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Speaker 2: We had Dick's Sporting Goods reporting results. They forecast full
Speaker 2: year sales growth across the company's namesake brand stores as
Speaker 2: well as at the newly acquired Footlocker chain. With us
Speaker 2: is Lindsay Dutch Bloomberg Intelligence Consumer Hardline Senior analyst on
Speaker 2: earnings from Dix. Lindsay, can you just run us through
Speaker 2: this report? What were the key takeaways?
Speaker 3: Hi, thanks for having me. Yes, solid results coming out
Speaker 3: of the Dick's legacy business in the fourth quarter despite
Speaker 3: a highly promotional holiday environment. And I think even more importantly,
Speaker 3: the turnaround at Footlocker is starting to show green shoots,
Speaker 3: and Dix was really under a lot of pressure to
Speaker 3: show that they can execute on their plan to turn
Speaker 3: this business around. Guidance really is forecasting slight growth in
Speaker 3: same sore sales for a foot locker, and I think
Speaker 3: that's a positive sign that this turnaround is underway.
Speaker 4: Lindsey, did they talk at all about tariffs and the
Speaker 4: impact they've been having is if I remember correctly, they
Speaker 4: were one of the companies early on to say that
Speaker 4: tariffs could actually hit the bottom line.
Speaker 3: So tariffs actually were not mentioned at all on the
Speaker 3: call this morning. I don't think the impact to twenty
Speaker 3: five results was significant.
Speaker 5: A lot of what ended.
Speaker 3: Up happening was the manufacturers that chose to raise prices
Speaker 3: as an offset to the higher cost. Those higher prices
Speaker 3: were mostly passed through to the consumer, and Dix really
Speaker 3: didn't face a significant margin headwind in twenty five from
Speaker 3: Tariff's a sort of a similar situation. Thinking about twenty twenty.
Speaker 2: Six, Lindsay, it looks like Dix has pretty ambitious investment
Speaker 2: plans for this year. I'm seeing one point seven billion
Speaker 2: dollars in gross capex planned for fiscal twenty twenty six.
Speaker 2: What is the breakdown between brick and mortar expansion, tech investments.
Speaker 2: What is it spending this money on?
Speaker 3: So I think the vast majority is actually going to
Speaker 3: the physical footprint, and you have two pieces of that.
Speaker 3: One is their House of Sport concept for the legacy
Speaker 3: Dick's business. They're opening another fourteen of those House of
Speaker 3: sports stores in this year. Those are higher capex to
Speaker 3: open their experiential stores, but they have really been driving
Speaker 3: strength in that core business, driving ticket and transaction growth simultaneously,
Speaker 3: which is really quite impressive. The other piece is they're
Speaker 3: redoing about two hundred and fifty foot locker stores. They
Speaker 3: want those done before back to school season, which probably starts,
Speaker 3: you know, in late June early a lie, depending on
Speaker 3: where you're located. So the vast majority of that investment
Speaker 3: is going to physical stores. They will continue to invest,
Speaker 3: you know, in technology in AI. You know, they do
Speaker 3: see some efficiencies both internally and you know, consumer facing
Speaker 3: with tech investment, the priority is that physical storefront, you.
Speaker 4: Know, lindsay and about the thirty seconds we have left,
Speaker 4: what about online sales for Dix, What's what's looking like
Speaker 4: for them?
Speaker 3: So they continue to see growth in online sales. I
Speaker 3: think a lot of that is supported by the fact
Speaker 3: that they have a higher income consumer who likes to
Speaker 3: shop across multiple channels. So we continue to see growth there.
Speaker 3: But the penetration in sports is you know, on the
Speaker 3: lower side, you always have that kid who forgets his
Speaker 3: cleats and they're on a soccer tournament and they have
Speaker 3: to run out and go get that piece of equipment.
Speaker 3: So the stores are really important to the growth story
Speaker 3: in general, and we will continue to see both store
Speaker 3: and online growth.
Speaker 5: Stay with us.
Speaker 2: More from Bloomberg Intelligence coming up after this.
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Speaker 2: Earlier this morning, we got earnings from Dollar General, a
Speaker 2: bellweather of the US consumer. The company forecasts sales in
Speaker 2: line with analyst estimates, slowing momentum for a company that
Speaker 2: had been exceeding Wall Street expectations quarter after quarter. Joining
Speaker 2: us to discuss the report is Jennifer Bartuccius, Bloomberg Intelligence,
Speaker 2: Senior analysts for retail, staples and package Food. Jennifer. Dollar
Speaker 2: General's earnings were solid, but it seems like the guidance
Speaker 2: was kind of the point that disappointed investors. What exactly
Speaker 2: is management seeing that is making them a little bit
Speaker 2: more conservative in their outlook?
