Why Dick's Sporting Goods Shares Are Diving Today

Dick's Sporting Goods Inc DKS shares are trading lower by over 19% after it reported a Q2 FY23 earnings miss.

Q2 sales grew 3.6% Y/Y to $3.22 billion, missing the analyst consensus of $3.23 billion.

Comparable store sales increased 1.8% versus a 5.1% decline a year ago.

Gross profit margin contracted 160 basis points Y/Y to 34.4%. The operating margin contracted 510 basis points to 9.7%, and operating income for the quarter fell 32.3% Y/Y to $311.8 million.

Adjusted EPS of $2.82, down 23% Y/Y, missed the analyst consensus of $3.81.

The company held $1.90 billion in cash and cash equivalents as of July 29, 2023. Total inventory at the end of Q2 fell by 5% Y/Y to $2.85 billion.

The retailer ended the quarter with 860 stores, with seven new House of Sport locations opening in Q2.

Related: Dick's Sporting Goods Opens 9 New House Of Sport Stores, Plans 75-100 More By 2027

Dividend: The company's Board of Directors declared a quarterly dividend of $1.00 per share, payable in cash on September 29, 2023, to stockholders of record on September 15, 2023.

FY23 Outlook: DKS reduced the adjusted EPS outlook to $11.50-$12.30 from $12.90-$13.80 vs. the consensus of $13.49.

The company reiterated its comparable store sales outlook at flat to +2% growth and capital expenditure of $550 million - $600 million on a net basis.

Headcount cut: DKS cut positions at its customer support center on August 21, 2023, to streamline its overall cost structure.

The company laid off around 250 employees, as per Bloomberg. 

DKS expects to incur severance expenses of about $20 million in Q3 2023 and cost savings from the action to be negated by strategic talent acquisitions in the coming 12 months.

The company expects the business optimization process to be completed by 2023 and projects additional one-time charges of $25 million-$50 million.

Price Action: DKS shares are trading lower by 19.3% at $118.64 premarket on the last check Tuesday.