Dick's Sporting Goods (NYSE:DKS) saw its shares drop more than 3% after it posted an earnings miss for the third quarter, despite raising its full-year guidance.
The company reported Q3 revenue of $4.17 billion, up 36.3% year-over-year, but falling short of Wall Street expectations of roughly $4.64 billion.
Adjusted earnings per share (EPS) were $0.86, significantly below the consensus estimate of $2.59. The miss was driven by margin pressures, as costs rose faster than revenue, with cost of sales increasing 41.9% year-over-year.
Comparable sales for the Dick's business rose 5.7% in the quarter, supported by continued growth in its specialty formats.
The company opened 13 new House of Sport locations and six new Dick’s Field House locations during the quarter, expanding its experiential retail footprint.
Looking ahead, Dick’s raised its full-year 2025 guidance for the Dick’s business, projecting comparable sales growth of 3.5% to 4%, up from the prior 2% to 3.5% range.
EPS guidance was also raised to $14.25 to $14.55, compared to the previous range of $13.90 to $14.50.
Full-year net sales for the Dick’s business are expected to reach $13.95 billion to $14 billion, with capital expenditures of approximately $1.2 billion on a gross basis.
Dick’s highlighted its Foot Locker acquisition, completed in the quarter, which it said positions the company as a global leader in the sports retail industry.
"We are incredibly excited about our acquisition of Foot Locker, which marks a bold and transformative step that expands our reach and creates a global platform at the intersection of sport and culture," Dick's executive chairman Ed Stack said in a statement.
"At Foot Locker, we've assembled a world-class management team and are taking decisive actions to 'clean out the garage' by clearing unproductive inventory, closing underperforming stores and laying the foundation for a fresh start in 2026. These steps, combined with our operational expertise, strong vendor relationships and the passion of our new team members, including the Stripers and Blue Shirts, will position the Foot Locker Business for profitable growth."
Management has initiated a review of unproductive assets, with merger and integration costs expected to result in pre-tax charges of $500 million to $750 million.
The company expects Foot Locker’s Q4 gross margins to be down 1,000 to 1,500 basis points year-over-year, with pro-forma comparable sales declining mid- to high-single digits. Excluding one-time costs, Foot Locker’s Q4 operating profit is expected to be slightly negative.