What Happened?

A number of stocks fell in the afternoon session after the release of a stronger-than-expected Producer Price Index (PPI) for January, fueled concerns about inflation and its impact on consumer spending. 

The U.S. Bureau of Labor Statistics reported that the PPI, a measure of wholesale prices, rose 0.5% in January, exceeding economists' expectations. A significant driver of this increase was a 0.8% advance in the index for final demand services. Specifically, the data showed a sharp 2.5% jump in margins for trade services, which reflects the profits received by wholesalers and retailers. This suggests that businesses are passing on higher costs, potentially including import tariffs, to customers. With recent data also showing a rise in consumer loan delinquencies, investors are worried that already-stretched households will cut back on discretionary purchases, negatively affecting companies tied to consumer spending.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Beauty and Cosmetics Retailer company Sally Beauty (NYSE: SBH) fell 3.2%. Is now the time to buy Sally Beauty? Access our full analysis report here, it’s free.
• Apparel Retailer company American Eagle (NYSE: AEO) fell 2.6%. Is now the time to buy American Eagle? Access our full analysis report here, it’s free.
• Apparel Retailer company Zumiez (NASDAQ: ZUMZ) fell 3%. Is now the time to buy Zumiez? Access our full analysis report here, it’s free.
• Home Furniture Retailer company Williams-Sonoma (NYSE: WSM) fell 2.8%. Is now the time to buy Williams-Sonoma? Access our full analysis report here, it’s free.
• Sports & Outdoor Equipment Retailer company Dick's (NYSE: DKS) fell 3.3%. Is now the time to buy Dick's? Access our full analysis report here, it’s free.

Zooming In On Dick's (DKS)

Dick’s shares are somewhat volatile and have had 12 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The biggest move we wrote about over the last year was 10 months ago when the stock dropped 14.2% on the news that the company announced the acquisition of footwear retailer Foot Locker for $2.4 billion. 

DKS would pay with some of its cash and take on new debt. As part of the transaction, Foot Locker shareholders will have the option to receive either (1) $24 cash or (2) 0.1168 shares of DKS common stock for each Foot Locker share they hold. The cash offer reflects a roughly 66% premium to Foot Locker's 60-day volume-weighted average price. Notably, there is no cap or minimum on the form of consideration, meaning the final mix of cash and stock will be determined entirely by shareholder elections. Should a sizable portion of Foot Locker shareholders opt for stock, DKS will be required to issue new shares, potentially increasing its total share count and resulting in near-term earnings dilution. That dilution may persist until Foot Locker's earnings contribution can offset the added share base. The market's initial reaction was cautious, reflecting investor concerns around integration challenges, rising leverage, and the risk of dilution. 

Also, some Wall Street analysts were not sold on the deal. TD Cowen downgraded the stock from Buy to Hold adding "With FL Dick's would be more exposed to Streetwear and lifestyle fashion trends, mall-based retail, and will be competing with smaller, more nimble sneaker retailers and marketplaces that are gaining share." Separately, the company reported underwhelming preliminary first quarter 2025 results as it guided for comparable sales growth of 4.5% (a significant deceleration vs 6.4% growth in the previous quarter) and non-GAAP EPS of $3.37.

Dick's is up 1.8% since the beginning of the year, but at $203.74 per share, it is still trading 13% below its 52-week high of $234.20 from October 2025. Investors who bought $1,000 worth of Dick’s shares 5 years ago would now be looking at an investment worth $2,753.

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