Shares of Dick’s Sporting Goods Inc. have been trading near 52-week lows due to investor concerns over Foot Locker’s recovery that were reinforced by JD Sports’ subpar first-half results. However, most analysts remain positive on Dick’s shares and expect the retailer to meet or exceed estimates when it reports Q2 results next Tuesday, August 25.
According to FactSet, Dick’s consensus estimates call for sales in the second quarter to reach $5.64 billion, up 55.3 percent from $3.65 billion a year ago and driven by last year’s acquisition of Foot Locker. Same-store sales at the legacy Dick’s business are expected to be up 4.1 percent.
Earnings are expected to reach $3.77 on a consensus basis, down from $4.38 a year ago due to the inclusion of the Foot Locker business that carries significantly lower margins compared to the legacy Dick’s operation. Profitability at the core Dick’s business is expected to be impacted by higher store pre-opening and marketing expenses, including to ramped-up expansion of House of Sports.
Shares of Dick’s tumbled $11.95, or 6.2 percent, to $179.34 on Thursday, December 20, after JD Sports axed its profit forecast due in particular to weakness in North America, where is has been rapidly expanding its flagship JD banner and also operates Hibbett, Finish Line, DTLR and Shoe Palace. JD Sports’ same-store sales were down 3.1 percent in the second quarter ended August 1, dragged down by declines of 6.8 percent in North America and 2.7 percent in Europe.
According to FactSet data, analyst sentiment on Dick’s shares remains favorable. Across 27 analysts covering the stock, the stock has 16 “Buy” ratings, nine “Hold,” and two “Sell.”
Shares of Dicks’ nonetheless continued to trade at the lower-end of 52-week range between $176.07 and $244.38 due to concerns over Foot Locker that includes the stalled recovery at Nike. On Friday, shares of Dick’s closed at $183.20, up $3.86 on the day.
Among analyst bearish on Dick’s, BNP Paribas Equity Research’s Aubrey Tianello in a note issued August 21, believes Dick’s recent share weakness is likely due to Foot Locker trends, and now JD results. He wrote, “We think intra-quarter share price movement has largely been dictated by the Foot Locker story.”
He said that that while the Foot Locker business surprised with a positive first-quarter comp, he believes trends have slowed and Foot Locker likely benefited in the prior quarter from the higher tax returns. He suspects investors are now expecting Foot Locker’s Q2 comps to decline 1 percent, and JD’s results have “have lowered the bar further” on expectations for Foot Locker.
For the legacy Dick’s business, he believes investors now expect a “modest sequential deceleration” in top-line growth as the World Cup’s benefit comes in lower than expected. Other factors that could pressure Dick’s, cited by Tianello, include slowing footwear growth as the benefit of opening premium in-store decks is lapped, signs in the marketplace of a trend shift away from athleisure toward more traditional/casual dress, and margin pressures from the “costly rollout” of House of Hoops.
Tianello reiterated his “Underperform” rating on the stock at a price target of $169. The analyst wrote, “We believe these risks, and their potential to be compounded by fashion shifts away from athletic, are still underappreciated.”
Several analysts have nonetheless reiterated their “Buy” ratings on Dick’s in recent weeks given expected momentum for the core Dick’s business and prospects for Foot Locker.
At Telsey Advisory Group, Cristina Fernández in a note issued August 19 reiterated her “Outperform” rating at a $255 target. She wrote, “We continue to view the Dick’s business as robust, driven by premium merchandising and new store formats, while the Foot Locker business is in the early stages of what we expect to be a multi-year transformation with opportunity to both accelerate sales growth and expand the operating margin.”
When reporting second-quarter results, Fernández believes Dick’s could increase the low-end of its 2026 sales and EPS guidance.
