A red brick Dick’s storefront under a blue sky. The retailer reported net sales grew 3.6% in the second quarter, but both net and operating income were down double digits. Permission granted by Dick’s Sporting Goods
The athletics retailer rolled out a business optimization plan to streamline its cost structure, while executives called theft an “increasingly serious issue.”
Dive Brief:
- Dick’s Sporting Goods on Tuesday 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.
- 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 athletics retailer expects the optimization plan to be completed within fiscal 2023.
- At the same time, the retailer reported earnings for the second quarter, with net sales up 3.6% year over year and comps up 1.8%. Dick’s fell short of profitability expectations, which CEO Lauren Hobart said in a statement was because of high levels of inventory shrink.
Dive Insight:
Dick’s is laying off employees as it looks to realign its investments. While the retailer did not answer questions about how many employees were laid off, Bloomberg cited unnamed sources in reporting that the job cuts will hit 250 corporate employees.
The company said it has not taken additional steps in the optimization plan yet, but it could incur additional costs if it does so, in the range of $25 million to $50 million.
While Dick’s net sales continue to rise, its net and operating income were both down double digits in the quarter. Net income fell 23% to $244 million, while operating income tumbled 32% to roughly $312 million. Hobart said on a call with analysts that the declines were due to the retailer’s “decisive action” on excess inventory and theft, which the executive called an “increasingly serious issue.”
“In our view this is a particular issue for Dick’s as many of the products it sells are desirable and have good resale values,” GlobalData Managing Director Neil Saunders said in emailed comments. “While the problem is not one of Dick’s making, management does not seem to have any immediate solutions to the problem which could, if left unchecked, continue to weigh down on the bottom line.”
Dick’s continues to invest in its experiential House of Sport store concept, opening seven more of the locations during the second quarter. Executive Chairman Ed Stack said in a statement that House of Sport, as well as Dick’s new 50,000-square-foot store format, “are yielding powerful results.”
The retailer in March said it would shutter its remaining Field & Stream stores and replace them with House of Sport locations or large-format Dick’s stores. Dick’s is aiming to operate between 75 and 100 House of Sport stores by 2027. The 50,000-square-foot format takes learnings from House of Sport and the retailer is expanding that format as well, with three stores opened so far and another eight planned to open by the end of the year, Hobart said.
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