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Dive Brief:
Weeks after announcing its plans to acquire Foot Locker, Dick’s Sporting Goods on Wednesday reported its fifth-straight quarter of 4%-plus comp growth. The retailer saw net sales increase 5.2% in the first quarter to nearly $3.2 billion. Net income fell 4% to $264 million.
Despite the threat of tariffs and falling consumer sentiment, Dick’s reaffirmed its guidance for the year, expecting comps growth of 1% to 3% and net sales up as much as 3.7%, to $13.9 billion.
Dick’s continued the revamp of its fleet in Q1, with two House of Sport locations and four Field House stores opening in the quarter. The retailer plans to convert five of its closing Public Lands stores into three House of Sport and two Field House locations this year. The outdoors banner lists just three stores on its site currently as Dick’s has quietly stepped back from the business.
Dive Insight:
Despite strong Q1 results, Dick’s continued to play defense on Wednesday as analysts questioned its planned acquisition of Foot Locker.
“We understand that there’s really a group of people out there — shareholders — that would really prefer we just continue to do what we’re doing,” Executive Chairman Ed Stack said on an earnings call. “We don’t think that’s right long-term for the business.”
Stack noted that the acquisition will strengthen Dick’s partnerships with brands, give the retailer a foothold in the $300 billion sportswear market and help it gain a customer it doesn’t currently have. Dick’s CEO Lauren Hobart noted on the call that Dick’s has just 30% of its stores in malls and does not currently have access to many of the urban environments Foot Locker operates in.
“What the Street needs to understand is that, like it or not, we don’t make investments or decisions for a quarter or two. We make these decisions and investments for a lifetime,” Stack said.
Even with Dick’s steadily gaining share over the years, Hobart said the retailer holds just 8% market share in the space, leaving plenty of room for both Dick’s and Foot Locker to gain share. Dick’s believes it can also improve Foot Locker’s operational efficiency, build up that company’s brand partnerships and better compete for market share long-term as a combined business.
“The truth is that Dick’s would be just fine as a stand-alone business, but it sees the rise of players like JD and their expansion into the US market, and it knows it must make bolder moves if it wants to remain on top,” GlobalData Managing Director Neil Saunders said in emailed comments. “Even so, Dick’s is now entering a new era where it switches from the familiarity of driving organic growth to the unfamiliar ground of mergers and acquisitions.”
Stack will lead a small team of Dick’s employees focused on helping Foot Locker advance its Lace Up plan and integrate that business. Hobart praised Foot Locker’s strategy as having many solid priorities, including revamping stores and focusing on digital, and expressed confidence in Dick’s ability to bring Foot Locker to a stronger position in the market.
“We are confident that we’ll be able to execute the heck out of this,” Hobart said.
