Key Takeaways:
Dick's Sporting Goods shares plunged 23% after Q2 adjusted earnings of $3.53 missed estimates and the company cut full-year guidance on a promotional footwear market.
"The promotional environment had a more significant impact on the Foot Locker business given its greater exposure to legacy footwear silhouettes," Executive Chairman Ed Stack said.
Revenue rose 53.2% to $5.59 billion, below the $5.65 billion consensus, while adjusted EPS fell from $4.38 a year earlier. The core Dick's banner delivered 4.9% comparable sales growth, but Foot Locker posted a 3.6% pro forma comp decline and a $31.9 million operating loss.
The company cut full-year non-GAAP EPS guidance to $11-$12 from $13.50-$14.50 and trimmed sales guidance to $21.9 billion-$22.2 billion. Shares fell to $143.77 in premarket trading from a $179.33 close, near the 52-week low of $175.65.
Consolidated gross margin contracted 300 basis points to 34.06%, while the Dick's business expanded gross margin by 79 basis points. SG&A expenses rose 65% to $1.43 billion, reflecting the Foot Locker addition and World Cup marketing investments. The company received approximately $59 million in tariff refunds during the quarter.
Foot Locker contributed $1.74 billion in sales but weighed on profitability. Management now expects Foot Locker full-year pro forma comps of negative 2% to flat, down from prior growth expectations of 1.5% to 3%, and an operating loss of $80 million to $40 million, versus a previously expected profit of $110 million to $150 million.
The company maintained its core Dick's comparable sales outlook of 2.5% to 4% growth but lowered operating margin expectations to 10.6% to 10.9% from 11% to 11.4%. Management cited a more promotional market, higher fuel and supply chain costs, and a higher tax rate of approximately 29%.
Stack said the weakness is cyclical rather than structural, pointing to inventory clearing and shifting consumer preference toward newness. "I do not think this is a demand issue," he said. The company still expects $100 million to $125 million in medium-term cost synergies from the Foot Locker acquisition and plans to open about 14 House of Sport and 20 Field House locations in 2026.
The decline puts the stock at its lowest level since before the Foot Locker acquisition closed, testing investor confidence in the turnaround. Third-quarter results are scheduled for Nov. 24, 2026.
This article is for informational purposes only and does not constitute investment advice.
