Dick’s Sporting Goods’ (DKS) sales and earnings results missed expectations as the retailer reduced its full-year outlook amid the “increasingly serious issue” of inventory theft.
The company’s stock responded to the news by plummeting more than 20% in the day’s trading.
For the second quarter ended July 29, Dick’s reported net sales growth of 3.6% to $3.22 billion on non-GAAP earnings per share (EPS) down 23% to $2.82, both of which came up short of analysts’ expectations. Net income fell 23% to $244 billion.
Comparable-store sales rose 1.8%, “driven by a 2.8% increase in transactions and continued market share gains," the company said.
Dick’s attributed its disappointing results to inventory theft, often referred to as “shrink” by retailers.
“While we posted another double-digit EBT (earnings before taxes) margin, our Q2 profitability was short of our expectations due in large part to the impact of elevated inventory shrink, an increasingly serious issue impacting many retailers,” said Lauren Hobart, CEO of Dick’s.
The disappointing quarter led the retailer to slash its full-year earnings outlook, now calling for earnings per diluted share of $11.33 to $12.13, instead of its previous forecast of $12.90 to $13.80.
Inventory shrink a growing issue for stores
The company reaffirmed its comparable-store sales outlook of flat to positive 2% growth.
“Despite moderating our 2023 EPS outlook, the enthusiasm we have for our business and the confidence we have in our long-term growth opportunities have never been stronger,” Hobart said.
Inventory shrink has been cited as a growing issue by Target and several other big box retailers.
Target CEO Brian Cornell said in an Aug. 16 second-quarter earnings conference call that the company saw a 120% increase in “theft incidents involving violence or threats of violence” in the quarter. Theft is “well above the sustainable level” that the retailer expects to operate in over time, he said.
Target estimates theft to reduce its full-year profitability by $1.3 billion in fiscal 2023, up from $800 million in fiscal 2022.
A recent survey by the National Retail Federation revealed that retail theft is a nearly $100 billion problem for the industry and is getting worse.
