Dick’s Sporting Goods (DKS) shares took a huge beating on Tuesday after the retailer reported weak sales despite the bankruptcy of a key competitor and announced job cuts.
The sports gear chain said first-quarter comparable sales, which include online sales but exclude business at newly opened or closed stores, rose 2.4%, below its own earlier projections and those of Wall Street analysts, who on average expected 3.6% growth, according to Consensus Metrix. And that generated a big sell off as investors feared it would dent Dick’s full year results.
UBS estimated that Dick’s had about 30% fewer rival stores to compete with in the period thanks to some bankruptcies compared to a year earlier and as such lowered its rating on the stock to neutral from buy. The results were a disappointment considering that that The Sports Authority went out of business entirely last year. “It’s hard to have confidence that it will be able to meet our prior comp (sales) expectations,” UBS analyst Michael Lasser wrote in a research note.
Compounding investor agita was the slowing pace of online growth- digital sales rose 11%, slower than the 20%+ clip investors had gotten used to in recent quarters. Dick’s recently relaunched its web site on its own platform. The company also announced it has cut 160 jobs at a support center as part of its effort to “adjust our business model,” as CEO Ed Stack put it in a statement.
Dick’s shares fell 13% to $41.34 by midday.
Stack told investors on a conference call that Gander Mountain’s likely closing of all 160 of its stores shortly would be “an opportunity to gain market share.” But it could also pressure Dick’s business during the liquidation sales of those defunct rivals.
This news comes just a week after Dick’s shook up its c-suite, saying operations chief André Hawaux would retire at the end of the second quarter and that its marketing head, Lauren Hobart, would become president and oversee stores and customer and digital operations, a job that could set her up to be the next president. Dick’s also named a new chief merchant in Keri Jones.
Total sales rose 9.9% to $1.83 billion for the quarter, thanks to the opening of news stores, while net income was up 2.3% to $58.2 million, or 52 cents per share.
