FQ2 was fantastic for HOS (+16% comps). Foot locker, not so much.
Dick’s House of Sport (HoS) had a very strong FQ2, with (observed) comp-traffic accelerating to +11%, from FQ1’s +2%; moreover, this was on a larger base of comp stores (20), up from FQ1’s 16.
- The earlier cohort of 2025 openings are also producing excellent traffic, with the figure up materially from each cohort of the prior three years, including +12% (on average) over the 2024 openings. Five new HoS locations opened in FQ2 and an additional nine are expected in the 2H.
- The HoS comp-traffic also vastly outperformed the traditional Dick’s store at -0.6% (Advan observed as management did not provide the figure on the call.)
- The reported comp-sales for the Dick’s brand of +4.9% can be deconstructed into +3.6% from average ticket and +3.3% from e-commerce (observed), offset by a decline in store traffic and transactions. Store-originated transactions declined, but obviously the store and brand are why e-commerce grew +12.5% (Advan).
- Applying the average ticket amount (+3.6%) to HoS’ comp-traffic suggests a +16% HoS comp-sales increase.
- We suspect that HoS’ outperformance stems from it being a pinnacle expression of sport, which has been the socialite rage this year and because it has a more affluent customer. (See the exhibits on the next page.)
- Unfortunately, sibling Foot Locker had a very difficult FQ2, especially July; four contributors in our view – (1) a higher exposure to the classic footwear category and the big brands, which are in a funk, (2) more challenging conditions EMEA, (3) a lower income consumer which is feeling more cautious in its spending (see comments from Walmart), and (4) a customer that was too busy watching World Cup play to go visit the mall. Since the Final, traffic to Foot Locker has accelerated by +300bps (B2S and increased promotions are also contributing).
Per the quarter and competitive environment, the quote that struck was Ed Stack saying, “As the quarter progressed, it became clear that inventory levels were building up across parts of the industry, leading to a much more promotional environment. This pressured our overall company earnings. Consumer preferences are evolving with athletes increasingly responding to newness, innovation, and a broader set of brands. As demand continued to shift during the quarter, inventory built up in parts of the industry particularly within certain legacy footwear silhouettes and apparel franchises that simply aren't resonating the way they once did. The inventory built up across the industry supply chains and across the retail marketplace, which led to an increasingly aggressive promotional environment. In response to these changes in the market, we felt it was important to remain competitively priced to protect our leadership position... These challenges affected both DICK'S and Foot Locker, but to different degrees… As you would expect, given its greater exposure to many of the legacy footwear silhouettes, the impact was more significant at Foot Locker.”
And on Foot Locker, Stack added, “The previous management team did nothing to market the business from a top-of-the-funnel standpoint to really build the brand. And we're in the middle of fixing that to increase consideration of Foot Locker and build that brand back. The new marketing campaign that we put out recently called COLORS, which kind of takes a journey of sneaker culture from the beginning to where it is today has gotten great response. We think it's going to help from a business standpoint, sales going forward. But we're putting a sizable amount of money into marketing.“
The exhibits below show how the HoS visitor differs from the traditional Dick’s visitor:
Sky High – HoS’ top segment at 6.57% of visitors vs. being only 0.3% of the US population and only 2.0% of Dick’s.
Good Life Citizens -- Dick’s Sporting Good’s top segment at 8.2% vs. being only 1.8% of the US pop and HoS.
The segmentation data comes from Spatial.ai and is based on the spending/shopping behavior, social activity, interests, and demographics of the visitor. There are 80 segments in total.
