Dick’s Sporting Goods (DKS) Swims Against The Inflationary Current In Q2 Delivering A Beat-And-Raise

2:12 pm Tuesday, August 23rd, 2022

Swimming against the strong current of an inflation-driven shift away from spending on discretionary goods, Dick’s Sporting Goods (DKS) posted beats on its top and bottom lines in Q2 (Jul) and raised its FY23 earnings and same-store sales guidance nicely. Incorporating today’s favorable reaction, shares of the sporting goods retailer are now turning positive on the year after ascending roughly 55% from May lows.

Leading into DKS’s upbeat Q2 earnings report, there were plenty of warning signs that sporting goods were experiencing softness in the wake of high inflation. Big 5 Sporting Goods (BGFV) noted earlier this month that sales in specific categories are softer than anticipated. Also, Walmart (WMT) mentioned that it was focused on reducing exposure to areas such as home and sporting goods during its JulQ earnings call last week. Furthermore, supply chain issues were improving but were still not fully resolved. BGFV stated it was still working through persistent supply chain hiccups in JulQ, while V.F. Corp (VFC), which owns the North Face banner, discussed in late July that although supply chains were improving in JunQ, they were nowhere near pre-pandemic levels.

Considering these headwinds explains why DKS is racking up a higher score today despite shares already running up significantly over the past few months.

This shows up in DKS’s raised FY23 guidance. The company expects adjusted EPS of $10.00-12.00, up from $9.15-11.70, and comps to range from (6%) to (2%), an increase at the low-end of its prior range of (8%) to (2%). Although DKS’s outlook is still below its initial forecast outlined in March, the market was likely expecting DKS to have to trim its projections as it did in Q1 (Apr), so the increased guidance is a welcomed surprise.

Bottom line, DKS’s Q2 report highlights its ability to successfully navigate a lengthy period of high inflation. Its results also speak volumes about the company’s brand loyalty and fortified position to capitalize on back-to-school trends and a secular shift toward living a more active lifestyle.

On a side note, DKS’s Q2 numbers are encouraging for its competitors Hibbett (HIBB) and Academy Sports + Outdoors (ASO), which report JulQ earnings on August 25 and September 8, respectively.