Shares of Dick’s Sporting Goods (NYSE: DKS) dropped approximately 29% on Tuesday morning after the retailer reported its second-quarter results, even as core demand held firm.
Comparable sales at the DICK’S business grew 4.9% year over year, aided in part by the 2026 FIFA World Cup, and management maintained the full-year sales outlook for that segment.
The damage was concentrated entirely in the profit outlook, where full-year adjusted earnings guidance collapsed to a range of $11.00 to $12.00 per share from the $13.50 to $14.50 range reaffirmed just three months earlier.
On a GAAP basis, the company cut its full-year earnings guidance to $10.94 to $11.94 per share, representing a roughly 18% reduction in expected profitability from May’s forecast.
Revenue for the quarter came in at $5.59 billion, with earnings per share of $3.50 on a GAAP basis and $3.53 on an adjusted basis.
Net income reached $315.5 million, though comparisons to the prior year were complicated by the September 2025 acquisition of Foot Locker.
The 4.9% comparable sales growth at the DICK’S business was described as broad-based, with both average ticket size and transaction volume contributing to the gain.
Foot Locker told a very different story, with comparable sales at that business falling 3.6% year over year on a pro forma basis during the quarter.
“As the quarter progressed, conditions across portions of the athletic footwear and apparel marketplace became increasingly promotional, and we took action to remain competitively priced to protect and grow our leadership position,” said executive chairman Ed Stack in the earnings release.
Management attributed Foot Locker’s decline to challenging conditions in athletic footwear, specifically citing the segment’s exposure to older footwear styles and its dependence on launch and retro product.
The full-year Foot Locker outlook shifted dramatically, moving from guided comparable sales growth of 1.5% to 3.0% and a profit of $110 million to $150 million, to a sales decline of up to 2% and an operating loss of $40 million to $80 million.
Full-year adjusted operating income guidance fell roughly $260 million at the midpoint, with the Foot Locker reversal accounting for approximately $190 million of that reduction.
The DICK’S business contributed the remaining $70 million in operating income losses, even though its sales outlook remained intact, reflecting the cost of staying competitively priced in a discounting environment.
Chief financial officer Navdeep Gupta said on the call he now expects gross margin at the DICK’S business to decline slightly for the year, driven by the promotional marketplace plus higher fuel and supply chain costs.
“[W]e expect gross margin pressure to be most pronounced in Q3,” Gupta said, signaling that relief is unlikely before the critical holiday selling season.
Shares closed Monday at $179.33 before falling to near $127 on Tuesday morning, placing the stock at roughly 11 times the midpoint of the company’s reduced full-year adjusted earnings guidance.
The market’s 29% reaction to an 18% earnings cut reflects the erosion of investor confidence that comes when a large guidance revision follows so quickly after a May reaffirmation.
Whether DKS represents a value opportunity at these levels depends largely on how fast Foot Locker’s losses stabilize and how long the promotional pricing environment persists across athletic footwear.
