- Dick’s Sporting Goods on Tuesday reported second quarter net sales of $2.2. billion, a nearly 10% increase over the same period last year, according to a company release. Consolidated same-store sales remained nearly flat, increasing just 0.1% and falling well short of the company’s estimates of a 2% to 3% increase.
- The athletic gear retailer posted adjusted net income of $104.8 million, or 96 cents per diluted share, which fell short of management’s estimates of $1.02 to $1.07 per diluted share. Earnings also fell short of the FactSet analyst consensus of $1 per share, according to MarketWatch. The company now expects earnings per share of $2.85 to $3.05, below analyst expectations of $3.09 per share, according to Thomson Reuters figures cited by CNBC.
- Shareholders punished the retailer not just for its missed expectations but also for a signal from Chairman and CEO Ed Stack that Dick’s would cut prices to maintain its market share in a fiercely competitive sector. "By design, we will be more promotional and increase our marketing efforts for the remainder of the year, as we will aggressively protect our market share," Stack said in a statement Tuesday. The company's stock price fell by more than 20% after the earnings release.
In a call with analysts, Stack elaborated on the "panic" in the retail industry. "It's been a difficult environment. I think people — I'm not going to speculate what they're thinking, but they seem to be in panic mode with how they are pricing product, and we think it's going to continue to be promotional, and at times irrational going forward," Stack said Tuesday, according to a Seeking Alpha transcript.
"And I think that's going to be across [a] number of different sectors," he added. "I don't think it's going to be particularly prevalent in the footwear business, but I do see it in the athletic apparel business like we did in the hunt-fish-camp business, and the electronics business is going to continue to be promotional too."
Investors panicked at those words, fleeing not just Dick’s but a handful of other sporting goods and apparel stocks. But Neil Saunders, managing director of GlobalData Retail, described the retailer's performance as "not too bad" in comments emailed to Retail Dive. "[O]verall sales are up nicely, operating income has grown, and net income has increased by almost a quarter." Although he noted that "one fragile figure stands out: comparable sales were virtually flat." This he attributed to the "crowding" of the sector with both specialist and generalist retailers.
Dick's has already taken pains to deliver more profits. In May, the retailer announced it would cut 160 corporate staff positions. The layoffs were part of broader cost-cutting plans that include slowing Dick’s store development program, consolidating its vendor base and reducing its dependency on "traditional marketing vehicles," the company said at the time. Savings from the cost-cutting measures will be reinvested in digital, ecommerce and marketing, Dick’s youth sports equipment service Team Sports HQ, and development of the company’s private brands, Stack said earlier.
The company has also had turnover in the c-suite recently. Earlier this year, COO André Hawaux announced his retirement after Q2 of this year, and CMO Lauren Hobart was promoted to president. Keri Jones also joined Dick’s this summer as the retailer's chief merchant and Don Germano, who oversaw the company's stores operations from 2010 through 2013, returned as the company's senior vice president of store operations.
Stack said at the time that the changes — including Hobart’s promotion to president — are meant to make Dick’s more efficient and boost the company’s efforts to reach and sell to customers across sales channels. They follow Dick’s growing dominance in the market after major competitor Sports Authority succumbed to bankruptcy and sold its intellectual property and store locations to Dick’s. Dick’s also acquired $43 million of assets from Golfsmith that it plans to fold into its Golf Galaxy chain.