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- 📉 Resilient Trader Trade Idea: The Inventory Short on Dick's Sporting Goods (DKS)
📉 Resilient Trader Trade Idea: The Inventory Short on Dick's Sporting Goods (DKS)
Regular people are starting to trade like institutional traders-and they’re making a living doing it. But not everyone is successful with their trades. There is a right way and a wrong way. I’m here to help you come up with vetted trade ideas so you actually make money off your trading.
Resilient Trader is where smart traders come for vetted ideas.
Every week, we cut through the noise and surface opportunities that institutions are already eyeing - but with strategies tailored for retail traders. Today’s setup? A retail stock flying high while cracks form beneath the surface.
We’ll cover:
Why Dicks Sporting Goods is a Short at current levels
How to take advantage with defined risk through a put spread
🔍 Trade Thesis: DKS Is Running Uphill With a Backpack Full of Unsold Gear
Dick’s Sporting Goods (DKS) has been on fire, up over 140% in the last two years. But we think this rally is running on fumes.
Behind the scenes:
🚨 Inventory is bloated: Up 18% YoY, while sales rose just 3.5%
📉 Margins under pressure: Hardlines (high-margin gear) are falling as a % of sales
🧾 Auditor red flag: Inventory obsolescence required "extensive audit effort"
📊 The Fundamentals Are Breaking Down
Let’s break it down:
💰 Revenue: $13.44B, up just 3.5%
📉 Comparable Sales: 5.2%, but guidance is soft - only 1-3% for 2025
📦 Inventory: Grew 5x faster than sales. That's usually bad news for margins
🛠️ Hardlines Shrinking: From 40% of sales in 2022 → 36% in 2024
🧮 Operating Margin: Likely to deteriorate from overstock markdowns
📐 Valuation Is Stretched
DKS is priced like it’s still in beast mode:
⚖️ EV/Sales: 1.06x vs. Academy Sports at 0.77x
🏷️ Gross Margin: 36.65% vs. Academy’s 33.96% - room for compression
📈 P/E Ratio: Trading at a premium to sector peers
🧭 Technicals Agree: This Chart Looks Tired
❌ Below key moving averages
❌ Resistance at $216.59
❌ 15 sell signals vs. 2 buy signals
❌ Current price: $210.92
🎯 Targets: $190 (initial), $160 (intermediate)
💥 Trade of the Week: Defined-Risk Put Spread
We’re combining a short equity position with a defined-risk options trade for leveraged downside.
🔴 Trade Setup
Short DKS at $210.92
🛡️ Options Play
Buy the Sept 19th $200/$170 Put Spread for $10.80
Buy Sept 19th $200 Put: $18.50
Sell Sept 19th $170 Put: $7.70
Net debit: $10.80
📈 Risk-Reward
Max Risk: $10.80
Max Reward: $19.20
Breakeven: $194.3
Risk-Reward Ratio: ~1:1.7
🚀 Catalysts on the Horizon
Keep your eyes on:
May Earnings (Q1 2025) - Margin compression could finally show up
Guidance cuts - Soft outlook likely gets softer
Analyst downgrades - Already happening (19 estimate cuts this month)
Technical breakdown - $200 breach could trigger accelerated selling
🛑 Risk Management Tip
Set a cover-stop at $215 to cap upside risk while allowing room for downside follow-through.
🧠 Final Thoughts
DKS is a classic case of a stock flying high while warning signs pile up below.
From the inventory blowout to margin risks, valuation premium, and technical weakness - this setup has all the ingredients for a profitable short.
✅ Short DKS at $201.34
💸 Buy the $190/$160 Sept 19th Put Spread for $11.10
We'll be watching this one closely.
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Stay liquid my friends…,
- The Resilient Trader