DICK’S Sporting Goods Inc (NYSE:DKS) stock fell 2.19% (As on August 23, 11:39:52 AM UTC-4, Source: Google Finance) after the company reported a 23% drop in profits and slashed its earnings guidance for the year after it saw an uptick in retail theft and implemented aggressive markdowns to clear out excess inventory in its outdoor category. For the first time in three years, Dick’s fell short of Wall Street’s estimates on the top and bottom lines. It also announced cuts to its global head count by less than 1%. The cuts will cost about $20 million in severance expenses in the next quarter and may result in additional one-time charges of $25 million to $50 million. Stack cautioned that the cuts were not a cost-saving strategy but rather an attempt to reallocate resources.
Further, the company lowered its profit forecast for the year in part because it expects shrink, a retail industry term that refers to inventory lost by theft or internal issues, to get worse before it gets better. The company’s reported net income for the three-month period that ended July 29 was $244 million, compared with $318.5 million, a year earlier.
DKS in the second quarter of FY 23 has reported the adjusted earnings per share of $2.82, missing the analysts’ estimates for the adjusted earnings per share of $3.81, based on a survey of analysts by Refinitiv. The company had reported the adjusted revenue growth of 35.9 percent to $3.22 billion in the second quarter of FY 23, missing the analysts’ estimates for revenue of $3.24 billion. Dick’s gross margins fell to 34% compared with 36% in the year ago period. Analysts had been expecting gross margins of 36%, according to StreetAccount. Same-store sales were up 1.8% in the quarter, compared with down 5.1% in the year-ago period, and were driven by a 2.8% uptick in transactions. Analysts had been expecting them to be up 2.7%, according to StreetAccount.
Dick’s now expects earnings to be in the range of $11.33 to $12.13 per share for the year, compared with previously issued guidance of $12.90 to $13.80. It reaffirmed its comparable store sales forecast of flat to up 2% and isn’t cutting its planned capital expenditures. Despite the profit loss during the quarter, the retailer still expects gross margins to increase for the full year compared with 2022, but gross margins are expected to be about half a percentage point less because of shrink.