. Elon SpaceX now wants to

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Speaker 7: go public. At one point seven five trillion dollars. That's

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Speaker 7: a breath taking number to even try to think through,

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Speaker 7: especially when you look not too long ago a decade

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Speaker 7: or so, its closer to twenty billion dollars. So there's

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Speaker 7: a lot of money and there's a lot of appetite,

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Speaker 7: and even just talking to people on Wall Street and

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Speaker 7: people who run investment portfolios, family offices or late stage growth.

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Speaker 5: You need to be able to go to clients that

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Speaker 5: if you're raising a fund and.

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Speaker 7: Say, oh I have access today Andro, oh I have SpaceX,

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Speaker 7: I have XAI. Otherwise it's like why are you going

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Speaker 7: to give someone your money to invest in companies that

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Speaker 7: you could access.

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Speaker 2: Let's say, Baley, that economic and geopolitical risks get bad

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Speaker 2: enough to freeze the IPO market and SpaceX doesn't go public,

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Speaker 2: how do investors in these vehicles get their money back?

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Speaker 7: Well, like anything, as long as the market is liquid,

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Speaker 7: you can sell it to someone else. So if there

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Speaker 7: were to be a prolonged downturn or the market was frozen,

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Speaker 7: or if Elon woke up more one morning and said,

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Speaker 7: you know what, I actually don't want to go public.

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Speaker 5: Which is not unlikely, which is not out of.

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Speaker 7: Question, out of the question, there still probably will be

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Speaker 7: a market. The question comes back to if you paid

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Speaker 7: on face value two trillion dollar value investing in SpaceX

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Speaker 7: because you thought there was an IPO and you thought

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Speaker 7: it would pop and go trade it three trillion dollars

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Speaker 7: and now there's no market for that, you have to

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Speaker 7: probably sell it at a steep discount.

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Speaker 5: That gets back to the whole issue around private markets.

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Speaker 4: What should investors know though, if they want to make

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Speaker 4: use of these special purpose vehicles sort of they want

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Speaker 4: to go in eyes wide open.

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Speaker 7: Do your research understand a that the core investment exists,

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Speaker 7: be that it's preferably on the cap table so it's

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Speaker 7: recognized by a SpaceX and see ask the questions of

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Speaker 7: what fees am I paying? What management fees are going

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Speaker 7: out the door, no matter what is being paid in

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Speaker 7: the form of carry because the issues and speaking to

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Speaker 7: people in the industry, the issues are that you can

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Speaker 7: be pitched an SPV or a fraction of a multi

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Speaker 7: layered SPV where you say two percent management fee, ten

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Speaker 7: percent fee, easy done. Well that's on top of a

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Speaker 7: twenty percent carry, on top of a twenty percent carry.

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Speaker 7: Where all of the sudden you say, okay, well I'm

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Speaker 7: up one hundred x. When these shares, if they do

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Speaker 7: get delivered, you say, oh, well, I actually doubled my

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Speaker 7: money in five years with risk and illiquidity, and it's

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Speaker 7: not worth it.

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Speaker 2: Does it vary by fun how much these fees weigh

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Speaker 2: and two returns.

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Speaker 5: Every deal is different.

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Speaker 7: And I think that's the tough part with reporting and

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Speaker 7: writing about this story is just like you can't hate

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Speaker 7: in broad strokes saying this is how every vehicle is structured.

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Speaker 7: Because there are very well structured, clean SPVs that are

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Speaker 7: on the cap table, and then there are deals that

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Speaker 7: you get a cold email and you say, okay, wire

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Speaker 7: me twenty five thousand dollars and congrats.

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Speaker 5: At some point you'll get shares.

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