Speaker 6: Good morning. It really comes down to a very tumultuous
Speaker 6: backdrop you know, when you think about Dollar General and
Speaker 6: you think about their core customer, it is the low
Speaker 6: income customer. They're under a lot of stress. They continue
Speaker 6: to be under stress, and I think that that, along
Speaker 6: with policy shifts, is just keeping the company with a
Speaker 6: very conservative outlook for twenty twenty six, even though they've
Speaker 6: had really good momentum in their core business coming into
Speaker 6: the year.
Speaker 4: Now this stock though, Jennifer I was looking at the stock,
Speaker 4: I mean, yes, it's getting hit today, but it had
Speaker 4: surged more than eighty percent in the past twelve months.
Speaker 4: So what was buttressing the stock.
Speaker 6: Well, the company really looked last year, as I looked
Speaker 6: at last years as an investment in a reset year,
Speaker 6: and so they put into place a lot of strategies
Speaker 6: to help reinforce the core business. And it was really
Speaker 6: a story about getting back to retail basics, so things
Speaker 6: like just having clean stores, you know, not having cluttered aisles,
Speaker 6: enough people working in the store so that there's customer service,
Speaker 6: you know, improving the assortment of what they are offering,
Speaker 6: and increasing their value perception by lowering prices in some
Speaker 6: areas and adding products that are in lower price point
Speaker 6: ranges to appeal to their core demographic. So as those
Speaker 6: changes started to gain traction and customers noticed it, that
Speaker 6: was really what was driving performance last year and why
Speaker 6: the stock then was rewarded with regards to its price appreciation.
Speaker 2: Jennifer, this is a company whose core customer is the
Speaker 2: lower income consumer. What are these results telling us about
Speaker 2: the health of that income group right now?
Speaker 6: Well, the results, you know, really show that that customer
Speaker 6: is very, very value focused. You know. One of the
Speaker 6: interesting things that the company called out on their earnings
Speaker 6: call was that, you know, they have over five hundred
Speaker 6: products that are at the one dollar price point or below,
Speaker 6: and that category of products had seventeen percent increase in sales.
Speaker 6: So that just shows how much value means to that
Speaker 6: low income consumer. And as long as Dollar General can
Speaker 6: continue to deliver on that need, there's no reason to
Speaker 6: think that they can't continue some of the some of
Speaker 6: the momentum that they've been able to establish.
Speaker 4: Has Dollar General been a real competitor as of late,
Speaker 4: for say, the Walmarts of the world or Family Dollar.
Speaker 4: Who is I guess Dollar General's biggest competition.
Speaker 6: It's a great question. You know, they they compete. Obviously,
Speaker 6: they disposed of Family Dollar because they owned it or
Speaker 6: sorry sorry. They compete with Family Dollar, which was disposed
Speaker 6: of by Dollar Tree last year. But they do compete
Speaker 6: with Walmart. You know. They strive to have their prices
Speaker 6: within three to four percent of the bigger box retailers.
Speaker 6: And it's with the it's with grocery stores, it's with
Speaker 6: the mass merchants, and to some extent with convenience stores
Speaker 6: are really their their main competitors. But what's really unique
Speaker 6: about Dollar General is that they are positioned in rural communities,
Speaker 6: and so while Walmart is a big competitor, the Walmart
Speaker 6: might be a ten or fifteen mile a minute drive
Speaker 6: away from where you live, versus a Dollar General that
Speaker 6: could be on the corner. So that's the competitive advantage
Speaker 6: that they've been building off of and that they continue
Speaker 6: to see as a competitive advantage.
Speaker 1: Stay with us.
Speaker 5: More from Bloomberg Intelligence coming up after this.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
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Speaker 2: It's interesting, Alexis to hear people talking about SpaceX and
Speaker 2: IPOs at a time when there's so much volatility in
Speaker 2: the market, but yet everyone wants in on SpaceX, from
Speaker 2: Silicon Valley to Wall Street to the City of London.
Speaker 2: Financial elites are hitting up their wealth managers and plugged
Speaker 2: in a front to find a way. And we have
Speaker 2: the reporter on this big take with us today, Bailey Lipschultz.
Speaker 2: He is senior equities reporter here at Bloomberg and Deputy
Speaker 2: Ecmsar Bailey, Can you tell us a little bit more
Speaker 2: about this? I think something so interesting is that these
Speaker 2: deals are increasingly being marketed to smaller investors through private
Speaker 2: funds and platforms. Should regulators be paying closer attention?
Speaker 7: Regulators are, and they should be, And I think the
Speaker 7: big question comes back to how are these deals being marketed.
Speaker 7: We've seen cases where there was outright fraud or allegations
Speaker 7: ab outright fraud, and obviously the government is moving to
Speaker 7: restrict that. But I think anyone with a social media
Speaker 7: account can say that they've been on X or on
Speaker 7: Instagram and someone's DM them saying, hey, I have access
Speaker 7: to SpaceX or the elon averse that you should just
Speaker 7: wire money.
