Dicks’ Sporting Goods (DKS) stock fell more than 20% Tuesday morning after the sporting goods retailer said organized retail crime had dented its earnings.
“Our profitability in the second quarter was lower than our expectations, due in large part to the impact of high inventory deflation, an increasingly serious issue affecting many retailers,” said Lauren Hobart, CEO of Dick at the company. Release of second quarter earnings before the bell on Tuesday.
The company’s adjusted earnings per share of $2.80 in the second quarter came in about a dollar below analyst expectations of $3.81.
Dick also cut its full-year earnings forecast due to a rise in retail crime. Dick’s now sees adjusted earnings per share for the full year in a range of $11.50 to $12.30, down from a range of $12.90 to $13.80.
The company’s earnings conference call is scheduled to begin at 10:00 a.m. ET.
“This is an issue that has negatively affected many retailers, but DKS hasn’t called it out before,” Wedbush analyst Seth Basham wrote on Tuesday.
However, quarterly sales of $3.22 billion came in just shy of the $3.24 billion forecast, and the retailer maintained its forecast for year-end comparable sales in a flat range of 2% year-over-year.
“[Dick’s management] He said sales accelerated significantly in July, but that was unlikely to ease doubts about their ability to deliver… [the second half of 2023]Citi managing director Paul Lejuez wrote in a note to clients after the release.
Legouise added that the company expects shares to fall “significantly” based on quarterly cuts and lower expectations, which still contains potential downside risks.
Organized retail crime has been a burden across the sector for over a year.
Target (TGT), Best Buy (BBY), Rite Aid (RAD), and Dollar Tree (DLTR) highlighted “deflation,” which includes theft, as a factor affecting earnings.
In 2022, Target said it lost $400 million in profits due to shrinking inventory. Last week, Target, Home Depot (HD), and Walmart (WMT) all cut back on their earnings calls.
“In the second quarter, our gross margin was 33%, down 8 basis points from the second quarter of last year, primarily driven by deflationary pressure,” Home Depot CFO Richard MacPhail said on the company’s earnings call.
“Shrink has been a constant squeeze over the past several quarters and even the last few years. It’s something we deal with every day.”
Josh Shaffer is a correspondent at Yahoo Finance.
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