Dick’s Sporting Goods experienced a significant drop in its stock on Tuesday following the release of a disappointing earnings report and a downward revision of its annual profit outlook due to inventory loss.
In the second fiscal quarter, which ended in July, the company reported adjusted profits of $2.82 per share, amounting to sales of $3.22 billion. These figures fell short of analysts’ expectations of $3.81 per share on $3.24 billion.
As a result, shares of Dick’s (DKS) plummeted 19% to $119.01 in premarket trading.
The company attributes its underwhelming second-quarter results to “inventory shrink,” which encompasses various factors such as employee theft and shoplifting.
In light of these challenges, Dick’s revised its projected full-year adjusted profits to be between $11.50 and $12.30 per share, compared to the previous guidance of $12.90 to $13.80.
Despite the setbacks, Dick’s Sporting Goods initially thrived during the Covid-19 pandemic with the surge in demand for outdoor workouts and increased interest in golf. Even as the economy reopened, these trends persisted. CEO Lauren Hobart noted in May that categories like bikes, fitness, and golf have remained strong compared to their pre-pandemic levels in 2019.
Apart from inventory loss this year, the company is also facing additional one-time costs. Dick’s is expected to pay roughly $20 million in severance expenses due to recent job cuts, primarily in customer support centers. These severance costs will impact third-quarter results. The aim of these job cuts is part of the company’s ongoing business optimization initiative, projected to conclude by fiscal 2023, potentially resulting in extra one-time charges ranging from $25 million to $50 million.
Furthermore, Dick’s now anticipates that the “expiration of student loan payment deferments” will significantly affect its results. As a result, consumers dealing with the resumption of student loan payments will have less discretionary income, as indicated in the company’s earnings report.
While Dick’s Sporting Goods faces certain challenges, it remains committed to navigating these obstacles and optimizing its performance in the years to come.
