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The analysts told investors in a note that the company’s margin outlook is weaker with less visibility.
“DKS reported 2Q23 results that were modestly below expectations on the top line but well below expectations on the bottom line, leading the company to sharply reduce its full-year bottom-line guidance,” they explained.
“Looking forward to 2024, SG&A growth should slow from the recent mid-teens levels, but we are now hard-pressed to see the company leveraging SG&A without +MSD comps, suggesting limited potential for margin expansion and EPS growth in 2024 as shrink persists into at least 1Q24 and the markdown environment is uncertain,” they added.
Although the DKS valuation is low relative to historical levels, the analysts said that more limited visibility to the sales outlook and bottom for margins has led the firm to cut estimates and reduce its rating on the stock.
