Please ensure Javascript is enabled for purposes of website accessibility

Why Dick's Sporting Goods Inc Shares Were Deflating Today

By Jeremy Bowman – Updated Jan 12, 2018 at 3:20PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of the sporting goods retailer sold off on weak sales growth in its first quarter.

What happened

Shares of Dick's Sporting Goods (DKS 0.75%) were falling flat today after the retailer missed sales estimates in its first-quarter report and said it would slow down store openings and cut jobs.

As of 12:07 p.m. EDT, the stock was down 13.1%.

A Dick's store

Image source: Dick's Sporting Goods.

So what

The nation's largest sporting goods retailer had a respectable quarter on the top line as comparable sales increased 2.4% as the company continues to take advantage of last year's bankruptcies in the industry, which include The Sports Authority and City Sports. However, analysts expected same-store sales growth of 3.5%, and management itself had projected a 3% to 4% increase.

Overall revenue increased 9.9% to $1.83 billion, matching analyst estimates, while adjusted earnings per share increased from $0.50 a year ago to $0.54, also meeting the consensus.

The market may also be disappointed with Dick's plans to scale down new store openings as it plans to open 15-20 locations next year and as little as 5-10 in 2019, after opening 43 this year. Management said it was waiting for real-estate prices to come down and could also consolidate some of its stores.

Separately, the company is cutting about 160 jobs, mostly in its Store Support Center, which will cut costs and boost profits.

Now what 

Looking ahead, Dick's said it expects adjusted earnings per share in the current quarter of $1.02 to $1.07, up from $0.82 a year ago, and comparable sales growth of 2% to 3%. For the full year, it sees adjusted EPS of $3.65 to $3.75, up from $3.12 last year, and same-store sales growth of 1% to 3%. 

Analysts, meanwhile, see EPS of $1 for the current quarter and $3.74 for the year.

Management acknowledged the "challenging retail environment," but profit growth continues to be solid. Shares are looking cheap after the sell-off. While the future will continue to be challenging, Dick's is certainly in better shape than many of its peers.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.