She sees second-quarter earnings coming in line with consensus targets but sales topping estimates due to several factors, including the U.S. Census Bureau reporting a 12.3 percent increase in sales in the sporting goods category, accelerating from a 9.5 percent increase in the first quarter. The analyst also cited checks in stores in the New York City area in the in May/June timeframe that indicated “higher traffic and strong sell through of New York Knicks and World Cup merchandise.” Finally, Fernández said the golf category appears healthy given the 4 percent increase in U.S. golf rounds played in the second quarter and recent results from Callaway and Acushnet.
Fernández expects Q2 comps at the legacy Dick’s business to climb 4.5 percent versus the FactSet consensus estimate of 4.1 percent. At Foot Locker, she sees potential benefits from the expansion of Fast Break retrofitted stores from 100 to 250 by the back-to-school period, as well as other merchandising and marketing changes, “despite a softer men’s lifestyle footwear market.”
At Citi Research, Paul Lejuez expects Dick’s to report results slightly above analyst targets. He noted signs of improving sales trends for Dick’s based on Placer in-store traffic data, Citi’s credit card data, and Similarweb web traffic data.
Lejuez said in an August-11 said investors’ anticipations are that the core Dick’s business continued to see “broad-based strength” and Foot Locker’s Europe remained weak in the second quarter, with the “big question mark” being the Foot Locker U.S. business.
He reiterated his “Buy” rating on DKS at a $280 target. Lejuez stated, “The key will be what mgmt says about early BTS selling and performance of Fast Break stores at Footlocker, and if anything changes in terms of expecting a 2H sales inflection at FL.”
In a note issued August 18, Lorraine Hutchinson at Banc of America Securities reiterated her “Buy” rating at a $245 price target while listing ten reasons supporting her investment thesis.
She cited promising results from the Fast Break format for Foot Locker and the likelihood that Dick’s continues to receive better product access and vendor terms due to leverage gained from Foot Locker merger.
She also sees Dicks elevated post-COVID margins continuing “as supported by durable improvements in merchandise mix and operating discipline,” including private label pushes. Hutchinson further believes Dick’s current stock price multiple “underappreciates the structural improvement in the business since COVID, including greater penetration of differentiated and exclusive product, growth in higher-margin vertical brands, fewer promotions, and more profitable inventory clearance through Going Going Gone.”
Other factors supporting Dick’s fundamentals, according to Hutchinson, include House of Hoop also helping Dick’s gain access to premium brands, a near-term World Cup tailwind, strength at GameChanger, credit card data showing sporting goods and athletic footwear/apparel sales accelerated during the second quarter, and the potential for hardlines growth to accelerate after trailing softline categories since the pandemic.
Hutchinson stated in a note, “Footwear has been cited in every comp commentary since F23, and investors have been cautious that the running trend may be peaking. We think DKS’s broad assortment and improved negotiating leverage position it to capture shifts in consumer demand. And DKS is not just a footwear story. House of Sport adds experience-led differentiation and should contribute ~150 bp to FY26 comps, while hardlines (especially golf) is beginning to benefit from replacement cycles after post-COVID purchases.”
Wells Fargo’s Ike Boruchow on August 10 upgraded Dick’s to “Overweight” from “Equal Weight,” citing a multi-year recovery story driven by the Foot Locker acquisition and strengthening core operations. He also raised his price target on Dick’s to $240 from $220.
Boruchow pointed to continued strong execution at the legacy Dick’s business and sees Dick’s newer initiatives, including the rollout of House of Sport and Field House concepts, GameChanger and its retail media push, as further differentiators for the retailer.
However, a primary reason he feels more positive on Dick’s is his belief that the Foot Locker business will be able to deliver multi-year margin upside, increasing from 1 percent to 2 percent to return to levels reaching 7-to-8 percent.
Boruchow wrote in a note, “FL can drive meaningful upside to estimates as DKS is bringing highly complementary operational and merchandising capabilities that directly address the historic weaknesses at the FL business, re-establishing healthier brand relationships and allocations that have driven at least half of the earnings deterioration over the last 4 years, which we think should clear relatively low expectations for margin recovery and drive meaningful EPS upside.”
Image courtesy Foot Locker
