Sporting goods retailer Dick’s Sporting Goods (NYSE: DKS) missed Wall Street’s revenue expectations in Q3 CY2025, but sales rose 36.3% year on year to $4.17 billion. The company’s full-year revenue guidance of $13.98 billion at the midpoint came in 21.9% below analysts’ estimates. Its GAAP profit of $0.86 per share was 66.8% below analysts’ consensus estimates.
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Dick's (DKS) Q3 CY2025 Highlights:
- Revenue: $4.17 billion vs analyst estimates of $4.64 billion (36.3% year-on-year growth, 10.2% miss)
- EPS (GAAP): $0.86 vs analyst expectations of $2.59 (66.8% miss)
- Adjusted EBITDA: -$37.73 billion vs analyst estimates of $459.2 million (-905% margin, significant miss)
- The company slightly lifted its revenue guidance for the full year to $13.98 billion at the midpoint from $13.85 billion
- EPS (GAAP) guidance for the full year is $14.40 at the midpoint, roughly in line with what analysts were expecting
- Operating Margin: 2.2%, down from 9.4% in the same quarter last year
- Same-Store Sales rose 1.7% year on year (4.2% in the same quarter last year)
- Market Capitalization: $16.56 billion
StockStory’s Take
Dick’s Sporting Goods’ third quarter was marked by a combination of robust results in its core business and underperformance from the newly acquired Foot Locker segment. While sales and comparable store growth at Dick’s banners continue to benefit from strong product assortment and omnichannel execution, management acknowledged that Foot Locker’s operational missteps and excess inventory weighed heavily on profitability. Executive Chairman Ed Stack described Foot Locker’s situation as “straying from retail 101,” emphasizing the need for aggressive cleanup and store portfolio optimization to stabilize the business.
Looking forward, Dick’s strategy centers on accelerating the transformation of Foot Locker, with an emphasis on inventory clearance, store closures, and improved vendor partnerships. Management expects these foundational changes to position Foot Locker for a fresh start in 2026, targeting the back-to-school season as a key inflection point. CFO Navdeep Gupta noted, “The building blocks start with cleaning out the garage, positioning the inventory, and having that excitement assortment and the newness that is resonating so well at Dick’s.”
Key Insights from Management’s Remarks
Management pointed to successful execution at Dick’s Sporting Goods banners and swift intervention at Foot Locker as the main factors shaping the quarter’s results and outlook.
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Dick’s core business momentum: The Dick’s Sporting Goods banners delivered strong comparable sales growth, supported by differentiated product assortments, effective in-store experiences, and continued gains in e-commerce engagement. Management highlighted the opening of 13 new House of Sport locations and six Fieldhouse stores as key drivers of customer engagement and long-term growth potential.
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Foot Locker turnaround efforts: Following the recent acquisition, management identified significant operational shortcomings at Foot Locker, including poor inventory management and misaligned product assortments. Ed Stack emphasized the immediate focus on “cleaning out the garage” by clearing excess inventory, closing underperforming stores, and revamping merchandising processes.
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Vendor alignment and support: Leadership reported renewed commitment from major brand partners to support Foot Locker’s turnaround, with suppliers pledging to invest alongside Dick’s to reinvigorate the store experience and product pipeline. This renewed vendor support is seen as critical for regaining lost market share in specialty sports retailing.
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E-commerce and digital innovation: Dick’s continued to invest in its digital ecosystem, expanding app-exclusive launches, personalized marketing, and the GameChanger youth sports platform. These initiatives are designed to deepen customer loyalty and diversify revenue streams beyond traditional retail channels.
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Cost structure and margin pressure: The consolidation of Foot Locker’s lower-margin business and the costs associated with inventory clearance and store optimization negatively impacted overall operating margin. Management described these actions as necessary short-term measures to enable sustainable profitability improvements in future periods.
Drivers of Future Performance
Dick’s management expects the next few quarters to be shaped by the pace of Foot Locker’s operational reset, evolving consumer demand, and ongoing digital investments.
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Foot Locker inventory and store overhaul: Leadership is prioritizing the rapid clearance of outdated inventory and the closure or repositioning of underperforming Foot Locker stores. The company expects most inventory write-downs and store rationalization to be completed before 2026, laying groundwork for improved margins and a refocused product offering in time for the key back-to-school season.
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Vendor partnerships and product access: Success in regaining allocations of high-demand products from major brands is central to Foot Locker’s recovery. Ed Stack highlighted the importance of vendor alignment and noted that renewed access to premium footwear and apparel is expected to drive higher average selling prices and improved store productivity.
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Continued digital and omnichannel investment: Dick’s plans to maintain investments in personalizing e-commerce experiences, expanding the GameChanger and Media Network platforms, and rolling out innovative store formats. Management sees these initiatives as essential for engaging customers and supporting long-term revenue growth, but also acknowledged that near-term spending will pressure margins.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will closely monitor (1) the pace of Foot Locker’s inventory clearance and store closures, (2) evidence of renewed vendor partnerships translating into improved product assortments and access, and (3) Dick’s ability to maintain sales and margin momentum in its core banners despite integration complexity. Progress on digital initiatives and the impact of merchandising changes at Foot Locker will also be key signposts for long-term success.
Dick's currently trades at $207.38, in line with $206.31 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free for active Edge members).
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