Dick's Shares Plunge 29% as Athletic Wear Demand Fades

Dick's Sporting Goods shares tumbled more than 29 percent on Tuesday, a drop that could set a record for the company if losses persist. The retailer issued a stark warning: demand for athletic wear and shoes is fading. This news followed a missed estimate for the second quarter and a reversal of previous expectations regarding annual comparable sales growth at Foot Locker. Dick's had spent $2.4 billion last year to buy Foot Locker, aiming to strengthen its sneaker business and reach international markets. Now that strategy faces headwinds as American consumers tighten their belts. Rising costs for gas and food are squeezing household budgets, forcing shoppers to prioritize fresh wellness launches over discretionary purchases.

Executive Chairman Ed Stack told analysts the situation is worse than anticipated. "Not only were there fewer launches in the second quarter, but those launches performed below both industry and our expectations," he said. He signaled a cautious view for the rest of the year. CEO Lauren Hobart added that while the outlook has shifted, the company remains highly confident in Dick's core business and its long-term chances at Foot Locker. This marks a shift from May, when executives raised annual targets and pointed to encouraging signs that sales would recover.

The problem lies with older styles that no longer resonate with buyers. "Lifestyle and legacy silhouettes were simply not resonating the way they once did," Dick's executives noted in their post-earnings call. This lack of interest created inflated inventory, leading to heavy discounting. Foot Locker took the biggest hit because it carries many legacy brands and operates in Europe and other international markets struggling with geopolitical uncertainty. Neil Saunders, managing director at GlobalData, warned that this does not bode well for major sneaker brands. Even if they lean into apparel around events like the World Cup to offset weakness, Saunders said, "it will set alarm bells ringing for investors."

The financial revisions are specific and sharp. Dick's now projects annual sales between $21.9 billion and $22.2 billion, down from an earlier forecast of $22.1 billion to $22.4 billion. For the quarter ending Aug. 1, the company reported $5.59 billion in net sales against estimates of $5.65 billion. Quarterly profit came in at $3.53 per share, missing the $3.76 estimate. Consequently, Dick's now expects Foot Locker's annual comparable sales to be flat or down 2 percent. Part of the $59 million in tariff refunds received will go toward promotions rather than pure margin improvement. The data compiled by LSEG confirms these figures reflect a tougher reality for the retail sector.