Dick's Sporting Goods(DKS) - 2026 Q3 - Quarterly Report

Acquisition and Financial Performance - The acquisition of Foot Locker was completed on September 8, 2025, for a total purchase consideration of $2.5 billion, with Foot Locker generating $8 billion in sales for fiscal 2024[86]. - Foot Locker Business reported net sales of $930.9 million and a net loss of $45.1 million for the third quarter of 2025, reflecting operations from the acquisition date[87]. - The company incurred $154.4 million in pre-tax acquisition-related costs, including $146.6 million in merger and integration costs[87]. - The acquisition of Foot Locker involved recording valuation allowances of approximately $288.5 million for deferred tax assets not likely to be realized[100]. - Corporate expenses included $138.5 million in merger and integration costs related to the Foot Locker acquisition[131]. - The acquisition of Foot Locker was completed for a total consideration of $2.5 billion, including $2.1 billion in share consideration[140]. Sales and Revenue Trends - Pro forma comparable sales for the Foot Locker Business decreased by 4.7% and 3.2% for the 13 and 39 weeks ended November 1, 2025, respectively, with international comparable sales declines of 10.2% and 9.9%[87]. - For Q4 2025, Foot Locker expects gross margin rates to decline by 1,000 to 1,500 basis points compared to the same period last year, with pro forma comparable sales projected to decrease mid to high single digits[92]. - Net sales increased by 36.3% to $4.17 billion in the current quarter, including $930.9 million from the Foot Locker Business, with a 5.7% increase in comparable sales for the DICK'S Business[104]. - Net sales for the 39 weeks increased 15.1% to $10,989.1 million, including $930.9 million from Foot Locker and a 5.0% increase in comparable sales for the DICK'S Business[117]. - DICK'S Business net sales increased 5.9% to $3,236.9 million for the current quarter, driven by a 5.7% increase in comparable sales[127]. Cost Management and Future Projections - Future actions to optimize the Foot Locker inventory and store portfolio are expected to incur estimated pre-tax charges of $500 million to $750 million, with anticipated cost synergies of $100 million to $125 million[88]. - The company anticipates selling, general and administrative expenses to deleverage in fiscal 2025 due to strategic investments in digital, in-store, and marketing initiatives[93]. - The DICK'S Business expects comparable sales growth for 2025 to be in the range of 3.5% to 4.0%, with earnings per diluted share projected between $14.25 and $14.55[91]. Market Conditions and Strategic Initiatives - The macroeconomic environment remains dynamic, influenced by elevated interest rates and inflationary pressures, which could impact consumer spending behavior[89]. - The company has transformed its business through strategic pillars, enhancing merchandise assortment and store experiences to drive sustained profitable growth[84]. - The company plans to continue investing in digital and in-store opportunities to grow market share and accelerate eCommerce channels[85]. - The company believes there is strength in the sports industry, with upcoming events like the 2026 World Cup and the 2028 Olympics expected to drive demand[85]. Operational Metrics and Cash Flow - Cash flow generation supports liquidity needs and capital expenditures, with lower operating cash flows typically experienced in the first and third fiscal quarters[96]. - Cash on hand as of November 1, 2025, was $0.8 billion, with access to a $2.0 billion Credit Facility[138]. - Net cash provided by operating activities decreased by $193.0 million to $487.3 million for the 39 weeks ended November 1, 2025, compared to $680.3 million in the prior year[154]. - Cash used in investing activities increased by $104.0 million to $661.3 million, driven by a $227.7 million increase in gross capital expenditures and $257.1 million cash acquired from the Foot Locker acquisition[155]. - The net decrease in cash and cash equivalents was $868.6 million for the 39 weeks ended November 1, 2025, compared to a decrease of $342.6 million in the prior year[153]. Profitability and Expenses - The company reported a net income of $75.2 million, or $0.86 per diluted share, which includes a $45.1 million net loss from the Foot Locker Business[104]. - Income from operations decreased to $93.1 million in the current quarter compared to $286.0 million for the same quarter last year[110]. - Gross profit increased to $1,380.9 million but decreased as a percentage of net sales by 264 basis points, primarily due to lower gross margin in the Foot Locker Business[111]. - Selling, general and administrative expenses increased 41.5% to $1,118.6 million, with a significant portion attributed to the Foot Locker Business since acquisition[112]. - Effective tax rate increased to 28.0% in the current quarter, impacted by losses in foreign jurisdictions and non-deductible acquisition-related costs[116].