Dick’s Sporting Goods Reports Decline in Profits and Revises Earnings Guidance

One sentence summary – Dick’s Sporting Goods reported a 23% decline in profits and revised its earnings guidance for the year due to challenges with retail theft and aggressive markdowns to clear excess inventory, particularly in the outdoor category, falling short of Wall Street’s estimates; however, despite the decrease in net income, sales rose and same-store sales saw positive growth, and the company expanded its reach by opening new stores, while also implementing workforce reductions to streamline operations and invest in talent and technology.

At a glance

  • Dick’s Sporting Goods reported a 23% decline in profits.
  • The company revised its earnings guidance for the year.
  • Retail theft and aggressive markdowns led to challenges with excess inventory.
  • The markdowns were particularly prevalent in the outdoor category.
  • Dick’s fell short of Wall Street’s estimates on both the top and bottom lines.

The details

Dick’s Sporting Goods, a leading sporting goods retailer, recently reported a 23% decline in profits.

The company also revised its earnings guidance for the year.

This comes after challenges with retail theft and aggressive markdowns to clear excess inventory.

The markdowns were particularly prevalent in the outdoor category.

As a result, Dick’s fell short of Wall Street’s estimates on both the top and bottom lines.

This is the first time in three years that the company has not met these estimates.

In the second fiscal quarter, Dick’s net income was $244 million.

This is a decrease from the previous year, where the net income was $318.5 million.

Despite the decrease in net income, sales rose to $3.22 billion.

This is an increase from the same period last year, where sales were $3.11 billion.

However, an increase in theft and inventory loss, also known as shrink, led the company to lower its profit forecast for the year.

The CEO acknowledged the impact of theft on shrink.

Measures were taken to address excess product in the outdoor category.

Dick’s now expects earnings of $11.33 to $12.13 per share for the year.

This is a decrease from the previous guidance of $12.90 to $13.80.

The company’s gross margins also declined to 34% from 36% in the previous year.

Aggressive markdowns on outdoor merchandise contributed to a reduction in gross margin by approximately 1.7 percentage points.

Shrink, including theft and other factors, further impacted gross margins by around 0.85 percentage points.

Most of the profit squeeze resulted from actions taken to clear excess inventories.

Dick’s is considering reassessing its inventory counting methods to mitigate the increased risk of shrink.

The company did not disclose the specific breakdown of shrink between theft and other factors.

Despite the challenging quarter, Dick’s profits have improved compared to 2019.

Same-store sales saw a 1.8% increase, driven by a 2.8% rise in transactions.

Dick’s also expanded its reach by opening seven new House of Sport locations during the quarter.

The company has plans to continue opening new stores.

To streamline costs and reallocate resources, the company made workforce reductions of less than 1%, primarily at its customer support center.

This move is not solely driven by cost-cutting measures but rather a strategic reinvestment in talent and technology.

However, these workforce cuts will result in severance expenses of approximately $20 million.

There may also be additional one-time charges ranging from $25 million to $50 million.

In summary, Dick’s Sporting Goods faced challenges with retail theft and excess inventory in its outdoor category.

This resulted in a decline in profits and a revision of earnings guidance.

The company is taking action to address shrink and is considering changes to its inventory counting methods.

Despite these obstacles, Dick’s profits improved compared to 2019.

Same-store sales and transaction numbers showed positive growth.

The company also expanded its presence by opening new stores.

Workforce reductions were implemented to streamline operations and invest in talent and technology.

This resulted in certain one-time charges.

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cnbc.com
– Dick’s Sporting Goods reported a 23% drop in profits and lowered its earnings guidance for the year.
The company saw an increase in retail theft and implemented aggressive markdowns to clear excess inventory in its outdoor category.
– Dick’s fell short of Wall Street’s estimates on the top and bottom lines for the first time in three years.
The company’s net income for the second fiscal quarter was $244 million, compared to $318.5 million the previous year.
– Sales rose to $3.22 billion from $3.11 billion a year earlier.
– Dick’s lowered its profit forecast for the year due to expected increases in shrink, which refers to inventory lost by theft or internal issues.
The company’s CEO mentioned that theft had a meaningful impact on shrink and the company took action on excess product in the outdoor category.
– Dick’s now expects earnings of $11.33 to $12.13 per share for the year, compared to previous guidance of $12.90 to $13.80.
The company’s gross margins fell to 34% compared to 36% in the previous year.
– Dick’s aggressively marked down outdoor merchandise to clear inventory, which cut into its gross margin by about 1.7 percentage points.
– Shrink hurt gross margins by about 0.85 percentage points, with the bulk of the profit crunch coming from actions taken to clear out excess inventories.
The company is considering revisiting how it does inventory counts to address the increased risk of shrink.
– Dick’s did not disclose the breakdown of shrink between theft and other factors.
The company’s profits are up compared to 2019, despite the rough quarter.
– Same-store sales were up 1.8% in the quarter, driven by a 2.8% increase in transactions.
– Dick’s opened seven new House of Sport locations during the quarter and plans to continue opening new stores.
The company cut less than 1% of its global workforce, primarily at its customer support center, in an attempt to streamline its cost structure and reallocate resources.
The cuts will result in severance expenses of about $20 million and may lead to additional one-time charges of $25 million to $50 million.
The CEO emphasized that the cuts were not a cost-cutting move but rather an effort to reinvest in talent and technology.

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