Dick's Sporting Goods, Inc. Goldman Sachs Global Consumer and Retail Conference

Jen is over there. Great.

Well, fantastic. Good morning, everyone, and thanks for joining us. I wanted to read the disclaimer, but I am guessing nobody is interested in reading it, so our non-disclosure agreement is actually filed on the website. Nate, wherever you are, thank you for doing the reminder for me for that.

Yeah. Thanks for the question and thanks for inviting us. I think that the idea that the athletic cycle is over is overdone. When you take a look at what our footwear business is on the DICK'S side, our business on the DICK'S side is really very good. The specialty channel is a bit more challenged, but on the DICK'S side, it is very good. A couple of things, and it is more the specialty channel. Foot Locker on launch shoes was much more dependent on the high launch retro shoes than we are at DICK'S. The same with some of the other specialty players. That business has slowed, and there is the ability to pivot to other areas of the business, which is, I think what we have done at DICK'S extremely well.

Whether it is new brands that I would say are not emerging anymore but have emerged, such as On and HOKA have been great. On the DICK'S side, we transitioned to those pretty quickly. Foot Locker didn't do that and wasn't able to do that. You see other brands now coming up with sock and dollars less expensive on such and such a site, we didn't want them to go someplace else to buy that product. We felt that we really wanted to retain that consumer, and we felt that that was the right investment to make in our business. We talked on our call, I used the word investment very purposefully, that we do feel it was an investment in our business to make sure that we keep that consumer. We wanted that consumer to come back and shop with us at Christmas.

We want that consumer to shop with us in the spring for his or her baseball cleats, softball cleats, soccer cleats, other product. We didn't want to be viewed as high price in the marketplace, and they get that mindset and don't come back and shop with us. It was an investment in our business. We talk all the time that we make investments in our business, not for a quarter or two, but for a lifetime. We look at it that this was really a lifetime investment that we're making in our business. We do think it's going to continue through the fourth quarter. But if we had a mulligan to do it all over again, what we did in the second quarter, we'd do it all over again exactly the same way because we look at this in a very long-term way.

I think that there's a couple things. Those legacy silhouettes, Foot Locker did really very well in the first quarter. A lot of it was really helped by the launch product, the Jordan Retro product. The second quarter was a disappointment in that product across the DICK'S business, the Foot Locker business, the other direct competitors businesses, and the brands. So we think that was a big issue there. These legacy silhouettes, they had been trending down, but somewhere in the second quarter, they really slowed. But when a couple of these brands, and Nike in particular, brought out different materials and different embellishments on some of those legacy silhouettes, Air Force 1 or Dunk, so to speak, you couldn't keep them in stock.

If you take an Air Force 1 silhouette in a traditional triple white, triple black, or a traditional white shoe with the varsity colors, red, blue, black, those have slowed significantly. But a triple white Air Force 1 in patent leather, a triple white Air Force 1 in black, you can't keep those in stock today. So it's trying to get enough of those in the marketplace. Now how long that has to run, I don't know. But right now, there's the ability if we had more of those product, it would be a very different scenario. The discounting got pretty aggressive in the second quarter, and like I said, we expect that to continue through the balance of the year.

I'll start with. DICK'S, we're really pleased with how the business is doing at DICK'S. In fact, as you know, we kept our comp guidance the same. We did reflect some of the promotionality from the legacy footwear, which affects the DICK'S business as well, and we also reflected some conservatism toward fuel costs and healthcare costs, which we have been experiencing all year. But overall, we are so bullish on. Well, we're bullish on the entire business, but the DICK'S business is very strong. We'll continue to manage through some of the impact of the margin and some of those other existential or exogenous impacts from fuel and healthcare. But overall, we never guide to the best possible outcome, but we feel really good about our guidance.

I think there's a concern out there that the contagion that is in Foot Locker will spread to DICK'S, and we don't see that. If you took a look at our footwear, we don't guide or disclose category by category what those comps are. But if you were to take a look at our comps in footwear, they're really quite good. You'd be pretty pleased. Part of this is this transition that the DICK'S team, we've been ahead of that from a legacy silhouette standpoint, but we still had to be competitive in the marketplace on those. But when you take a look at what's happening from a transition out of some sneakers, so to speak, into some other categories, whether it's Birkenstock, UGG, Timberland, that's all part of the footwear business.