(Bloomberg) -- Dick’s Sporting Goods Inc. sank after cutting its profit outlook for the full year as the retailer deals with slowing growth and more theft at its stores.
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Chief Executive Officer Lauren Hobart said earnings for the second quarter fell short of expectations due “in large part to the impact of elevated inventory shrink,” an industry term that refers to factors such as shoplifting, employee theft and damaged goods. Comparable-store sales, a key gauge of retail performance, also trailed analyst estimates in the period.
The slowdown in sales at Dick’s is “another piece of evidence which suggests consumer spending is under a bit of pressure,” Neil Saunders, an analyst at GlobalData Plc, said in a note to clients on Tuesday.
The shares fell as much as 25% in New York, their biggest intraday drop in three years. Before Tuesday, the stock had surged almost 600% since the end of March 2020.
“This is Dick’s first hiccup in a number of quarters and puts them in the penalty box,” Will Gaertner, an analyst at Wells Fargo, said in a research note.
Dick’s has been one of retail’s biggest winners of the pandemic, buoyed by strong demand for athletic-wear and sports gear. Hobart has been opening more stores and adding square footage, including new experiential retail spaces with activity areas like putting greens and climbing walls.
Now, cost-cutting is taking on a bigger focus. Dick’s lowered its forecast for capital expenditures this year. It also laid off about 250 employees from its corporate workforce, a person familiar with the matter said. Customer-support jobs were most affected by the cuts.
“We are conducting a business optimization of our organization to better align our talent, organization design and spending in support of our most critical strategies while also streamlining our overall cost structure,” the company said in a statement.
Dick’s now expects earnings of $11.50 to $12.30 a share this year excluding some items — down from the previous range of $12.90 to $13.80. The company said the revision reflects the second-quarter miss as well as gross margin expectations for the second half of the year. The outlook for sales was maintained.
(Updates with analyst comments in the third and fifth paragraphs.)
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