(Bloomberg) -- Dick’s Sporting Goods Inc. boosted its outlook for a second-straight quarter while missing analyst estimates on gross margin.
Comparable-store sales are now expected to fall 1.5% to 3% this year, up from the prior forecast for a decline of as much as 6%. Earnings excluding some items are now seen in a range of $11.50 to $12.10, compared with a low of $10 previously.
The forecast revisions are higher than Wall Street was looking for but still lower than the company’s guidance from eight months ago. Analysts had high expectations ahead of the results, in part because of a strong report last week from Foot Locker Inc.
Shares of Dick’s rose 0.9% at 9:30 a.m. New York time. The stock has outperformed other sporting-goods retailers this year.
Dick’s earlier this year slashed its sales and profit forecasts, with executives attributing the move to an abundance of caution about the health of US consumers, though at the time no slowdown had materialized. The company had raised its outlook on both metrics last quarter as well.
Dick’s said its new forecast still includes “an appropriate level of caution” due to the economic environment. Discretionary spending has taken a hit as higher prices for essential items such as food and housing take up more of shoppers’ budgets.
In the third quarter, Dick’s said it attracted more shoppers and they also shelled out more money. Comparable-store sales increased 6.5% in the period, while analysts had been looking for a 3.1% decline.
At the same time, gross margin of 34.2% came in short of the 34.9% average estimate. Increased promotional activity has been a concern for analysts as companies across the retail industry grapple with higher inventory levels. Elevated freight and labor costs also remain a challenge.
Inventories at Dick’s rose 35% to about $3.4 billion ahead of the holiday shopping season, levels the company views as healthy.
(Updates shares in fourth paragraph.)
©2022 Bloomberg L.P.
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