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Dick’s Sporting Goods Beats Forecast in Q1 But Cautions on Inflation, Supply Chain

Dick’s Sporting Goods is the latest big-box retailer to post a weak outlook after reporting results for this first quarter.

The sporting goods giant beat expectations, posting Q1 earnings per share of $2.85 and revenues of $2.7 billion. This included a comparable store sales drop of 8.4% in Q1, following a 117% increase in comp sales in the same period last year. Given the results, Dick’s trimmed its outlook for fiscal year 2022 and now expects to earn between $9.15 and $11.70 per share, on an adjusted basis, down from its prior range of between $11.70 and $13.10.

Shares of Dick’s were up over 10% as of Wednesday morning.

In addressing the company’s diminished outlook, Dick’s CEO Lauren Hobart said that the company took a cautious approach, given the “rapidly evolving macroeconomic environment.” In a call with investors discussing Q1 results on Wednesday, executives highlighted headwinds such as wage and inflationary pressures as well as increased freight costs.

“These costs have gotten more pronounced in the last three months since we gave the original guidance,” said CFO Navdeep Gupta. “The fuel prices continue to remain elevated as well as are continuing to go up. So we wanted to acknowledge these risks that we are seeing from a cost structure perspective and we incorporated that in our guidance.”

With these results, Dick’s joins the roster of big-box retailers struggling to post strong gains against a backdrop of strong growth last year, bolstered by stimulus payments and sales normalization.

Earlier this month, Target and Walmart both reported earnings for Q1 that fell short of analysts’ estimates. Both big-box retailers said sales had been impacted by a general consumer shift away from from discretionary to non-discretionary categories such as groceries, given the highly inflationary environment. Consumer prices rose by 8.3% in April compared to a year ago, according to the Bureau of Labor Statistics’ monthly report.

Kohl’s last week posted an earnings miss for its fiscal first quarter and cut its outlook for the year as well.

Despite the lower outlook, Hobart said that Dick’s still expects fiscal year 2022 results to exceed results from 2019. Analysts appear confident in the retailer’s long-term growth potential as well, with GlobalData managing director Neil Saunders calling Dick’s “a credible, well-run business.”

In a note, equity analyst at CFRA Research Zachary Warring wrote “We still believe the company is well positioned over the next few years to take market share and return capital to shareholders through dividends and share repurchases.”

He added that he sees “great value for long-term investors looking for a strong retailer investing in all the right aspects of their business.”

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