Shares of Dick’s Sporting Goods beat Wall Street expectations on its top and bottom lines in its 2018 Q4 earnings report on Tuesday, but shares sank more than 10% on a decline in same-store-sales and disappointing guidance for 2019.
And Dick’s is ditching two key parties in 2019: hunting and Reebok.
Removing hunting items in 125 stores
Last year, Dick’s removed hunting items from 10 stores where it underperformed. After the removal, those stores generated positive comp sales in Q4. “Following this success,” Dick’s CEO Ed Stack said on the Q4 earnings call, “we will remove Hunt from approximately 125 additional Dick’s stores in 2019 where the category underperforms.”
Dick’s defines the hunting category as rifles and ammunition, plus “accessories associated with firearms, hunting apparel, anything associated with hunting,” Dick’s president Lauren Hobart clarified later on the call. “It would not include kayaks and other outdoor activities like that.”
Dick’s entered the national political conversation one year ago when it stopped selling assault-style rifles in all 35 of its Field & Stream stores following the school shooting in Parkland, Fla. It also immediately raised the minimum age to 21 for anyone buying guns in its stores.
Dick’s has seen same-store-sales declines since then, and some have blamed that on politics, but Dick’s stock is up 10% since that move, and up 12% in 2019 so far.
On Tuesday’s call, Dick’s signaled that the Field & Stream brand may soon go away. “We’re not sure exactly what we’re going to do with it,” said Stack. “We’re not opening any new Field & Stream stores. And right now, on a formal basis they’re cash flow positive and they’re not a drain on the company.”
Removing Reebok in all stores
Dick’s also shared plans for its private labels that spell bad news for Adidas and Under Armour.
Stack said Dick’s private apparel brands, such as CALIA by Carrie Underwood, will “continue to be an integral part” of its strategy, and “play an important role in our space allocation and assortment strategies.” It will expand the footprint of CALIA in 80 stores, and launch a new private brand that will replace Reebok in time for the back-to-school season.
“We think that we’ll do more business there than we did with Reebok,” said Stack.
That ends a licensing agreement Dick’s had with Reebok, and it sent shares of Adidas Group, which owns the Reebok brand, tumbling.
Dick’s didn’t have great news to share about Under Armour sales, either. Dick’s CFO Lee Belitsky said that Under Armour “continues to be difficult” for Dick’s and, “We’ve been able to replace the loss Under Armour apparel business with other brands in the stores at this point.”
Belitsky did add that Dick’s is “enthusiastic” that Under Armour sales “will turn around in our stores.” Dick’s has made changes with the volume of Under Armour gear it displays and how it displays it. “We see a very different trajectory from Under Armour going forward.”