Under Armour weakness hits Dick's Sporting sales

Dick’s Sporting Goods reported a bigger-than-expected drop in quarterly same-store sales on Wednesday and forecast further declines this year, hit by a drop in Under Armour sales and tighter gun controls.

Shares in the company fell as much as 10 percent after it posted a 1.9 percent drop in same-store sales, bigger than analysts’ average estimate of a 0.62 percent dip.

Dick’s said on Wednesday it expected annual same-store sales to decline by 3 percent to 4 percent, compared with a 0.3 percent decline in 2017.

Chief Executive Officer Edward Stack said Under Armour sales fell as a result of the sports apparel maker’s decision to expand distribution to a broader range of stores.

"As expected, sales were impacted by the strategic decisions we made regarding the slow growth, low margin hunt and electronics businesses, which accounted for nearly half of our comp decline," the CEO  said in the company's earnings release. "In addition, we experienced continued significant declines in Under Armour sales as a result of their decision to expand distribution."

Shares in Under Armour Inc, for whom Dick’s 700 stores have played a major role in efforts to challenge Adidas and Nike, fell 6 percent to $19.66.

Still, Dick’s said it expects these headwinds to subside and is confident that its sales trajectory will improve next year. It raised its earnings per share forecast for the year ending February 2019 to between $3.02 and $3.20 versus an earlier forecast of $2.92 to $3.12.

“The improvement in the U.S. athletic market should overcome the weakness in hunting, electronics, and Under Armour as we get into 2019,” Feldman added.

The company’s net income rose 6 percent to $119.40 million, or $1.20 per share. Analysts had estimated $1.06 per share.

Net sales inched up nearly 1 percent to $2.18 billion, below the average Wall Street estimate of $2.24 billion.