Key Takeaways:
DICK'S Sporting Goods shares plunged over 30% Tuesday, the worst single-day drop on record, after Q2 earnings missed estimates and management cut full-year guidance.
"The latest figures reflect the strength of our athlete-focused strategy, broad differentiated assortment, strong brand partnerships and continued focus on profitable growth opportunities," CEO Lauren Hobart said.
Net sales rose 53% year over year to $5.59 billion, below the $5.65 billion consensus, while adjusted EPS of $3.53 missed the $3.78 estimate. Excluding Foot Locker, which DICK'S acquired last year, core comparable sales rose 4.9%, but Foot Locker comps fell 3.6%.
Management cut consolidated net sales guidance to $21.9 billion to $22.2 billion from $22.1 billion to $22.4 billion, and adjusted EPS to $11 to $12 from $13.50 to $14.50. Foot Locker is now expected to lose $40 million to $80 million, versus a prior forecast of $110 million to $150 million in profit.
Executive Chairman Ed Stack attributed Foot Locker's weakness to excess inventory that pushed top footwear brands to increase promotional activity, directly pressuring specialty retailers. Foot Locker's EMEA operations also suffered from geopolitical developments and cautious consumer spending. The company's core business, by contrast, posted pretax profit of more than $485 million, while Foot Locker recorded a pretax loss of nearly $32 million.
The selloff triggered a wave of Wall Street downgrades. Truist cut DKS to Hold from Buy with a $135 price target, while Telsey Advisory downgraded to Market Perform from Outperform with a $145 target, down from $255. KGI Securities moved to Neutral from Outperform with a $135.10 target. Barclays trimmed its target to $150 from $280 but kept an Overweight rating. Telsey said slowing demand for athletic apparel and footwear could delay the expected turnaround at DICK'S for at least several quarters.
The weakness also hit Nike. Truist downgraded NKE to Hold from Buy with a $42 target, citing DICK'S results as "incremental murkiness" around the athletic giant's turnaround. The firm said it wants greater clarity on Nike's cleanup efforts and the product pipeline expected in 2027 before becoming more constructive on the shares.
Options activity reached a record 163,000 contracts. The September 18 $120 put surged about 8,700 percent to near $4.40, while further out-of-the-money puts gained more than 11,000 percent. Market-wide put volume hit a year-to-date low of roughly 18.6 million contracts, dragging the put/call ratio to 0.61.
The stock closed near a three-year low, roughly 50 percent below its 2026 high of $244.38. The guidance cut shows Foot Locker's turnaround will take longer than expected, and investors will watch the holiday quarter for signs of stabilization in athletic footwear demand.
This article is for informational purposes only and does not constitute investment advice.
