Dick’s Sporting Goods reported a 23 percent drop in profits and slashed its earnings guidance for the year after it saw an uptick in retail theft. The sporting goods retailer also implemented aggressive markdowns to clear out excess inventory in its outdoor category, reports CNBC. On Tuesday, Dick’s announced a “business optimization” plan that includes cutting jobs and streamlining its overall cost structure, according to a company press release. The unspecified number of layoffs come mostly from its customer support center.
For the first time in three years, Dick’s fell short of Wall Street’s estimates on the top and bottom lines. The retailer reported earnings for the second quarter, with net sales up 3.6 percent year-over-year and comps up 1.8 percent. Sales rose to $3.22 billion from $3.11 billion a year earlier.
Total Retail’s Take: Dick’s lowered its profit forecast for the year in part because it expects shrink to get worse before it gets better. It’s the first reference the athletic goods retailer has made to shrink in a press release in nearly 20 years. “The impact of theft on our shrink was meaningful to both our Q2 results and our go forward expectations for the balance of the year,” CEO Lauren Hobart said on a call with analysts. “Beyond shrink, we also took decisive action on excess product, particularly in the outdoor category, to allow us to bring in new receipts and ensure our inventory remains vibrant and well positioned.”
Dick’s is realigning its investments in a new optimization plan, positioning layoffs as the first step to “better align our talent, organizational design and spending in support of our most critical strategies,” according to a press release. The job cuts, which were made on Monday, will cost Dick’s $20 million in severance expenses in the third quarter, but any cost savings from the move are expected to be offset by hiring investments elsewhere. The optimization plan is expected to be completed within fiscal 2023.
Although Dick’s released a mixed quarterly report cautious of retail theft’s impact going forward, Executive Chairman Ed Stack is bullish on its success. “We’re extremely excited about the future of our business. Our newest DICK’S concepts, DICK’S House of Sport and our next generation 50,000-square-foot DICK’S store, are yielding powerful results. We haven’t seen growth opportunities like these since we went public in the early 2000s.”
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