Consumer Discretionary
A story riddled with risk - Brian McGough argues DKS is priced for perfection despite mounting structural and cyclical headwinds. Core growth is tapped out and the House of Sport concept – its only unit growth driver - is not working; comping down 20% in year 2 and down again in year 3. Inventory issues, including a Critical Audit Matter on carrying value, and gross margin risks from tariffs on private-label apparel add further pressure. Apparel (40% of sales) has turned deflationary and the Foot Locker merger is seen as immediately margin-destructive, with no strategic merits and likely to strengthen competitors such as Academy and JD Sports. Brian is incrementally of the view that the 5-year CAGR for athletic footwear in the US is -300bp below pandemic-era trends and warns that at 10x EBITDA, a historical peak, DKS is over-owned, over-earning and due for a correction.
Edition: 223
- 31 October, 2025
Retail Cross Currents: 4 key themes & top stock ideas
Consumer
Gordon Haskett Research Advisors
GHRA highlights an unusually volatile retail backdrop through late 2025 and early 2026, noting multiple “cross currents” affecting both consumers and retailers. Recent rating changes include downgrades for Dollar Tree (Reduce) and BJ's Wholesale Club (Hold), while upgrades cover Williams-Sonoma (Buy), Wayfair (Accumulate), Kohl's (Accumulate) and Dick's Sporting Goods (Hold). GHRA’s key investment themes emphasise: 1) stocks offering both EPS upside and multiple expansion (Five Below, Ross Stores, Burlington); 2) underappreciated turnaround stories (Kohl's, Dollar General); 3) selective “rate-trade” exposure favouring home furnishings over home improvement (Williams-Sonoma, Wayfair, Tractor Supply); and 4) secular winners / “Coffee Can” stocks (Walmart, Costco, TJX, Ollie's Bargain Outlet, Casey's).
Edition: 221
- 03 October, 2025
High-conviction short ideas
Dick’s Sporting Goods (DKS) - the Foot Locker acquisition will go down as one of the most value-destructive deals in retail history. The first time DKS misses a quarter because of perennial weakness at FL, this newco will trade at 3-4x EBITDA.
Best Buy (BBY) - 100% of EBIT comes from extended warranties, credit and membership - all of which are facing cyclical and secular pressure. Tariffs could take margins to zero, spurring a massive round of store closures.
Lam Research (LRCX) - the most complacent name in semicaps with 2026 WFE expectations set too high especially in DRAM. P/E now 4.5x turns above 3-yr average despite little growth in 2026. Domestic competition in China intensifying longer-term.
Edition: 218
- 22 August, 2025
Consumer Discretionary
John Zolidis removes DKS from his LONG list, following the group's proposed takeover of Foot Locker. He argues that the deal undermines the rationale for assigning DKS a premium multiple, which had been supported by its consistent performance and structurally superior margins. John is deeply sceptical that management can succeed where respected executive Mary Dillon failed. The acquisition threatens to create even more banner conflict, overlapping real estate, greater reliance on Nike and adds significant operational complexity. Crucially, FL lacks unit growth - the one element DKS was missing. While some cost synergies and FCF may eventually be realised, it will take a long time to recoup the $2.5bn price tag.
Edition: 211
- 16 May, 2025
Consumer Staples
Gordon Haskett Research Advisors
EPS north of $10.00 is very much on the cards for FY24 - shares of TGT were up 12% post 4Q earnings and are now up ~20% since GHRA turned bullish in early Feb. In their latest note, they make the case for both earnings upside and multiple appreciation (via traffic gains and business mix diversification). To this end and within their coverage universe, TGT joins the likes of Dollar General, Dollar Tree and Dick's Sporting Goods where this dynamic could play out in the months ahead. Their TP increases to $200 and is based on ~18.5x GHRA’s 2025 EPS of $10.75.
Edition: 181
- 08 March, 2024