Shares of Dick’s Sporting Goods plunged by as much as 12 percent in premarket trading Wednesday morning after the retailer said it sold less merchandise during the second quarter than analysts were expecting.
Sales at Dick’s Sporting Goods stores open for at least 12 months also tumbled by a bigger-than-expected 4 percent during the quarter ended Aug. 4, which was partly blamed on Under Armour. The clothing and sneaker brand has been moving into more off-price channels, like Kohl’s, frustrating companies like Dick’s that try to sell inventory at higher price points.
“As expected, sales were impacted by the strategic decisions we made regarding the slow growth, low margin hunt and electronics businesses, which accounted for nearly half of our comp decline,” CEO Ed Stack said in a statement. “In addition, we experienced continued significant declines in Under Armour sales as a result of their decision to expand distribution.”
Dick’s was also one of the first businesses in the U.S. to stop selling assault rifles and high-capacity magazines, additionally barring the sale of guns to customers under the age 21, following a massacre at a Florida high school earlier this year. The company had predicted this move could hurt sales but also would draw more shoppers to its stores.
Stack said Wednesday he was confident sales would turn around as those challenges lessen.
Dick’s raised its profit outlook for the full year and now expects to earn between $3.02 and $3.20 per share in 2018, up from a prior range of $2.92 to $3.12.
Here’s what the sporting goods retailer reported for the second quarter compared with what Wall Street analysts polled by Thomson Reuters expected:
- Adjusted earnings per share: $1.20 vs. $1.06 expected
- Revenue: $2.18 billion vs. $2.24 billion expected
- Same-store sales: down 4 percent vs. a decline of 0.6 percent expected
Dick’s said online sales increased 12 percent during the second quarter, boosted by some of its private-label brands.
The company has been investing in more of its own in-house lines, like one called Second Skin, which is strikingly similar to Under Armour in style and fit. It’s also seen success with a line for women called Calia by Carrie Underwood.
Dick’s has benefited as there have been a wave of retail bankruptcies over the past few years from the likes of Sports Authority and Sport Chalet. The company is viewed by retail analysts to be one of the last major bricks-and-mortar sporting goods retailers left standing today.
But that doesn’t mean Dick’s can avoid the threat of Amazon, which likewise has added a handful of new sportswear brands to its website within the past year. Amazon is also working with Nike to grow its marketplace.
“While we recognize same-store sales missed expectations, [Dick’s] appears to be managing its transformation to a more focused higher margin business well,” Susquehanna Financial Group analyst Sam Poser said in a research note.
Shares of Dick’s Sporting Goods have climbed about 26 percent so far this year, bringing the company’s market cap to about $3.7 billion.