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Dick's Sporting Goods (DKS) is heading lower today after reporting its Q3 (Oct) results this morning. The company beat EPS expectations, while revenue increased 36.3% yr/yr to $4.17 bln. That was well above expectations but reflects a partial contribution from Foot Locker ($931 mln). The company also raised FY26 guidance for its standalone business, now expecting EPS of $14.25-14.55, revenue of $13.95-14.00 bln, and comp sales growth of +3.5-4%.

• Comp sales increased +5.7%, the seventh consecutive quarter of +4% or greater growth, driven by a 4.4% increase in average ticket and a 1.3% increase in transactions. Strength was broad-based across footwear, apparel, and hardlines.
• Foot Locker was a major focus on the call. DKS emphasized that Q3 reflects only eight weeks of Foot Locker results, a historically unprofitable period, and that a heavy clean-up phase is underway.
• The aggressive turnaround includes clearing unproductive inventory, closing underperforming stores, and resetting assortments and vendor relationships after the company missed the mark post-COVID, with management targeting a more meaningful inflection by back-to-school 2026.

Briefing.com Analyst Insight

This was the first quarter where we finally got a partial look at the consolidated Dick's and Foot Locker setup, and the contrast between the two businesses was pretty clear. The Dick's Sporting Goods business continues to execute well, evidenced by its seventh straight quarter of +4% or better comp growth and posting another solid margin performance, with gross margin expanding for the Dick's segment even as the consolidated rate was pulled down by Foot Locker's lower-margin profile.

Foot Locker, meanwhile, remains early in its turnaround. Pro-forma Q3 comps were negative, international trends were soft, and management emphasized that the heavy clean-up phase has only begun. The company is clearing unproductive inventory, closing underperforming stores, and resetting assortments, all with the goal of getting Foot Locker to an EPS-accretive place in 2026. As management put it, they're "cleaning out the garage," and that process will pressure Foot Locker margins and comp sales in Q4 before the business gets a fresh start next year.

Overall, while the Dick's business remains a steady performer and the raised outlook signals confidence into the holidays, the scope and timing of the Foot Locker turnaround is now the key storyline for investors. With back-to-school 2026 positioned as the first real inflection point, we suspect investors will stay focused on early progress over the next few quarters.