DKS

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended August 1, 2026 (Q2 Fiscal 2026) and the 26 weeks ended August 1, 2026, for DICK'S SPORTING GOODS, INC. The reporting period includes the full results of the Foot Locker acquisition, which was completed on September 8, 2025. Consequently, the Company now operates two reportable segments: DICK'S and Foot Locker. The prior year comparative periods reflect only the DICK'S Business on a stand-alone basis.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Net sales increased 53.2% in Q2 and 57.6% year-to-date, driven primarily by the inclusion of Foot Locker sales ($1.74 billion in Q2; $3.52 billion YTD). The DICK'S Business reported comparable sales growth of 4.9% in Q2 and 5.4% YTD.
• Profitability Pressure: Despite revenue growth, Net Income and Operating Income declined in Q2 compared to the prior year. This was due to the dilutive impact of 9.6 million shares issued for the Foot Locker acquisition, lower gross margins in the Foot Locker segment, and significant acquisition-related charges.
• Acquisition Costs: The Company recorded $31.6 million in merger and integration costs for Q2 and $85.4 million YTD. Additionally, $40.4 million was charged to write down and liquidate Foot Locker inventory.
• One-Time Items: Results were favorably impacted by $59.0 million in IEEPA tariff refunds (reducing COGS) and $150.0 million in interchange fee litigation settlement income (recorded in SG&A) recognized in the first half of fiscal 2026.
• Segment Performance: The DICK'S segment generated a profit of $485.2 million in Q2. The Foot Locker segment reported a loss of $31.9 million in Q2 and $14.4 million YTD.

Guidance, Outlook, and Risks

Revised Fiscal 2026 Outlook: Management has lowered its full-year sales and profit outlook due to a challenging footwear marketplace and promotional pressures.

• Total Net Sales: Expected to range from $21.9 billion to $22.2 billion.
• Diluted EPS: Expected to range from $10.94 to $11.94.
• DICK'S Segment Profit: Expected to range from $1.54 billion to $1.60 billion (10.6% to 10.9% margin).
• Foot Locker Segment Loss: Expected to range from $40 million to $80 million.

Key Risks and Contingencies:

• Integration Risks: Total estimated pre-tax acquisition-related charges are up to $750 million; $515.8 million has been incurred to date.
• Market Conditions: Elevated interest rates, inflation, and aggressive promotional activity in the athletic footwear and apparel sectors.
• Legal Proceedings: Ongoing securities litigation regarding inventory shrinkage and risk factors; the Company intends to defend vigorously.
• Inventory Management: Continued review of unproductive assets and inventory assortment within the Foot Locker Business.

Investor Verification Checklist

• Foot Locker Integration Progress: Verify the timeline for realizing the anticipated $100–$125 million in cost synergies and the execution of the "Fast Break" store initiative.
• Margin Trajectory: Monitor the gross margin compression in the Foot Locker segment and the ability to offset it with DICK'S margin expansion and tariff refunds.
• Capital Allocation: Review the remaining $28.2 million under the 2021 share repurchase program and the status of the new $3.0 billion 2025 program.
• Inventory Levels: Assess the impact of the $40.4 million inventory write-down and future liquidation efforts on working capital.
• Legal Exposure: Track developments in the securities litigation and Section 220 stockholder demands regarding inventory shrinkage disclosures.