Dick's Core Business Grew Comparable Sales 4.9% While Foot Locker's Fell 3.6%. Here's Why the Full-Year Guidance Still Came Down.

Shares of Dick's Sporting Goods (NYSE:DKS) fell about 29% Tuesday morning, as of this writing, after the retailer reported its second-quarter results. The odd part is what the report said about demand. Comparable sales at the DICK'S business grew 4.9% year over year, with help from the 2026 FIFA World Cup, and management maintained its full-year sales outlook for that business.

The damage sits in the profit outlook. Dick's cut its full-year earnings guidance to $10.94 to $11.94 per share on a GAAP basis, and to $11.00 to $12.00 on a non-GAAP (adjusted) basis. Three months ago, the adjusted range was $13.50 to $14.50.

Why would a company selling this well expect to earn about 18% less than it thought in May? Management's answer has two parts -- a marketplace that turned promotional, and a Foot Locker recovery that went backward.

Image source: Getty Images.

Growth at the core, decline at Foot Locker

The quarter itself was strong, where Dick's controls the outcome. Revenue came in at $5.59 billion, and earnings per share were $3.50 on a GAAP basis, or $3.53 as adjusted.

Net income was $315.5 million, with the comparison to last year muddied by the Foot Locker acquisition.

And the 4.9% comp growth at the DICK'S business was broad-based, the company said, with both average ticket and transactions growing.

Foot Locker, which Dick's acquired in September 2025, went the other way. Comparable sales at that business fell 3.6% year over year on a pro forma basis -- that is, against the year-ago quarter as if Dick's had owned Foot Locker then. The company pinned the decline on challenging conditions in the athletic footwear marketplace, and specifically on Foot Locker's exposure to older footwear styles and its dependence on launch and retro product.

"As the quarter progressed, conditions across portions of the athletic footwear and apparel marketplace became increasingly promotional, and we took action to remain competitively priced to protect and grow our leadership position," said executive chairman Ed Stack in the earnings release.

Most of the cut is Foot Locker

Notably, the revision didn't touch every number. Dick's maintained the DICK'S business's comparable sales outlook of 2.5% to 4% growth. It lowered Foot Locker's comparable sales outlook to a range of negative 2% to flat. And it lowered the operating income outlook for both businesses.

In other words, the company still expects its core business to sell about what it thought it would. What changed at that business is how much profit those sales produce while everyone around it discounts.

The Foot Locker reversal is the sharpest part, I think, and it drives most of the cut. In late May, management guided that segment to a full-year profit of $110 million to $150 million, with comparable sales growing 1.5% to 3%. One quarter later, the same segment is guided to a loss of $40 million to $80 million, on comparable sales of negative 2% to flat.

Full-year adjusted operating income guidance came down about $260 million at the midpoint. The Foot Locker swing accounts for about $190 million of that. The DICK'S business gave up about $70 million.

However, the smaller number matters, too. The DICK'S business is giving up profit even with its sales outlook intact -- the cost of staying competitively priced while rivals discount.

Chief financial officer Navdeep Gupta said on the call he now expects gross margin at the DICK'S business to decline slightly for the year, on the promotional marketplace, plus higher fuel and supply chain costs. "[W]e expect gross margin pressure to be most pronounced in Q3," he said.

Is the drop an overreaction?

The market took about 29% off the stock for an earnings cut of about 18%. Shares closed Monday at $179.33 and traded near $127 Tuesday morning, about 11 times the midpoint of this year's reduced adjusted earnings guidance.

Why the bigger drop? A cut this large, one quarter after a raise, and mostly from the business management just bought, costs some benefit of the doubt.

Sure, a 4.9% comp at the DICK'S business is a result most retailers would gladly take. But Dick's doesn't get to set industry prices, and its own guidance now assumes the discounting continues through the holidays.

I'd frame Tuesday's drop as less a verdict on the DICK'S business, where demand held, than on the Foot Locker turnaround -- and on what every sale earns while the industry discounts. At about 11 times this year's reduced expected earnings, the stock is arguably no longer priced for the strong version of this business. Bargain hunters may now see a value stock. Whether it is one depends on how quickly Foot Locker's losses stop widening and how long the promotions last, and management just told investors not to expect relief this quarter.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.