Dick’s Sporting Goods Inc. (NYSE:DKS) shares plunged about 25% Tuesday after the retailer cut its full-year profit outlook and reported a $31.9 million second-quarter segment loss at Foot Locker, less than a year after acquiring the chain for $2.5 billion.
The sharper reversal came in Foot Locker’s outlook. Three months after projecting $110 million to $150 million in full-year segment profit, Dick’s now expects a $40 million to $80 million loss, a $190 million midpoint swing.
It cut consolidated adjusted earnings guidance to $11 to $12 per share from $13.50 to $14.50.
Foot Locker’s Turnaround Abruptly Reverses
After posting a $17.5 million segment profit and 0.6% comparable-sales growth in the first quarter, comps fell 3.6% in the second.
Executive Chairman Ed Stack blamed an increasingly promotional market and Foot Locker’s reliance on sneaker launches, retro products and older footwear styles.
"Not only were there fewer launches in the second quarter, but those launches performed below both industry and our expectations," Stack said.
Dick’s Expected An Earnings Boost
Dick’s completed the $2.5 billion acquisition on Sept. 8 using shares, cash and its pre-existing stake. It said the deal would boost earnings in fiscal 2026, its first full year, excluding one-time costs, and deliver $100 million to $125 million in medium-term cost synergies.
The turnaround is already costly. Dick’s has booked $515.8 million in related charges, potentially rising to $750 million, while the Foot Locker business has closed 110 locations this fiscal year, including 67 stores identified through its unproductive-assets review.
Is This A Consumer Warning?
The core Dick’s business remains healthy. Comparable sales rose 4.9%, driven by growth in transactions and average spend and strong World Cup demand. Segment profit climbed to $485.2 million.
That makes Tuesday’s report a warning about Foot Locker and the wider sneaker market rather than compelling evidence of a looming recession. Traders on Polymarket currently give a U.S. recession by year-end just an 8% chance, on $1.7 million in volume.
The read-through may matter more for Nike Inc. (NYSE:NKE) and other athletic brands. Nike shares also fell following the report.
Prediction Traders Expected Foot Locker Mention
Kalshi traders were nearly certain Foot Locker would come up on the earnings call, pricing a mention at 97%. Nike stood at just 26%. The 13-outcome market had generated approximately $42,390 in volume before the call began.
Traders predicted the topic, not Foot Locker’s loss or the stock plunge.
Dick’s continues to express confidence in Foot Locker’s long-term potential. For now, its strongest business is subsidizing an acquisition that has gone from forecast profit to projected loss in three months.
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