Dick’s Sporting Goods reported a 7.7% increase in second-quarter comparable sales on Thursday, driven by strong demand for athletic apparel, footwear and hardlines. However, the retailer’s profit took a hit due to inventory shrinkage.
Net sales for the three months ended July 30, 2023, rose 12.2% to $2.9 billion, in line with analysts’ expectations. Comparable sales increased 7.7%, exceeding the FactSet consensus estimate of a 3.9% gain.
Gross profit margin decreased 140 basis points to 30.2% due to higher promotional activity and increased markdowns to clear excess inventory. Inventory increased 27.5% to $3.3 billion, largely driven by strategic inventory investments to support future growth initiatives.
Selling, general and administrative (SG&A) expenses increased 9.6% to $719.7 million, primarily due to higher labor and occupancy costs. As a result, operating income declined 25.4% to $293.5 million.
Net income fell 32.9% to $200.8 million, or $1.41 per share, below analysts’ estimates of $1.56 per share. Dick’s Sporting Goods said that inventory shrinkage had a negative impact of approximately $18.5 million on its gross margin in the quarter.
“We are pleased with our comparable sales growth in the second quarter, which was driven by strength across all major categories,” said Lauren Hobart, President and CEO of Dick’s Sporting Goods. “Our teams have done an excellent job navigating the challenging macroeconomic environment and executing our strategies to drive traffic and improve profitability.”
Despite the inventory shrinkage issue, Dick’s Sporting Goods raised its full-year outlook. The company now expects comparable sales to increase in the low- to mid-single digits, up from its previous guidance of flat to low-single-digit growth.
Dick’s Sporting Goods also announced a new $1 billion share repurchase program, which will commence once the company completes its acquisition of Public Lands.
“We remain confident in our ability to execute our long-term growth strategies and deliver value for our shareholders,” said Hobart. “We believe that the strategic initiatives we have in place will position us for continued success in the future.”
Shares of Dick’s Sporting Goods rose 3.5% in premarket trading on Thursday..
