Episode Details

DICK'S Sporting Goods (DKS) Q2 FY2026 — Q2 FY2026 (13 weeks ended August 1, 2026): net sales $5,586.8m, UP 53.2%, against a $5,642.9m bar. Operating income $440.8m, DOWN 2.5%. Non-GAAP EPS $3.53 against a $3.74 bar and $4.38 a year ago; GAAP $3.50 against $4.71. DICK'S Business comps +4.9%; Foot Locker proforma comps -3.6%. The shares closed at $124.31, down 30.68% on 38,849,960 shares. One ticker now holds two retailers moving in opposite directions. The DICK'S Business comped +4.9%, grew segment profit 2.16% to $485.2m and had its full-year comparable-sales outlook left untouched. Foot Locker, 31.1% of the quarter's sales, comped -3.6% and LOST $31.9m. Full-year operating profit guidance came down $260.5m at the midpoint and 73.08% of that cut is Foot Locker, from a business that is 33.79% of the guided revenue. The shares fell 30.68% - the worst session in 5,000 of price history. THE CALL: BUY (3/5, A HEALTHY TWO-THIRDS BEING GIVEN AWAY WITH A SICK THIRD) — base-case value ~$155.39 vs ~$124.31 today. KEY METRICS: - THE SPINE: non-GAAP operating income IS the sum of the two segment profits, to the dollar, in both years: $485,204k of DICK'S plus a $31,876k Foot Locker LOSS = $453,328k. DICK'S ADDED $10.3m (+2.16%); Foot Locker SUBTRACTED $31.9m. No attribution argument is available. - THE GUIDANCE CUT: full-year non-GAAP operating profit $1.77bn -> $1.51bn, a $260.5m midpoint cut. DICK'S gave back $70m; Foot Locker swung from a guided +$130m PROFIT to a -$60m LOSS = $190m, 73.08% of the cut on 33.79% of guided revenue. The DICK'S comp outlook was MAINTAINED at +2.5% to +4.0%. - THE DILUTION, MEASURED: non-GAAP EPS fell $0.85, $4.38 to $3.53. Holding earnings constant and moving only the share count, $0.3964 - 46.89% - is nothing but the 9.6 million shares issued to buy Foot Locker. Diluted shares went 81.0m to 90.1m. - THE PRIOR-YEAR DISTORTION: the $4.71 GAAP comparison contained $49.7m pre-tax of non-cash gains on DICK'S pre-bid stake in Foot Locker equity - $0.4542 a share, 37.54% of the GAAP decline. 81.6% of the whole pre-tax decline is that one non-operating line. - THE PROPORTIONALITY TEST: enterprise value fell $17.16bn to $12.20bn - $4.96bn in one session - against a $260.5m cut to this year's operating profit. That is 19.04x the cut: 50.9% the earnings reset at Monday's multiple, 49.1% the multiple itself, 9.69x to 8.08x. - THE REVERSE SOLVE: hold the DICK'S Business at 10.0x its own guided $1.57bn of segment profit and it is worth $15.70bn - $3.50bn MORE than the entire enterprise. Foot Locker is worth exactly zero only if DICK'S itself is worth 7.77x. - THE TAPE: $179.33 to $124.31, -30.68%, on 38,849,960 shares = 32.9x the median and 1st of 252 sessions. It gapped -20.62% and closed 1.38% off its own low. Worst of 5,000 sessions since October 2006; the prior worst was -24.15% in August 2023. - CAPITAL RETURN: net debt $992.6m, 0.66x guided operating profit, revolver undrawn. The board declared $1.25 a share on August 24, the day BEFORE the print - an annual $5.00, a 4.02% yield here against 2.79% the day before, 43.5% of guided earnings. The half's buyback went at $196.38, now -36.70%. What to watch: UP: a real repurchase against the $3.00bn unused authorisation, and a Foot Locker proforma comp that stops deteriorating in the November quarter. DOWN: Foot Locker inventory rising into a falling comp, which would take the announced clean-up bill above the current $750m ceiling. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.