DICK’S Q2 2026: Contradictions Emerge on Tariff Strategies, Foot Locker Synergies, and Consumer Demand

The above is the analysis of the conflicting points in this earnings call

Date of Call: None provided

Financials Results

• Revenue: $3.65B, up 5% YOY
• EPS: $4.38 non-GAAP per diluted share, compared to $4.37 in the prior year
• Gross Margin: 37.06%, up 33 bps YOY
• Operating Margin: 13.02% non-GAAP, down 81 bps YOY (vs 13.83% last year)

Guidance:

• FY25 comp sales growth now 2%–3.5% (from 1%–3%).
• FY25 consolidated sales expected at $13.75B–$13.95B (from $13.6B–$13.9B).
• Expect FY gross margin expansion; SG&A to deleverage due to strategic investments.
• FY operating margin ~11.1% at midpoint; ~10 bps expansion at high end.
• FY EPS $13.90–$14.50 (from $13.80–$14.40); Q3 EPS down YOY, Q4 up YOY.
• Preopening expenses $65M–$75M; most in Q3 for 13 House of Sport and 6 Fieldhouse openings.
• Net capex ≈$1.0B; outlook includes current tariffs; ~81M diluted shares; ~25% tax rate.

Business Commentary:

* Strong Financial Performance: - DICK'S Sporting Goods reported comps of 5% for the second quarter of 2025, with a gross margin expansion of 30 basis points. - The growth was driven by a strong product assortment, differentiated omni-channel athlete experience, and strategic investments in digital and in-store capabilities.

• Upcoming Acquisition and Strategic Benefits:
• The pending acquisition of Foot Locker is expected to close on September 8, with Foot Locker shareholders and regulatory approvals already secured.

• This acquisition is anticipated to enhance DICK'S Sporting Goods' global leadership in the sports retail industry by expanding its total addressable market and strengthening partnerships with leading sports brands.

• Retail Media Network and Technology Integration:

• DICK'S Media Network is expected to be a long-term growth driver, with increasing leverage from automation and personalized data.

• Investments in AI, machine learning, and computer vision are enhancing productivity and empowering teammates to focus on athlete interaction.

• House of Sport and Fieldhouse Expansion:

• DICK'S Sporting Goods is planning to open 16 House of Sport locations and 15 Fieldhouse locations in 2025, marking 13 and 6 openings in Q3 respectively.
• These investments are fueling powerful financial results, enhancing athlete engagement, and laying the foundation for sustainable long-term growth.

Sentiment Analysis:

• “Q2 comps increased 5% with growth in average ticket and transactions.” Gross margin expanded 33 bps YOY. Management raised full-year comp, sales, and EPS guidance and expects FY gross margin expansion. “We are not seeing any signs of slowdown with the consumer.” E-commerce grew faster than the company overall; inventory is well positioned. Foot Locker acquisition expected to close Sept 8 with $100–$125M synergy target.

Q&A:

• Question from Brian Nagel (Oppenheimer): How will you revitalize Foot Locker and what’s the timing of key initiatives?
  Response: Post-close, they’ll partner with brands and invest in stores, marketing, and merchandising (incl. apparel) to turn the business; detailed plans to follow after Sept 8 close.

• Question from Brian Nagel (Oppenheimer): Tariffs—mitigation efforts and any demand impact from pricing?
  Response: Guidance embeds tariff impact; price actions are surgical; no demand hit evident as comps rose 5% and gross margin expanded.

• Question from Simeon Gutman (Morgan Stanley): Second-half comp assumptions and any consumer slowdown?
  Response: No slowdown seen; broad-based strength across footwear, apparel, team sports, and golf; second-half comp outlook increased despite macro uncertainty.

• Question from Simeon Gutman (Morgan Stanley): Q2 gross/merch margin drivers and SG&A leverage threshold?
  Response: Q2 gross margin +33 bps; merchandise margin +18 bps driven by assortment/mix and early DMN/GameChanger; aim to leverage SG&A at low-single-digit comps while investing in differentiating capabilities.

• Question from Adrienne Yih (Barclays): Industry dynamic and brand power shift; comp drivers and pricing into spring?
  Response: Dick’s/Foot Locker scale strengthens brand partnerships; Q2 comp was ~1 pt transactions and the rest basket growth; pricing for spring not detailed.

• Question from Robbie Ohmes (Bank of America): Customer behavior, e-commerce vs stores, back-to-school, and promotions?
  Response: Strength across channels with e-commerce outpacing; back-to-school mainly Q3; promotions remain surgical as newness/innovation drive demand across income tiers.

• Question from Michael Lasser (UBS): Why soften gross margin phrasing vs prior +75 bps and what’s realistic now?
  Response: Still expects FY gross margin expansion, balancing tariffs, inventory vibrancy, and promo; at high end, operating margin expands ~10 bps; overall top- and bottom-line outlook increased.

• Question from Michael Lasser (UBS): Will Foot Locker be EPS-accretive given potential higher share issuance?
  Response: Management still expects accretion; magnitude depends on stock/cash mix and synergy timing ($100–$125M); more details post-close.

• Question from Mike Baker (DA Davidson): GameChanger user/revenue updates?
  Response: Q2 had 7.4M unique active users and ~5.5M MAUs (+16% YoY); on track for ~50% revenue growth after >$100M last year; increasing integration with DMN.

• Question from Chris Horvers (JPMorgan): Implied back-half deceleration despite strong trends—why?
  Response: Guidance is prudently balanced for macro/tariffs and tough compares (Q4’24 comp +6.4%); second-half outlook still raised.

• Question from John Kernan (TD Cowen): Footwear cycle and consumer ability to absorb price increases?
  Response: Footwear demand remains strong; selective, small price increases to offset tariffs have been absorbed without pushback.

• Question from Paul Lejuez (Citi): Vertical brand performance and tariff-driven pricing strategy for private/national brands?
  Response: Vertical brands (e.g., DSG, CALIA, VRST) are strong with 700–900 bps higher margins; pricing actions are surgical/flexible to balance growth and profitability.

• Question from Joseph Civello (Truist): Traffic and ticket vs transactions in House of Sport/Fieldhouse; DMN scaling?
  Response: No traffic breakout; formats drive strong baskets and engagement; DMN is early but a long-term revenue/margin driver, enhanced by GameChanger and in-store activations.

• Question from Eric Cohen (Gordon Haskett): Post-Foot Locker, does larger footwear mix increase risk?
  Response: Management views footwear as the growth engine for sport/lifestyle; Dick’s and Foot Locker serve distinct consumers, supporting confidence in category exposure.