Dick's Says Under Armour, New Gun-Sales Policy Dragged on Results -- 2nd Update

Date : 08/29/2018 @ 7:33PM
Source : Dow Jones News
Stock : Dicks Sporting Goods (DKS)
Quote : 37.89  0.75 (2.02%) @ 3:59PM

Dick's Says Under Armour, New Gun-Sales Policy Dragged on Results -- 2nd Update

Dicks Sporting Goods (NYSE:DKS)
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By Allison Prang 

Dick's Sporting Goods Inc. said weaker sales of Under Armour Inc. apparel and a decision to pull back from the hunting business dragged on the retailer's latest quarterly results.

Comparable-store sales fell 4%, Dick's said. Not adjusting for the 53rd week last year, the company's same-store sales declined 1.9%.

The weaker-than-expected results bucked a trend in the retail sector, which largely has benefited from a surge in consumer spending fueled by a booming economy.

Consumer confidence for August, measured by the Conference Board's consumer-confidence index, was the highest it has been in about 18 years.

That sentiment, along with other factors, has powered companies such as Walmart Inc. and Target Corp. to their best quarterly results in more than a decade.

Dick's said part of the company's sales problems were a result of Under Armour's decision to sell in more stores including Kohl's. Under Armour declined to comment.

Also hurting sales was Dick's decision to tighten its policy on gun sales after 17 people were killed in a February shooting at a Parkland, Fla., high school. The retailer halted sales of any firearms to people under age 21 at all of its 845 Dick's and Field & Stream stores and stopped selling assault-style weapons at Field & Stream.

Under Armour's results accounted for three percentage points of declining sales at Dick's, while weakness in the hunting and electronics categories contributed two percentage points of decline. When excluding Under Armour and the hunting and electronics business, comparable-store sales fell 1%.

"Notwithstanding these challenges, the health of our core business is relatively strong, and we're confident sales trends will improve next year as these headwinds are expected to subside," Dick's Chief Executive Edward Stack said on a call with analysts to discuss the results.

Shares of Dick's, up 24% for the year to date, fell 2.2% Wednesday.

Mr. Stack said hunting is a low-margin business that was underperforming. As Dick's clears out products from more stores, he said, it will use the space to expand into more profitable areas such as baseball gear.

Mr. Stack also said Under Armour is likely to be "much less of a drag" in 2019. Dick's plans to expand a merchandise line with the actor Dwayne "The Rock" Johnson that is sold by only Dick's and Under Armour, Mr. Stack said on the call. He said "there hasn't been any meaningful change in the relationship" between the companies.

Net income rose 6.2% to $119.4 million for the company's second quarter ended Aug. 4, compared with a year earlier. Dick's reported earnings of $1.20 a share, up from $1.03 a share. Analysts polled by Thomson Reuters had expected the company to post earnings of $1.05 a share.

Net sales rose 1% to $2.18 billion. Analysts had expected $2.24 billion.

Dick's said it expects its earnings for the year to be between $3.02 a share and $3.20 a share. The company had previously expected earnings of between $2.92 and $3.12 a share. The company said it now expects same-store sales to fall between 3% and 4%. It had previously expected same-store sales to be roughly flat to down by a low-single-digit percentage. Dick's now expects net capital expenditures to be $225 million for the year. It had previously expected them to be $250 million.

Selling, general and administrative expenses rose 5.3% to $495.3 million.

Write to Allison Prang at allison.prang@wsj.com


(END) Dow Jones Newswires

August 29, 2018 19:18 ET (23:18 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.

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