This story was originally published on Shop Eat Surf Outdoor.
Key Takeaways:
- Dick’s now expects Foot Locker to post a full-year operating loss of $40 million to $80 million, reversing a forecast of $110 million to $150 million in profit issued just one quarter ago.
- Executive Chairman Ed Stack said brand-level promotions spilled into the broader marketplace and will likely continue through year end.
- Dick’s lowered its full-year non-GAAP earnings forecast to $11 to $12 per diluted share, down from $13.50 to $14.50.
Dick’s Sporting Goods Executive Chairman Ed Stack said on the company’s second-quarter earnings call Tuesday that promotions brands ran on their own sites spilled into the broader marketplace, a dynamic centered in athletic footwear that is pressuring both the Dick’s and Foot Locker businesses, with a heavier toll on Foot Locker given its greater reliance on the category.
“A number of brands got very promotional on their sites, and those promotions spilled into the broader marketplace, and we expect that to unfortunately continue through the balance of the year,” Stack said.
One footwear brand executive described the current climate in stark terms during a conversation with Stack.
“I’ve never seen the specialty channel of distribution so promotional in my career,” Stack said, relaying the comment on the call.
Dick’s and Foot Locker Consolidated Results
For the quarter ended Aug. 1, Dick’s posted consolidated net sales of $5.59 billion, up 53.2%, including a $1.74 billion contribution from the Foot Locker business. Consolidated net income was $315.5 million, or $3.50 per diluted share, compared with $381.4 million, or $4.71 per diluted share, a year earlier.
Consolidated non-GAAP gross margin was 34.06%, down 300 basis points from 37.06% a year earlier, which the company attributed to the mix impact of adding the Foot Locker business.
The company lowered its full-year non-GAAP diluted earnings per share forecast to $11 to $12, down from a prior range of $13.50 to $14.50. Full-year consolidated net sales are now expected between $21.9 billion and $22.2 billion, with operating income between $1.45 billion and $1.55 billion.
Foot Locker Business Posts Operating Loss
The Foot Locker business generated net sales of $1.74 billion for the quarter, with a proforma comparable sales decline of 3.6%, compared with a decline of 2.2% in the prior-year quarter. The segment posted an operating loss of $31.9 million; there is no comparable prior-year result, as the acquisition closed in September 2025.
Dick’s now expects Foot Locker to post a full-year operating loss of $40 million to $80 million, reversing a forecast of $110 million to $150 million in profit that the company issued just one quarter ago, following its first-quarter results.
The company also lowered its full-year Foot Locker comparable sales outlook to a range of negative 2% to flat, down from a prior forecast of 1.5% to 3% growth.
For the full year, Dick’s expects the Foot Locker business to post net sales of $7.4 billion to $7.5 billion and a segment loss of $40 million to $80 million, representing negative 0.5% to negative 1.1% of net sales.
Asked what changed since the company raised its outlook and expressed optimism about both businesses just 90 days earlier, Stack pointed to promotional spillover from brand websites as the key shift, adding that Foot Locker felt a heavier impact than the Dick’s business because of its greater reliance on footwear.
“As you would expect, given its greater exposure to many of the legacy footwear silhouettes, the impact was more significant at Foot Locker,” Stack said. “In addition, Foot Locker is more dependent on launch and retro product. Not only were there fewer launches in the second quarter but launches we did see perform below industry and our expectations.”
Stack said the pressure stems from an inventory buildup across the sporting goods supply chain rather than weaker underlying demand.
“The consumer is looking for products that are new, innovative, different in the marketplace, and some of these older legacy silhouettes and franchises that have done so well have slowed and slowed relatively quickly,” Stack said.
Foot Locker’s EMEA operations added further pressure, with proforma comparable sales for that international business declining 3.3% for the quarter.
“The Foot Locker business in EMEA has been more challenging than expected,” Stack said. “The promotional environment remains very aggressive in EMEA. The industry is carrying too much inventory, and the consumer has been even more cautious than expected due to the geopolitical environment.”
Despite the pressure, Stack said the company remains committed to the turnaround, including its first major marketing campaign in more than a decade, called “Colors,” and increased payroll for in-store staff known as stripers.
“We’re still early in the Foot Locker turnaround,” Stack said. “We continue to invest to strengthen the business for the long term.”
“Foot Locker hasn’t had an out-of-home marketing plan since roughly 2013,” Stack said. “The previous management team did nothing to market the business from a top of funnel standpoint to really build the brand, and we’re in the middle of fixing that.”
The results mark a reversal from Q1, when Foot Locker had returned to positive comparable sales for the first time since the fourth quarter of 2024 and Dick’s had raised its full-year Foot Locker outlook to 1.5% to 3% growth.
The Foot Locker business closed 110 stores during the year to date, including 67 identified through the company’s review of unproductive assets, ending the quarter with 2,478 stores.
Dick’s Fast Break remodel initiative, which reformats Foot Locker stores around clearer storytelling and a more curated assortment, surpassed its goal of approximately 250 stores globally by back to school. Stack said Fast Break stores have outperformed legacy stores and that the company expects to reach roughly 300 to 350 Fast Break doors globally by year end.
He also reiterated the company’s confidence in achieving $100 million to $125 million in cost synergies over the medium term, primarily from procurement and direct sourcing efficiencies.
Dick’s Business Delivers Growth
The Dick’s business, which includes the Dick’s Sporting Goods, Golf Galaxy, Going Going Gone! and Public Lands banners along with GameChanger, posted net sales of $3.85 billion for the quarter, up from $3.65 billion a year earlier.
Comparable sales rose 4.9%, reflecting a 3.6% increase in average ticket and a 1.3% increase in transactions, with growth across footwear, apparel and hardlines. Segment gross margin expanded 79 basis points to 37.85%.
“In Q2, we delivered total sales growth of 5.6% and comp sales growth of 4.9% for the Dick’s business,” CEO Lauren Hobart said. “Importantly, our growth outpaced the broader industry by nearly 200 basis points, reinforcing our ability to strengthen our leadership position and gain market share.”
Hobart said investment in marketing tied to the 2026 FIFA World Cup, primarily through the company’s Adidas partnership, contributed to the quarter’s results.
Growth businesses including Dick’s Media Network and GameChanger, along with a $19 million merchandise margin benefit to the Dick’s Business from tariff refunds, also helped offset promotional pressure in footwear and apparel.
Of the $59 million in total tariff refunds the company received during the quarter, $38 million related to prior-year costs and was excluded from non-GAAP results; of the remaining $21 million included in non-GAAP results, $19 million benefited the Dick’s Business and $2 million benefited Foot Locker.
For the full year, Dick’s maintained its comparable sales forecast for the Dick’s business at 2.5% to 4% growth, with net sales expected between $14.5 billion and $14.7 billion and segment profit between $1.54 billion and $1.60 billion, representing 10.6% to 10.9% of net sales.
“We think Q3 is going to be a bit more difficult than Q4,” Stack said. “I think the market is going to continue to be promotional through the balance of the year.”
Despite the near-term pressure, Stack said the company remains confident in its long-term strategy.
“We have navigated environments like this before, and we remain confident in our strategy, our competitive position and long-term opportunities ahead for both Dick’s, Foot Locker, and GameChanger,” he said.
