DICK’S Sporting Goods Reports Strong Core Sales Growth, But Cuts Earnings Outlook on Promotional Pressures and Foot Locker Setback

Key Points

• Comparable sales at DICK’S core business increased 4.9% in the second quarter, with the company maintaining its full-year sales outlook for this segment.

• Full-year adjusted earnings guidance was revised down to $11.00 to $12.00 per share, compared to the $13.50 to $14.50 range previously reaffirmed in May.

• Foot Locker’s pro forma comparable sales outlook shifted from 1.5% to 3.0% growth to a potential decline of up to 2%.

Shares of Dick’s Sporting Goods (NYSE:DKS) dropped approximately 29% Tuesday morning following the release of second-quarter results. Despite reporting robust demand metrics, the company’s revised profit projections disappointed investors.

The retailer’s core DICK’S business delivered a 4.9% year-over-year increase in comparable sales during Q2, supported by heightened interest in the upcoming 2026 FIFA World Cup. Management reaffirmed its full-year sales outlook for this segment, indicating sustained momentum.

However, the earnings revision weighed heavily on investor sentiment. Dick’s reduced its full-year earnings guidance to $10.94 to $11.94 per share on a GAAP basis, and to $11.00 to $12.00 on an adjusted (non-GAAP) basis — down significantly from the $13.50 to $14.50 range established in May.

Image source: Getty Images.

The second quarter results were strong in areas within the company’s control. Revenue reached $5.59 billion, with GAAP earnings per share of $3.50, or $3.53 on an adjusted basis. Net income stood at $315.5 million, though year-over-year comparisons were complicated by the recent Foot Locker acquisition.

The 4.9% comparable sales growth at DICK’S was broad-based, driven by increases in both average transaction values and customer visit frequency.

Foot Locker, acquired in September 2025, presented a contrasting picture. On a pro forma basis — comparing performance as if Dick’s had owned the chain in the prior year’s quarter — comparable sales declined 3.6%. The company attributed this downturn to difficult conditions in the athletic footwear market, particularly Foot Locker’s inventory of older styles and reliance on limited-edition launches and retro releases.

“As the quarter progressed, conditions across portions of the athletic footwear and apparel marketplace became increasingly promotional, and we took action to remain competitively priced to protect and grow our leadership position,” stated Executive Chairman Ed Stack in the earnings release.

Importantly, the guidance adjustment did not impact all metrics uniformly. Dick’s maintained its DICK’S business comparable sales outlook of 2.5% to 4% growth but lowered Foot Locker’s comparable sales projection to a range of negative 2% to flat.

This indicates that while the company still expects its core business to deliver consistent top-line performance, the profitability of those sales faces challenges due to competitive pricing pressures throughout the retail landscape.

The Foot Locker turnaround proved to be the primary driver of the earnings cut. In late May, management had projected a full-year profit of $110 million to $150 million for this segment, with comparable sales growth of 1.5% to 3%. Just one quarter later, the outlook shifted to a projected loss of $40 million to $80 million, with comparable sales ranging from negative 2% to flat.

Overall, full-year adjusted operating income guidance decreased by approximately $260 million at the midpoint. The Foot Locker segment accounted for roughly $190 million of this reduction, with the DICK’S business contributing the remaining $70 million decline.

While smaller in magnitude, the profit reduction at the core DICK’S business remains significant. Even with its sales outlook unchanged, the segment faces margin compression from the need to maintain competitive pricing in an increasingly promotional environment.

CFO Navdeep Gupta noted on the earnings call that gross margins at the DICK’S business are now expected to decline slightly for the year, citing promotional pressures alongside increased fuel and supply chain costs. He emphasized that gross margin pressure would likely be most pronounced in the third quarter.

Is the Drop an Overreaction?

The market’s reaction reflected a substantial 29% decline in share price for an earnings downgrade of approximately 18%. Shares closed Monday at $179.33 and traded near $127 Tuesday morning, representing roughly 11 times the midpoint of this year’s revised adjusted earnings guidance.

The magnitude of the sell-off can be attributed to several factors. This significant guidance cut occurred just one quarter after a previous increase, raising questions among investors. Additionally, the majority of the revision stemmed from the Foot Locker acquisition — a business that management had only recently integrated.

While the 4.9% comparable sales growth at the DICK’S business represents a performance most retailers would welcome, Dick’s operates within a competitive retail environment where it cannot unilaterally set pricing. The company’s updated guidance now assumes that promotional activity will persist through the holiday season.

Tuesday’s stock decline appears to reflect more concern about the Foot Locker turnaround than about the underlying health of the DICK’S business. With sales expectations unchanged but profit projections reduced due to ongoing industry-wide discounting, the stock is no longer priced for peak performance. Bargain-minded investors might view this as an opportunity to acquire a value stock, though much will depend on how swiftly Foot Locker’s losses stabilize and how long promotional pressures endure.

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