DICK'S Q2 2026 Earnings: Foot Locker Pressure Drives Outlook Cut

DICK’S Sporting Goods (NYSE: DKS) reported fiscal Q2 2026 net sales of $5.587 billion, up 53.2% year over year, while diluted EPS fell to $3.50 from $4.71. The acquired Foot Locker operations drove most of the reported sales increase but recorded negative comparable sales and a segment loss, while the core DICK’S Business generated 4.9% comparable-sales growth.

Core Earnings Data

The quarter covered the 13 weeks ended August 1, 2026. Year-over-year consolidated revenue comparisons are affected by the Foot Locker acquisition: current results include both businesses, while the prior-year quarter reflects DICK’S on a stand-alone basis.

Despite the acquisition-led revenue increase, operating income declined slightly and margins contracted. Net income fell 17%, while the additional shares issued for the Foot Locker acquisition contributed to the larger 26% decline in diluted EPS.

The diluted share count rose 11% to approximately 90.1 million, reflecting the 9.6 million shares issued in the Foot Locker transaction.

Business and Segment Performance

The two operating businesses delivered sharply different results. DICK’S benefited from broad category growth, FIFA World Cup-related demand, and increases in both average ticket and transactions, while Foot Locker faced weaker footwear launches and a more promotional marketplace.

DICK’S Business sales increased approximately 5.6% from the prior-year quarter, while segment profit rose about 2.2%. Management attributed the comparable-sales gain to broad-based category growth and higher ticket and transaction levels.

Foot Locker’s pro forma comparable sales declined 3.6% on a constant-currency basis, compared with a 2.2% decline in the prior-year quarter. Management said Foot Locker was more exposed to legacy footwear silhouettes and depended more heavily on launch and retro products; launches were both less frequent and weaker than expected during the quarter.

Acquisition-Led Sales Growth Did Not Translate Into Higher Earnings

Foot Locker added substantial revenue but brought a lower gross-margin profile and an operating loss. Based on reported segment sales and gross profit, Foot Locker’s gross margin was approximately 25.7%, compared with about 37.8% for the DICK’S Business, before corporate and other items. That mix helps explain why consolidated gross margin contracted even as gross profit dollars increased.

The increasingly promotional athletic footwear and apparel market also affected pricing. DICK’S took action to remain competitively priced, while the effect was more pronounced at Foot Locker because of its merchandise exposure and launch dependence.

Quarterly GAAP results included $59.0 million of IEEPA tariff refunds and $2.1 million of related interest income. Of that amount, $38.1 million associated with prior-year tariff costs, along with the interest income, was excluded from non-GAAP results. Non-GAAP operating margin was 8.11%, compared with 13.02% in the prior-year quarter.

Cash Flow and Balance Sheet

Cash-flow information was provided for the first 26 weeks of fiscal 2026 rather than the quarter alone. Operating cash flow increased to $792.3 million from $735.6 million, even as inventory consumed $662.5 million of cash. Gross capital expenditures rose 41% to $743.5 million, while net capital expenditures increased 35% to $614.2 million.

Cash and cash equivalents declined by $439.5 million during the first half to $913.7 million. In addition to capital spending, the company paid $224.8 million in dividends and used $141.2 million for share repurchases.

Consolidated inventory reached $5.565 billion, but the year-over-year increase largely reflects the acquired Foot Locker inventory. Foot Locker accounted for approximately $2.0 billion, while DICK’S inventory was $3.6 billion and increased 6% year over year. Long-term debt and financing lease obligations stood at $1.906 billion, and the company reported no revolving-credit borrowings.

Full-Year 2026 Guidance

DICK’S revised its fiscal 2026 outlook because of the more promotional footwear and apparel environment. It maintained the DICK’S comparable-sales range but lowered Foot Locker’s pro forma comparable-sales outlook and reduced operating-income expectations for both businesses. The fiscal year ends January 30, 2027.

The company also expects approximately $1.6 billion of gross capital expenditures and $1.4 billion of net capital expenditures for the year.

Investor Risks to Monitor

• Promotional pressure: More discounting in athletic footwear and apparel could continue to weigh on gross margin, especially because both businesses’ operating-income outlooks were lowered.
• Foot Locker demand and product risk: Continued weakness in legacy footwear styles, launches, and retro products could keep comparable sales and segment profit below management’s plans.
• Integration and restructuring costs: The company has recorded $515.8 million of cumulative pre-tax charges related to its review of Foot Locker assets and expects total charges of up to $750 million, including $200 million in fiscal 2026.
• Capital and inventory requirements: Higher capital expenditures and the cash required for inventory contributed to the first-half decline in cash, increasing the importance of operating cash generation during the remainder of the year.

Summary

DICK’S core business continued to produce comparable-sales growth, but Foot Locker’s sales decline, lower margin profile, and segment loss prevented acquisition-driven revenue growth from translating into higher earnings. The main indicators for the remainder of fiscal 2026 are promotional intensity, Foot Locker’s comparable-sales trajectory, margin performance at both businesses, and progress on the acquired company’s asset and inventory restructuring.