Why Dick’s Sporting Goods stock is down today

Actions of Dick’s Sporting Goods (DKS -5.75%) fell on Wednesday after the athletic goods retailer reported results for its fiscal second quarter. As of 1:45 pm ET, Dick’s shares were down 6.7%, but were down nearly 11% earlier in the session.

More sales and more profits

In its fiscal second quarter, which ended Aug. 3, Dick’s same-store sales rose 4.5 percent, leading to a nearly 8 percent increase in its net sales. The company’s net sales of $3.5 billion were better than expected, which helped boost profit margins — a welcome development.

In addition to the financial benefits that come from higher sales, Dick’s profits also improved due to lower levels of shrinkage (stock losses due to shoplifting, employee theft, and various types of fraud and errors). The company’s net income rose 48% year over year to $362 million.

In light of its strong second-quarter results, management raised Dick’s full-year profit outlook. The outlook for same-store sales was modestly higher. As a result, management now expects earnings per share (EPS) of $13.55 to $13.90, while it previously expected earnings per share of $13.35 to $13.75.

So why is it down?

Apparently, raising its guidance wasn’t enough to satisfy investors looking at Dick’s stock. Investors sensed that management was still cautious, and given how many other retailers are worried about how the rest of 2024 will play out, that left the market feeling pessimistic about Dick’s as well.

I think investors are overreacting. The reality is that profits for Dick’s rose in part because it was charging full price for more merchandise instead of relying on discounts. It’s a huge deal for the company. Moreover, achieving better shrinkage control is also a big deal, given that other retailers are still struggling with it.

Overall, things are looking great for Dick’s right now, and I think the stock can return to recent highs in the near future.