Dick’s Sporting Goods stock rebounds after the retailer cut guidance

Yahoo Finance Live anchors discuss quarterly earnings for Nordstrom and Dick's Sporting Goods.

Video Transcript

AKIKO FUJITA: Well, as we've been saying, retail stocks took a beating last week, with inflation concerns still weighing on the economy. Investors worried further declines may be on the horizon, as consumers confront increasing prices, though there have been a few bright spots in this space. You see all the stocks we've been following today in the green right now.

And let's start with Nordstrom and their results, Brian, because it is sort of similar to what we just heard from Tim. You know, although Nordstrom competes at a higher price point, we should point out, they have said that people are buying again. They're going out, going back to work. And so, they're stocking up in that way. But--

BRIAN CHEUNG: Inventory story is--

AKIKO FUJITA: But inventory story is the same. It increased 24%. And so, they're saying that they haven't necessarily seen an impact from higher costs, consumers pulling back yet. But at least the company is saying, well, maybe part of that is because of where they're competing, not necessarily high end luxury, but at a higher price point than some of these brands.

BRIAN CHEUNG: So let me just say, coming out of that interview with Tim, I mean, really interesting kind of tonal change that we've heard in terms of what we heard from Target and Walmart last week, which is, oh, my gosh, this inventory situation is horrible for us. We have to discount all of this stuff to get stuff out of our warehouse. And Tim essentially saying, look, that's OK with us. We have the product to be able to push that back. We can distribute it over the seasons. We've got a nice backlog, and the demand is still there.

And I guess, really, the differentiating factor there is just the size of the goods, right? I mean, we remember Target on the call, Brian Cornell saying, because we have all this patio [INAUDIBLE] that can't move, that's a lot larger physically of a space that we could have otherwise used in our warehouse for other types of goods. If you're just a clothing retailer like a Nordstrom, like an Express, it's really not that hard to hold on to a few extra suits, right?

AKIKO FUJITA: Well, in the case of Nordstrom, you pass it out to Nordstrom Rack, right? That's not necessarily a bad thing when they've got a distant--

BRIAN CHEUNG: Express has the retail stores, yeah.

AKIKO FUJITA: Yeah, discount element, too. I mean, to me, the question is, if we're talking about inventory levels and these companies not being able to plan for what they have seen over the last few months, is this a one quarter story where they adjust and then come back in Q2 and say, things have gone down, or is this something that's a little more medium term?

BRIAN CHEUNG: Yeah, and I think quickly, just kind of the whole idea about which retailers are going to benefit from an inventory, really, because, again, high inventory is not bad across the board. It's going to be these types of brands that have outlet stores like Express and also like a Nordstrom. I mean, Nordstrom is a specifically a unique story because they have the anniversary sale. They really only discount about once a year. That sale's coming up in the second quarter, so we didn't see the impact of that yet. But that would be a great opportunity for them to unload a lot of the extra inventory.

And even if they don't sell it, guess where it goes? It goes to Nordstrom Rack. So I guess the real takeaway here is that for those types of companies, it's going to be a lot more beneficial because they have that outlet. And I guess, for us, it means that we're going to get some pretty lit options at the Nordstrom Rack on 14th Street.

AKIKO FUJITA: Yeah, Nordstrom does do sales. Not quite anniversary sale, but they do these things.

BRIAN CHEUNG: Every now and then. Every now and then. But let's also move on to another stock that's on the move, and that is Dick's Sporting Goods. Again, they are a huge mover this morning as we see the stock up about 10%. They did cut their outlook for the year, which kind of is interesting, because maybe if you saw that headline on the top, you would not have expected the stock to be moving up. And to be fair, in pre-market trading, shares were down 10%.

But what's important to remember is that this stock took a beating during the retail puke that we saw at the end of last week as well. So the argument here is, well, was it already priced in ahead of their earnings and whatnot? That very much an open question, but again, for Dick's Sporting Goods, kind of, I guess, a similar story on the inventory front.

AKIKO FUJITA: Up 40%.

BRIAN CHEUNG: Yeah.

AKIKO FUJITA: I mean, that's similar to what we've heard from some of these other companies, right?

BRIAN CHEUNG: Well, actually, they have to hold on to basketball hoops and stuff, too, which are quite large.

AKIKO FUJITA: You're talking about the space.

BRIAN CHEUNG: Yeah.

AKIKO FUJITA: The space that it requires.