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Sporting Goods Retailers Post Strong Q2 Results as Apparel Stores Struggle

It was a big week for retail earnings.

Caleres, Shoe Carnival, Dick’s Sporting Goods, Hibbett, Macy’s, Nordstrom and Gap Inc. all reported results for the most recent quarter. In some cases, companies revealed weak sales due to softening demand in non-discretionary categories amid a highly inflationary environment.

However, some retailers managed to stand out with stronger-than-expected results, despite economic headwinds.

Here were our top three takeaways from the reports this week:

Momentum for sporting goods

Sporting goods retailers in Q2 thus far appear to have bucked the trend of weak sales in the wake of slowing demand.

Dick’s Sporting Goods on Tuesday raised its guidance for 2022 after reporting Q2 results that topped analysts expectations. CEO Lauren Hobart said that demand trends had remained relatively stable across all income demographics. Dick’s also said it avoided the labor and staffing shortage that has permeated the broader retail industry.

“We are not seeing a significant trade down,” said Dick’s CEO Lauren Hobart in a call with investors on Tuesday. “Our consumer is holding up very well.”

Hibbett Sports executives on Thursday also said the retailer has largely managed to avoid the issue of consumers trading down to cheaper alternatives. Hibbett is also seeing benefits from its strategy of focusing on opening stores in “underserved markets,” where there is less competition among similar retailers.

Both companies noted their strong product assortment, which includes high-heat product from Nike.

Weakness in apparel

Retailers specializing in apparel sales lowered their outlooks after reporting results for the second quarter, as consumers shifted spending away from non-discretionary categories.

Despite beating earnings expectations in Q2, Macy’s cut its full-year guidance, citing inflationary pressures.

Macy’s CFO Adrian Mitchell said the retailer has seen declining retail traffic in areas of weakening apparel sales over the quarter, as the consumer faces higher costs on essential goods, particularly grocery items. Pandemic-related categories, which include active, casual, sportswear, sleepwear and soft home, also continued to decelerate in Q2.

Nordstrom also lowered its yearly guidance, despite performing well in the second quarter.

Gap Inc. on Thursday withdrew its full-year financial outlook, citing macroeconomic headwinds and a search for a new CEO, which is currently underway.

Gap Inc. CFO Katrina O’Connell said in a call with investors on Thursday that “signs of weak demand in the low-income consumer are making forecast precision increasingly difficult.”

Shoe retailers benefit from back-to-school

Shares were up for both Shoe Carnival and Caleres, which owns Famous Footwear, after the two retailers reported results for Q2 this week. Both noted the benefit of the crucial back-to-school season.

Caleres chairman and CEO Diane Sullivan said that the company expects “a solid back-to-school season,” while noting that consumers appeared to have started shopping for this period later than usual.

She added that Caleres’ diverse portfolio of brands across various markets makes it “well-positioned” to continue to grow, despite current challenges in the macro environment. Caleres reiterated its full-year outlook for 2022 and said it expects earnings per diluted share to be between $4.20 and $4.40, which would mark another record or near-record year of earnings.

Shoe Carnival said it has already seen strong back-to-school results. In an interview with FN, CEO Mark Worden noted that the company’s Thursday market gains followed the company reporting the highest three-day sales period in its history, during back-to-school this month.

Shoe Carnival affirmed its earnings guidance and expects EPS in the range of $3.95 to $4.15 for fiscal year 2022.

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