DKS - Dick's Sporting Goods downgraded at Citi ahead of earnings

Citi expects conservative guidance from Dick’s Sporting Goods ( NYSE: DKS ) in an earnings release next week could hamper the stock in the near term.

The analysts explained that while Q4 earnings should reflect strong sales and will likely exceed EPS estimates, margin erosion could be rearing its head. A promotional environment could show “sales are coming at a cost,” according to Citi.

“We expect near-term GM pressure to continue (driven by excess inventory in the marketplace) and for F23 guidance to reflect another year of sales/margin give back,” the team concluded. “With DKS up against difficult multi-year comparisons in 2023 (esp 2H), it's tough to see how they can sustainably grow sales/EPS, particularly if demand slows in key categories of apparel/footwear (~55% of sales).”

Given the recent outperformance of the stock, rising over 20% in the past six months, the risk reward is balanced in the view of the bank’s analysts. As such, the team moved from a Buy to Neutral rating. The team also trimmed their price target to $140 from $143.

Shares of Dick’s Sporting Goods ( DKS ) dipped 1.4% in premarket action on Tuesday.

Read more on the earnings expectations for the retailer next week .

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