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Dick’s Sporting Goods Blames Under Armour for Weak Sales

Shares of both Dick’s Sporting Goods and Under Armour were in the red after the former reported second quarter financial results.

Under Armour saw losses over 7% before rebounding and Dick’s Sporting Goods dropped around 2.2% on the results.

Dick’s Sporting Goods blamed the athleisure wear company for weak sales during the quarter, and said the brand contributed to it missing sales expectations.

“We reported second quarter earnings per diluted share of $1.20. Revenue grew 1% to approximately $2.18 billion. Adjusted for the calendar shift due to the 53rd week, our consolidated same-store sales declined 4% and our e-commerce business increased 12%. As a percent of total net sales, the online business increased to approximately 11% compared to approximately 9% in the same period last year. We also delivered double-digit growth in private brands and athletic apparel, excluding Under Armour,” said Dick’s Sporting Goods CEO Ed Stack during the earnings release.

“However, as expected, sales were impacted by strategic decisions we made regard the slow growth, low margin hunt and electronics business, which accounted for nearly half of our comp decline. In addition, we experienced significant declines in Under Armour sales as a result of their decision to expand distribution. Networks these challenges, the health of our core business is relatively strong and we’re confident sales trends will improve next year, as these headwinds are expected to subside,” he added.

According to Stack however, the challenges with Under Armour should subside in 2019.

“Our Under Armour business has been difficult,” said Stack. “We are … looking at how we can grow moving forward. … Between us, we think we are going to get this figured out.”

“There will be a significant change [at Dick’s] in the direction of Under Armour,” the CEO told analysts.

Optimistically Stack said, “As we continue to focus on driving profitable sales, we are very pleased with our strong gross margin improvement. An improved product cycle, fewer promotions, and a favorable product mix contributed to the overall strength in our merchandise margin.”

He also remarked, “We also continue to be enthusiastic about the product improvements we’re seeing from Under Armour, particularly the innovation they’re delivering with the HOVR shoe, as well as foundational core products such as ColdGear and Compression.”

Analysts had been expecting $1.06 for earnings per share and revenue of $2.23 billion. Comparable sales fell 1.9% while analysts expected a drop of just 0.8%.

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