Shoppers Are Abandoning Dick's Sporting Goods, Data Shows—Here's Why
The sports retailer's recent profits haven't quite met expectations.
Whether you're an athlete, a person who shops for an athlete, or someone who enjoys refreshing your gym clothes a few times a year, you probably visit Dick's Sporting Goods (or its website) somewhat regularly. The store, which boasts more than 740 locations around the country, is known for its sporty footwear, clothing, and exercise equipment; you can even buy outdoor goods like kayaks, sleeping bags, and skis. However, the company's most recent earnings report showed a troubling decline in profits. Read on to find out why shoppers may be abandoning Dick's Sporting Goods.
Dick's Sporting Goods profits have declined.
In an Aug. 22 call, Dick's Sporting Goods announced its earnings for its 2023 fiscal year's second quarter, which ended on July 29. Most notably, the retailer reported a 23 percent drop in profits.
Dick's also failed to meet Wall Street analysts' expectations for the quarter: One survey found that analysts were expecting $3.24 billion in revenue, while the retailer reported just $3.22 billion, according to CNBC. This was the first time in three years that Dick's fell short of analyst estimates.
However, it wasn't all bad news: Sales at Dick's increased 3.6 percent to $3.22 billion from $3.11 billion in 2022. Those sales were driven in particular by July's back-to-school season, explained Lauren Hobart, the president and CEO.
The store expects its 2023 sales to be flat.
On the earnings call, Navdeep Gupta, chief financial officer of Dick's Sporting Goods, said the company expected store sales to be either flat or increase 2 percent for 2023 as a whole. Gupta said it was important to consider "macro-economic uncertainties," such as the upcoming resumption of student loan payments.
In other words, iff shoppers are turning away from Dick's, it could be because they're spending less on athletic gear and more on repaying student loans.
The sales decline has already had some unfortunate consequences. The company announced that it had cut less than 1 percent of its global workforce in August, with those roles primarily at its customer support center.
Shoppers may be shopping for outdoor gear less.
But it's not just student loan payments that shoppers might be thinking about. On its earnings call, Dicks' leadership expressed that sales in its outdoor category, which includes boating, camping, cycling, patio, fishing, and other similar activities, were lower than ideal.
"There's a very short window in which to sell through that," explained Hobart.
The news was much different from the retailer's 2020 earnings call, in which its expansive outdoor category was a boon, as people were looking to pick up more socially distanced hobbies. This past quarter, the top-performing categories were footwear and team sports apparel, according to the call.
The company also cited theft as a cause for low profits.
Dick's Sporting Goods' leadership explained that the biggest issue for its profits was "shrink," an industry term for theft, damage, and cashier error, according to Investopedia.
"Organized retail crime and theft in general is an increasingly serious issue impacting many retailers," said Hobart on the earnings call. "The impact of theft on our shrink was meaningful to both our second-quarter results and our go-forward expectations for the balance of the year."
Gupta reiterated that point: "This is not just a Dick's Sporting Goods challenge. This is a collective retail challenge."
Indeed, other retailers have reported problems with theft. Target recently said it expected to lose half a billion dollars to it, while Dollar Tree just said it would be taking a "very defensive approach to shrink" and would be either locking up high-value items or discontinuing them altogether.
It's yet to be decided what Dick's Sporting Goods will do to combat the issue.
"Shrink … is a problem for our entire country," said Hobart, "and it's something that we all need to work together on with our partners, with our trade organizations, and with our government honestly to continue to address the shrink issue."