Dick's Tops Expectations but CEO Warns of Headwinds

If the latest earnings results from Dick's Sporting Goods (DKS) - Get Report are any indication, the struggling sports retail sector may finally be in recovery mode.

Dick's was up more than 8% on more than three times its normal volume Thursday afternoon following its latest earnings release, which comes just weeks after rival Sports Authority declared bankruptcy. Dick's topped analysts' bottom-line expectations by a penny per share, while revenue was in line with estimates. Shares closed up nearly 9% at $41.36.

The fall of Sports Authority may seem like a windfall for Dick's, but the company warned of short-term headwinds due to the industry's consolidation.

"We're looking at this as some short-term pain that we're willing to endure for the long-term benefit of our shareholders," said Edward W. Stack, chairman and CEO.

"We are pleased to have delivered first-quarter earnings at the high end of our expectations in a challenging retail environment," Stack said. "The consolidation that is occurring among sporting goods retailers is creating a unique time in the industry. Given the expected near-term liquidation activity in the market, we have adjusted our guidance to contemplate this dynamic. Over the longer term, we remain confident in our ability to aggressively capture displaced market share and to strengthen our leadership position."

That position will only get stronger over the long term thanks to Sports Authority's departure. However, Dick's believes the store closings will put pricing pressure on the retailer in the near term.

"These sites are interesting sites that we would take if we can get them at the right economics. But they're really inconsequential. We think this is a time to be very patient out in the marketplace," Slack said.

That near-term pressure is evident in the company's current quarter guidance. Dick's forecast earnings between 62 cents and 72 cents per share vs. Wall Street's expectations of 78 cents per share. For the year, the company forecast EPS between $2.60 and $2.90 per share versus the consensus estimate of $2.95. Last year the company earned $2.87 per share.

Dick's is the largest customer of sports apparel maker and Growth Seeker holding Under Armour (UA) - Get Report . Growth Seeker portfolio managers Chris Versace and Lenore Hawkins expect a growing relationship between the two companies as Dick's expands its athletic footwear offerings.

Though the market is also waiting to see the latest results from Foot Locker (FL) - Get Report -- which reports on Friday -- Dick's results are an encouraging sign, even if its guidance suggests the industry isn't on strong footing yet.