Dick’s Sporting Goods felt the heat Tuesday after its shares dropped 30.7 percent following a second quarter earnings report that missed Wall Street’s expectations and resulted in a cut in Foot Locker’s yearly guidance.
The challenges began Tuesday morning when analysts were expecting net sales of $5.64 billion and adjusted diluted earnings per share (EPS) of $3.76 and what Dick’s reported were net sales of $5.59 billion on an adjusted diluted EPS of $3.53. Dick’s quarterly report was dragged down by Foot Locker, which saw its proforma comps decline 3.6 percent, impacted by challenging conditions in the athletic footwear marketplace.
Executive chairman Ed Stack said in a statement that conditions across portions of the athletic footwear and apparel business became increasingly promotional. In footwear, sales at Foot Locker were hurt by a greater exposure to legacy footwear silhouettes. There were fewer launches in the second quarter, and the shoes that came out in the quarter performed below both industry and company expectations. With “a more cautious view” of the rest of the fiscal year, Dick’s cut guidance for the Foot Locker business. That, in turn, then impacted the overall outlook for Dick’s for the fiscal year.
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Investors immediately reacted by selling shares of Dick’s, which was down over 20 percent in pre-market trading Tuesday morning.
That reaction, and sell-off, seems to be the trend these days. Shoe firms have been feeling the heat on earnings days when reported results and revised outlooks fail to meet investor expectations.
Stock swings seem to be more connected to what the company says about outlook and less about a current earnings report. That’s not a surprise as many traders are focused on the short term, and a cut in outlook impacts what happens the next quarter and the one after that.
One recent example is Crocs Inc. The shoe firm had a solid second-quarter report on July 30, with profits swinging to the black against a year-ago net loss. In addition, revenues were up for the quarter and Crocs also raised its yearly guidance. But what the shoe firm didn’t do was meet guidance expectations for the third quarter. Crocs issue a third-quarter earnings forecast that was below market expectations. Investors punished the share price by sending it down to at low as $113.00 in intraday trading on July 30, the day of the earnings report, before retracing up to close at $123.66. Shares of Crocs closed at $133.52 the day before the earnings report.
Shares of Dicks’s closed Tuesday’s trading session at $124.31, down from Monday’s close of $179.33. The stock on Wednesday gained back 4.3 percent to close the trading session at $129.66.
While the 4.3 percent represents a nominal gain given the 30.7 percent drop the day before, it could mean that some longer-term investors might see the lowered price from the selloff as a good time to buy the stock.
After all, Stack said during the company conference call that the second quarter report wasn’t all bad news. He cited new styles from Nike, including its Mind shoe range and the latest running offerings such as the Vomero and Pegasus models, as “doing extremely well.” And he noted that the product pipeline for Nike basketball is also promising. On the more casual side, he cited Ugg and Birkenstock as brand highlights, noting that Dick’s has greater access to the shoe styles and a greater allocation.
More importantly, Dick’s net sales for the quarter were $3.85 billion, up from $3.65 billion in the same year-ago period. The company left is net sales forecast for the Dick’s operation unchanged at between $14.5 billion and $14.7 billion in fiscal 2026.
“We’re proud of our second quarter performance in the Dick’s business, where we delivered comp sales growth of 4.9 percent and gained market share despite growing pressure across portions of the athletic footwear and apparel marketplace,” said Dick’s Sporting Goods president and chief executive officer Lauren Hobart in a statement Tuesday. She noted that while the company was taking a more cautious view of the balance of the year, “we remain highly confident in the strength of the Dick’s business and our long-term opportunity at Foot Locker.”
