Dick’s Sporting Goods tops Q1 earnings, slashes outlook

Yahoo Finance Live anchors discuss first-quarter earnings for Dick’s Sporting Goods.

Video Transcript

JULIE HYMAN: We're a few minutes from the opening bell here this morning. And once again, we have some retail earnings. But not all of them disappointed. But this one did. Dick's Sporting Goods down by 10% after that company came out with disappointing numbers. Now, the numbers you're looking at aren't disappointing, as you can see. Earnings and sales beat estimates. It is the forecast that is dismaying to investors. The company cut its adjusted earnings per share guidance for the full year, revenue as well.

So for the full year, now, the company says it will earn $9.15 to $11.70 a share. $9.15 to $11.70. And the upper end of its forecast now was the lower end of its forecast before. The company also says for the full year, comparable sales will fall by 2% to 8%. So obviously, this is dismaying for investors.

JARED BLIKRE: Yes. I mean, we've been talking about the retail numbers since last week, since Walmart fell off a cliff, since Target fell off a cliff. And it comes down to a number of things. Margins are under pressure. Everybody is concerned about inflation. Seems to be some kind of a consumer spending slowdown that just began four to six weeks ago. And then you have this. And I get back to inventories as well.

Now, if we can go to the YFi Interactive, I have a collection here of all the retail earnings and how much their inventories have surged. And they tend to keep inventories, as I understand-- Brian Sozzi is the expert here. But retailers don't like to build inventory, so they try to get rid of it. And they can discount. And so this isn't going to be a persistent problem, but this shows you, when something like this shows up-- and I express, by the way-- I'll put them in there-- they were up 40% as well. Now, the stock is doing well today for other reasons.

But this is indicative of some kind of overhang or some kind of shift in the sands here that we just haven't been able to prepare for.

JULIE HYMAN: Yeah. And now there's a lot of talk about maybe promotions, a.k.a. sales, coming back right to a lot of these companies. There are some analysts chatter around that this morning. We're seeing a lot of the other sporting goods retailers on the decline this morning. You were watching Hibbett Sporting Goods earlier--

JARED BLIKRE: Right. Here we go.

JULIE HYMAN: --I recall, and those shares are down sharply as well. We should be watching Big 5, as you pointed out. Foot Locker, which fared better when it came out with its numbers. Even the likes of a Lululemon, even though they tend to be a little bit more insulated, as we saw. Nordstrom insulated. We'll talk more about that in just a second. But it has been-- it's been interesting, this earnings season, to see the speed with which this seems to have changed, and now the retailers trying to adjust to it with pretty divergent success rates.

JARED BLIKRE: Yes. And I think it just speaks to the-- the speed of the economy and the speed of the markets has only increased seemingly. This has been a trend I've been noticing over the last 20 years, is the lack of liquidity in the market tends to speed things up. Because if you think about it, if you have liquidity-- let's say you're a hedge fund, and suddenly you realize that you have to readjust your entire portfolio because of what the Fed is doing. Well, you're trying to readjust a huge thing.

Think about-- I don't know-- a bunch of water that's gushing through French doors and that same amount of water then has to go through a mouse hole. Well, it's going to come out a lot faster on the other side because of the pressure. That's what we're seeing in the market. That's the best analogy I can come up with on the fly, but I hope it makes sense.

JULIE HYMAN: I like it.

JARED BLIKRE: I hope it makes sense here. And the economy is doing the same thing. So we have the Fed and the fiscal response around the world to the pandemic. That was huge. It righted the ship, but it also threw things out of whack. So when you're taking trillions of dollars over here, putting them into the economy, and then things shift, that's why we see things changing at this breakneck pace. And unfortunately, businesses and humans are not quick enough to adapt to this in a reasonable fashion. I think we're going to have to slow things down and get back to some kind of normalcy.

But in order to do that, the Fed has to put the brakes on. And that is their mission, and I think they're going to do it. But they're going to break things. They're already breaking things in the process. It's just the way it is. Not as bad as the early '80s, but we could get there, and that's what the Fed wants to avoid.

JULIE HYMAN: Yeah. And now I think we're seeing investors also kind of rejigger their expectations for the Fed based on some of these numbers that we're getting. So those expectations are also pivoting really quickly.