Shares of Dick's Sporting Goods (DKS) were falling sharply, down 9.53% to $55.03 in Tuesday afternoon trading, after the sports retailer provided holiday quarterly guidance that failed to meet analyst expectations.
Dick's said that it expects fourth quarter earnings to range between $1.19 and $1.31 per share, below FactSet's $1.32 expectations for the period. The company also expects same store sales in the holiday quarter to increase between 3% and 6%, compared Wall Street expectations of a 4.2% increase.
Dick's CEO Ed Stack addressed the company's guidance during an earnings call with analysts this morning, saying: "So we've got a lot of outerwear both ski outerwear, cold weather outerwear, hunting outerwear and we're weather sensitive in the fourth quarter. And we're just concerned about what's going to happen from a weather standpoint."
BlackRock Fund Advisors, Dick's second largest institutional holder, has intermittently trimmed and added to its position in the company this year, but the firm lowered its position by 2.04% as of the end of its last reporting period in September, according to Fintel. BlackRock did not respond to TheStreet's request for comment.
In the third quarter, Dick's reported adjusted earnings per share of $0.48 on revenue of $1.81 billion, better than the $0.42 per share on revenue of $1.77 billion that analysts polled by FactSet forecast.
A slew of large cap retailers from Macy's (M) to the Gap (GPS) have pointed to falling mall traffic as a reason for sagging sales. The added pressure from TheStreet's Growth Seeker growth stock holding Amazon.com (AMZN) on brick and mortar retailers makes Dick's online strategy important.
To that end, the company said online sales as a percentage of revenue increased in the third quarter, accounting for 9.6% of total net sales compared with 8% in the year ago period. Despite the fact that malls are attracting fewer customers, Dick's said it expects to open 38 new locations and relocate nine more by the end of this year.
While the company's best-case scenario for the fourth quarter failed to meet analysts' expectations, Dick's acknowledged that there were threats to its guidance, including a slow down in online sales and further disruption from the liquidation of competitors including The Sports Authority.
The Sports Authority filed for bankruptcy earlier this year, flooded the market with $400 million of sharply discounted inventory, and Dick's stock took a sharp dip.
However, after two consecutive quarters topping analyst expectations, Dick's shares climbed 72% year to date and more than 40% over the past 12 months before today's sell off.
Despite that, Dick's will be a "buy" in the near future, TheStreet's Jim Cramer said on CNBC's "Squawk on the Street" on Tuesday morning. Management teams often try to lower expectations in the hope that they can over deliver in the future, Cramer added.
Also today, Wedbush reiterated its "outperform" rating on the company while maintaining a $65 price target. Analysts at Canaccord reiterated their "buy" rating with a $70 price target.
On another upbeat note, analysts at Oppenheimer reiterated their $75 price target saying, "We advise clients to look beyond any naysayer commentary that 'good news in now priced into DKS.' In our view, DKS is one of the few names that affords investors the potential for accelerating sales well into 2017."