By Angela Christy M
Aug 25 (Reuters) – Dick’s Sporting Goods cut its full-year forecasts and said bloated inventory and heavy discounting in the legacy footwear market were weighing on its Foot Locker business, even as high fuel costs pressure margins.
Shares of Dick’s Sporting Goods plunged 20% in early trading after the company also missed second-quarter estimates, and said it now expects annual comparable sales at Foot Locker to fall.
“Not only were there fewer launches in the second quarter, but those launches performed below both industry and our expectations,” the company’s executive chairman, Ed Stack, said, adding that the company is taking a more cautious view of the rest of the year.
The comments were a departure from the company’s upbeat tone in May, when it raised its annual target and said that it saw encouraging “proof points” to return Foot Locker comparable sales to growth.
U.S. consumers have been more selective about discretionary purchases, preferring fresh launches in categories such as wellness and health, when compared with legacy brand names as their household budgets buckle under costlier gas and food.
LEGACY BRANDS STRUGGLE
Dick’s Sporting Goods executives said on a post-earnings call that it faced heavy discounts “within certain legacy footwear silhouettes and apparel franchises that simply aren’t resonating the way they once did.”
The company responded with increased promotions to stay competitive as inventory built up, and said heavy discounting in the category is expected to continue for the year.
“This environment had a more significant impact on the Foot Locker business given its greater exposure to legacy footwear silhouettes and greater dependence on footwear launch and retro product,” Stack added.
The executives said the retailer was taking steps to shift its product assortment toward in-demand brands.
For the 13 weeks ended August 1, which included the FIFA World Cup held in the U.S., the company reported net sales of $5.59 billion, missing estimates of $5.65 billion, according to data compiled by LSEG.
Footwear maker Nike’s shares fell 3.3% in early trading on Tuesday.
While athletic brands flagged softness in the U.S. wholesale market in the quarter, Dick’s sharp 2026 guidance cut surprised investors and highlighted Foot Locker’s sensitivity to footwear trends, Telsey Advisory Group analyst Cristina Fernandez said.
The athleticwear retailer expects annual sales of $21.9 billion to $22.2 billion, compared with its earlier forecast of $22.1 billion to $22.4 billion.
The company expects annual earnings per share of $11 to $12 on an adjusted basis, compared with its earlier forecast of $13.50 to $14.50.
For the second quarter, its earnings per share of $3.53 missed estimates of $3.76.
It received $59 million in tariff refunds under the International Emergency Economic Powers Act, and used those refunds in part to invest in promotions.
(Reporting by Angela Christy in Bengaluru; Editing by Maju Samuel)
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