Dick's Sporting Goods' stock fell 9.5% in pre-market trading Wednesday after posting lower-than-expected results for the second quarter. The company reported net sales of $2.18 billion, an increase of just 1% from the year-ago quarter and $60 million short of FactSet estimates of $2.24 billion.
Same-store sales were worse, falling 4% in the quarter, according to a company press release — 3.4% more than the FactSet estimated decline. Net income was up, at $119.4 million compared to $112.4 million in the year-ago quarter.
In a spot of good news, the retailer opened five stores in the quarter, and e-commerce sales increased 12%, making up 11% of net sales in the quarter. Dick's also raised its full-year guidance to between $3.02 and $3.20 earnings per share, from $2.92 to $3.12.
On the heels of a disappointing Q2 performance, Dick's CEO Edward Stack said in a statement that declines were due to strategic investments in the hunting and electronics business, but also laid the blame on Under Armour, citing "significant declines" in sales of the brand "as a result of their decision to expand distribution."
Stack also noted that the company saw "double digit growth in e-commerce, private brands and athletic apparel excluding Under Armour" — a brand which itself has struggled as of late. Results at Dick's were also down from the first quarter, when the retailer seemed to be getting a handle on merchandise assortment, and improving e-commerce and omnichannel services.
The big-box athletics retailer operates in a competitive sector, with Nike and Adidas both making moves in the direct-to-consumer space (and so far avoiding any catastrophic repercussions from controversies). It also faces threats from specialty retailers like Lululemon, Outdoor Voices and even Gap Inc.'s Athleta, all of which are benefiting from the athleisure trend and selling consumers on sportswear that is more fashion-focused than performance-based.
That doesn't mean Dick's isn't capable of weathering the storm, though. In March, the company controlled the highest amount of market share (19%) in the category, according to data from Euromonitor, with the next-closest belonging to Bass Pro (14%).
The company also won over public opinion for a short time after its decision to stop selling assault-style rifles, leading to increased traffic at the retailer the weekend after the news was announced. While the retailer's politically controversial decision is only a small piece of Dick's history over the past year, consumers are becoming more politically-motivated overall, which could leave Dick's with more loyal consumers than in the past.
Overall, the results indicate that Dick's has some work to do if it hopes to keep pace with popular brands like Nike and Adidas — and perhaps even newcomers like Amazon, which entered the category last year.