Dick's Sporting Goods shares fall as consumer demand for apparel weakens
Dick's Sporting Goods shares declined by more than 29% during Tuesday's trading session, potentially marking a record one-day percentage drop. The decline followed a second-quarter earnings report that missed estimates and included a reversal of previous expectations regarding annual comparable sales growth for Foot Locker.
The company has revised its 2026 outlook and issued warnings concerning weakening consumer demand for athletic apparel and footwear. Dick's acquired Foot Locker for $2.4 billion last year to increase its sneaker market presence and gain access to international markets.
Financial performance and revised guidance
The retailer reported quarterly profit of $3.53 per share, which fell short of the $3.76 estimated by analysts. Net sales for the 13 weeks ending on Aug. 1, a period that included the FIFA World Cup, were $5.59 billion, missing the $5.65 billion estimate compiled by LSEG.
Dick's Sporting Goods has adjusted its annual sales projections. The company now projects annual sales of $21.9 billion to $22.2 billion, a reduction from its previous forecast of $22.1 billion to $22.4 billion. Furthermore, the company now expects Foot Locker's annual comparable sales to be flat or down by 2%.
The company indicated that it will invest part of $59 million received in tariff refunds into promotions.
Shifting consumer trends and inventory issues
Executives noted that lifestyle and legacy silhouettes are "simply not resonating the way they once did," a trend that resulted in inflated inventory and necessitated heavy discounting. Foot Locker was particularly affected by this trend due to its exposure to legacy brands and its presence in Europe and international markets, which have struggled because of geopolitical uncertainties.
Executive Chairman Ed Stack commented on the performance of product releases during the second quarter:
The company's cautious stance comes after it had raised its annual target in May, claiming it saw "proof points" that would return Foot Locker's comparable sales to growth.
Dick's Sporting Goods CEO Lauren Hobart stated that while the company is adopting a more cautious outlook, she remains "highly confident in the strength of Dick's Business and our long-term opportunity at Foot Locker."
In the U.S., consumers have become more selective with discretionary spending as more expensive food and gas impact household budgets. Current spending patterns show consumers focusing discretionary funds on fresh launches within health and wellness categories.
Analyst observations
Neil Saunders, managing director at GlobalData, suggested the results "does not bode well for the major sneaker brands, although they may have been able to offset some of the weakness by leaning more into apparel, especially around the World Cup." He added that the situation "will set alarm bells ringing for investors."