Dick’s Sporting Goods: 2Q26 Immediate Call Postmortem

Inventory levels building up across parts of the industry (specifically called out “legacy footwear” and “apparel franchises” that aren’t resonating the way it once did), leading to a promotional environment. Athletes increasingly responding to newness, innovation, and “a broader set of brands”. To put it as nicely as possible: Ed’s opening statement is not a good read through for Nike. Probably not good for Under Armour either.

Dicks has broad category mix and balanced portfolio so not as impacted. Many areas such as team sports and licensing were strong. New emerging apparel brands generated strong engagement. Footwear categories like running, cleats, and outdoor remained healthy. Sounds like a solid read through for Deckers Brands, On, and Amer Sports (Salomon). Foot Locker more dependent on launch and retro product. Launches they did see preformed below expectations. EMEA more challenging than expected. Promotional environment is aggressive, industry has too much inventory, and consumer has been even more cautious due to geopolitical issues. Looks like the key takeaway here is the retro trend is long in the tooth…beyond Nike and Adidas, not a good read through for parts of Asics and Wolverine Worldwide (Saucony) beyond their performance business.

Dick’s Media Network and Gamechanger continue to generate strong returns. Along with tariffs helped to offset promotional pressure. Navdeep explicitly said “Dick’s Media Network and Gamechanger will start to become a bigger driver of the merch margin expansion as well”. We extensively dig into Dick’s Media Network and show how it’s already a material gross margin driver in a report for subs on 7/9/26 (find link to our website in profile).

Give Gutman some credit. He went straight at them with first question in Q&A and even Ed mentioned how direct it was. What changed for their business is number of brands got very promotional on their sites and that spilled into the broader marketplace. Still excited about long-term opportunities for Foot Locker – the margin pressure is much greater there than Dicks and that business is much more reliant on “legacy silhouettes that have slowed down”.

Ed does not think this is a demand issue. The consumer is looking for products that are new, innovative, different in the marketplace. Some things are working extremely well: Nike Mind, Adidas women’s product in print and pattern. Ed also explicitly mentioned On and HOKA. New product in apparel like the Nike Solo Fleece doing well. As is Gymshark and FP Movement. Extremely excited about what Nike is doing with Basketball. Ed mentioned once again that new silhouettes coming from On, Adidas, and HOKA are doing well. At least he tried to throw a lifeline to Nike so that this entire call wasn’t negative for that brand.

Ed said that he was talking with one of the brands and they said “I’ve never seen the specialty channel of distribution so promotional in my career”. That person probably hasn’t had too long a career as this has happened in US several times in last 20 years and I remember it once being so bad in China it took years to sort out.

LOL. Ed explicitly said about Foot Locker “right now I am sure some of you are kind of scratching your head”. At least he is aware of how much most investors hate that business. Fast Break stores are outperforming legacy stores. Will continue to invest in it and will be somewhere north of 300-350 doors by end of year. We didn’t hear “its just retail 101” this quarter – guess maybe that acquisition is going to be a bit more difficult to fix than Ed thought going in.

There is also a shift to the brown shoe business. Ed specifically called out UGG (Deckers) and Birkenstock. “Those businesses for us are really on fire. They are up significantly”.

Ike had a good question about $200 million rev cut at Foot Locker driving a $200 million profit cut. Making “sizable” investments in Foot Locker marketing, which has never had an out of home marketing plan since roughly 2013. Prior management team did nothing to market the business from a top of funnel standpoint. Ed thinks the best time to make the marketing investments are now to gain more share so will be in a better position when they come out the other side.

*These are our unabridged quick thoughts and notes from the call. We get them out as soon as possible after the call ends. Management has given some topics to dig deeper into and will circle back afterwards with much more in depth work on what was mentioned. You can find that work (and more on Dick’s Sporting Goods and other retail/consumer research) at our website here: M Squared Capital

Originally posted on X and Substack.