Dick's Sporting Goods is intensifying efforts to transform its subsidiary, Foot Locker, which posted growth in the first quarter of the fiscal year—marking its first return to growth since late 2024.

However, this transformation is proving expensive, adversely impacting Dick's Sporting Goods' profitability. Consequently, the company's earnings for the quarter fell short of Wall Street expectations.

The established athletic footwear retailer Foot Locker is gradually re-entering a growth phase, but this costly overhaul continues to hamper the earnings performance of its parent company, Dick's Sporting Goods. The company reported its financial results on Wednesday, with overall profits missing market forecasts.

For the quarter ended May 2, Dick's Sporting Goods incurred $96.5 million in expenses related to the acquisition of Foot Locker. This included $53.8 million in merger-related costs such as layoffs and store closures, with an additional $42.7 million allocated for inventory clearance.

Although the company's revenue exceeded expectations, the aforementioned expenses ultimately led to overall profits falling short of targets.

In terms of performance, Foot Locker's comparable store sales saw a slight increase of 0.6%, marking the first positive growth since the end of the 2024 fiscal year. Dick's Sporting Goods' own stores reported a 6% rise in comparable sales, while the combined entity achieved a 4.1% growth in overall comparable store sales. Dick's Sporting Goods has focused its transformation efforts primarily on Foot Locker's U.S. market, where comparable store sales surged by 6.4%.

According to analyst forecasts compiled by the London Stock Exchange Group, the company's actual performance for the first quarter of the fiscal year compared with market expectations is as follows:

Adjusted earnings per share: $2.90, expected $2.92 Total revenue: $5.17 billion, expected $5.09 billion

Following the earnings release, the company's pre-market stock price fell by nearly 5%.

For the quarter, Dick's Sporting Goods reported a net profit of $319.82 million, or $3.54 per share. This compares to a net profit of $264.29 million, or $3.24 per share, in the same period last year. Excluding special items such as acquisition costs and litigation, the company's adjusted earnings per share stood at $2.90.

Boosted by the inclusion of Foot Locker's operations, total revenue for the quarter increased to $5.17 billion, a significant rise of approximately 63% from $3.17 billion in the prior-year period.

While consumer enthusiasm for sports remains high and Dick's Sporting Goods is not lacking in customers, maintaining profitability has become increasingly challenging.

After releasing its first-quarter report, the company raised its comparable store sales growth forecast for its two main segments for the 2026 fiscal year: the growth expectation for Dick's Sporting Goods' core business was revised upward from 2%–4% to 2.5%–4%, while Foot Locker's growth expectation was adjusted from 1%–3% to 1.5%–3%.

Simultaneously, the company lowered its guidance for consolidated operating profit and earnings per share for 2026:

The expected range for consolidated operating profit was reduced from $1.71 billion–$1.83 billion to $1.69 billion–$1.81 billion. The full-year earnings per share expectation was lowered from $13.70–$14.70 to $13.27–$14.27.

The company maintained its adjusted earnings per share guidance at $13.50–$14.50, with the upper end of the range exceeding the market expectation of $14.32. The full-year net sales forecast remains at $22.1 billion–$22.4 billion, largely in line with the market estimate of $22.4 billion.

Additionally, the company raised its adjusted operating profit guidance, increasing the range from $1.68 billion–$1.81 billion to $1.71 billion–$1.83 billion.

Following the acquisition of Foot Locker, Dick's Sporting Goods has leveraged the latter's extensive store network and unique customer base while implementing several corrective measures: closing underperforming stores, optimizing product assortments, and adjusting store formats.

The company previously launched a pilot program called "Fast Break," involving 11 initial stores primarily testing new product categories and display methods (as the majority of Foot Locker's revenue comes from physical stores). This pilot has now expanded to approximately 100 stores globally, with these locations achieving double-digit growth in comparable store sales and showing significant improvement in merchandise gross margins.

The company plans to expand the pilot to 250 stores before the back-to-school season and will continue to add more pilot locations ahead of the year-end holiday shopping peak.

As of the end of the fiscal quarter, Foot Locker, including brands such as Champs Sports, WSS, and Kids Foot Locker, operates a total of 2,483 stores worldwide.