Speaker 5: Granted, those are outright scams.
Speaker 7: But there's also this this world as it relates to
Speaker 7: SPV special purpose vehicles where investors, people who are allocating these,
Speaker 7: are creating these are full within their fully within their
Speaker 7: rights to email people who can check the box that
Speaker 7: they're accredited investors and offer terms to these investments, and
Speaker 7: by definition it's totally legal.
Speaker 5: It is murky.
Speaker 7: People should do diligence, but there's no real restriction around
Speaker 7: those executed deals.
Speaker 4: So these SPVs, I guess Wall Street likes acronyms. They're
Speaker 4: fairly new, and weren't they just they came to market
Speaker 4: just a couple of years ago. How much of the
Speaker 4: market are they now and just that short amount of time.
Speaker 7: So we aggregated our data through caplite. They see about
Speaker 7: a third of the flow. They say that SPV volumes
Speaker 7: over the last few years has gone up eleven x.
Speaker 7: We've seen these layered SPVs that are even more opaque
Speaker 7: and more convoluted. We've seen them go basically from a
Speaker 7: nothing market to well north of a quarter million dollars,
Speaker 7: but probably even far larger than that if you looked
Speaker 7: on the whole unrabled access all of the data. It's
Speaker 7: something that is a factor of or is emblematic of
Speaker 7: just where we are, because these are companies that have
Speaker 7: stayed private for so long. Elon SpaceX now wants to
Speaker 7: go public. At one point seven five trillion dollars. That's
Speaker 7: a breath taking number to even try to think through,
Speaker 7: especially when you look not too long ago a decade
Speaker 7: or so, its closer to twenty billion dollars. So there's
Speaker 7: a lot of money and there's a lot of appetite,
Speaker 7: and even just talking to people on Wall Street and
Speaker 7: people who run investment portfolios, family offices or late stage growth.
Speaker 5: You need to be able to go to clients that
Speaker 5: if you're raising a fund and.
Speaker 7: Say, oh I have access today Andro, oh I have SpaceX,
Speaker 7: I have XAI. Otherwise it's like why are you going
Speaker 7: to give someone your money to invest in companies that
Speaker 7: you could access.
Speaker 2: Let's say, Baley, that economic and geopolitical risks get bad
Speaker 2: enough to freeze the IPO market and SpaceX doesn't go public,
Speaker 2: how do investors in these vehicles get their money back?
Speaker 7: Well, like anything, as long as the market is liquid,
Speaker 7: you can sell it to someone else. So if there
Speaker 7: were to be a prolonged downturn or the market was frozen,
Speaker 7: or if Elon woke up more one morning and said,
Speaker 7: you know what, I actually don't want to go public.
Speaker 5: Which is not unlikely, which is not out of.
Speaker 7: Question, out of the question, there still probably will be
Speaker 7: a market. The question comes back to if you paid
Speaker 7: on face value two trillion dollar value investing in SpaceX
Speaker 7: because you thought there was an IPO and you thought
Speaker 7: it would pop and go trade it three trillion dollars
Speaker 7: and now there's no market for that, you have to
Speaker 7: probably sell it at a steep discount.
Speaker 5: That gets back to the whole issue around private markets.
Speaker 4: What should investors know though, if they want to make
Speaker 4: use of these special purpose vehicles sort of they want
Speaker 4: to go in eyes wide open.
Speaker 7: Do your research understand a that the core investment exists,
Speaker 7: be that it's preferably on the cap table so it's
Speaker 7: recognized by a SpaceX and see ask the questions of
Speaker 7: what fees am I paying? What management fees are going
Speaker 7: out the door, no matter what is being paid in
Speaker 7: the form of carry because the issues and speaking to
Speaker 7: people in the industry, the issues are that you can
Speaker 7: be pitched an SPV or a fraction of a multi
Speaker 7: layered SPV where you say two percent management fee, ten
Speaker 7: percent fee, easy done. Well that's on top of a
Speaker 7: twenty percent carry, on top of a twenty percent carry.
Speaker 7: Where all of the sudden you say, okay, well I'm
Speaker 7: up one hundred x. When these shares, if they do
Speaker 7: get delivered, you say, oh, well, I actually doubled my
Speaker 7: money in five years with risk and illiquidity, and it's
Speaker 7: not worth it.
Speaker 2: Does it vary by fun how much these fees weigh
Speaker 2: and two returns.
Speaker 5: Every deal is different.
Speaker 7: And I think that's the tough part with reporting and
Speaker 7: writing about this story is just like you can't hate
Speaker 7: in broad strokes saying this is how every vehicle is structured.
Speaker 7: Because there are very well structured, clean SPVs that are
Speaker 7: on the cap table, and then there are deals that
Speaker 7: you get a cold email and you say, okay, wire
Speaker 7: me twenty five thousand dollars and congrats.
Speaker 5: At some point you'll get shares.
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