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
Fourlis (FOYRK GA) Greece
Consumer Discretionary
ResearchGreece is keen to see the contribution from the new IKEA stores in Patra and Crete; the roll-out of Foot Locker stores; and the recovery from the recent cyber-attack. In short, evidence that the business plan is working. Management guides for €600m in retail sales and €38m in cash EBITDA in 2025, vs Q1 sales of €118m and EBITDA loss of €1.1m. Upcoming Q2 results will be key in assessing if the implied 2025-2027 CAGR +12% sales and +24% EBITDA are on track. ResearchGreece rates Fourlis as OI (Own it).
Edition: 219
- 05 September, 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 Discretionary
The market misunderstands Nike's relationship with FL and is failing to grasp the impact that changes in the entire athletic footwear ecosystem will have on FL’s sales and margins. John Zolidis forecasts >$8 in EPS & FCF/ Share by FY23. Multiple expansion to ONLY 10x P/E - shares could rise to >$80 (+50% upside). Should Nike consider buying FL in order to accelerate its Consumer Direct offence?
Edition: 119
- 17 September, 2021