Dick's Sporting Goods (DKS) reported an ugly quarter this morning.
The largest sporting goods retailer in the US reported lower than expected earnings ($0.96 vs. $1.02-1.07 guidance) and comps (+0.1% vs. +2-3% guidance). That's the second quarter in a row management missed its own same-store sales guidance.
Analysts were far more cautious than management in recent quarters and it looks like that was for good reason. Management bought back 3.4 million shares at an average cost of $41.56/share and opened 13 stores during the second quarter. It seems management has underestimated its competitive pressures in a difficult retail environment.
"In this very competitive and dynamic marketplace, we were able to deliver a significant increase in our bottom line from last year. We continued to capture market share and generated strong results in eCommerce, footwear and golf, although sales were pressured by weakness in hunting, licensed and athletic apparel," said Edward W. Stack, Chairman and Chief Executive Officer. "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. We have updated our outlook to reflect these investments. We continue to believe retail disruption creates opportunities for us as we look long-term."
Dick's guided third quarter earnings below consensus and lowered its outlook for the full year. Dick's lowered earnings guidance to $2.80-3.00 from $3.65-3.75 and comp sales guidance to flat to low-single digit decline from +1-3% for fiscal 2018 ending January.
The stock is down 18% premarket at a seven-year low. At current levels, the stock trades at ~10x earnings.