Things aren’t looking good for Dick’s Sporting Goods , and Bank of America thinks investors need to steer clear of the athletics apparel. The stock plunged 24.1% on Tuesday — its biggest one-day drop on record — on weaker-than-expected second-quarter results. Dick’s also cut its guidance for the year amid a rise in retail theft and sluggish sales in its outdoor segment. DKS 5D mountain Dick’s Sporting Goods shares “Post 2Q results, we see increased risks to DKS sales & margin outlook,” analyst Robert Ohmes said in a Wednesday note, adding that there are “risk[s] of further inventory action in 2H.” Ohmes downgraded shares to neutral from buy. He also reduced his price target to $125 from $180, implying 12% upside from Tuesday’s close. Shares lost an additional 2.2% Wednesday before the bell. The analyst cited several downside risks ahead for Dick’s, including: normalization of spending on categories that outperformed during the pandemic, as well as high inflation impacting consumer spending and magnified expense deleverage given investments in wages, ads, technology and store growth. Student loan repayments could further tighten discretionary purchases, according to Ohmes. To be sure, the analyst believes Dick’s “near-term headwinds are partially offset by compelling valuation.” “We still see: (1) improving footwear allocations from key vendors including Nike & adidas, (2) strong apparel momentum led by exclusives from Nike, continued strength in adidas, and better segmented men’s product from Under Armour, (3) strong omni-channel execution, and (4) strong momentum in higher margin private label,” Ohmes said. The stock is down more than 7% for the year following Tuesday’s sell-off. —CNBC’s Michael Bloom contributed to this report.
