Will investors support the chain for being socially conscious?
Two weeks ago, after Dick’s Sporting Goods announced that it would stop selling assault rifles and raise its age requirement for gun purchases to 21, the retailer’s shares rose 1% even as the broader stock market fell sharply. In the wake of the shooting at Marjory Stoneman Douglas High School, investors seemed eager to distance themselves from gun sellers while rewarding socially-conscious firms. But now comes the real test: Will they stick by a retailer that is suffering as a result of its new gun policy?
Dick’s, which reported fourth-quarter earnings on March 13, said same store sales fell 2 %, double the decline analysts expected. Profits reached USD 1.22 a share, two cents above estimates, yet revenue fell short at USD 2.66 billion, trailing estimates of USD 2.74 billion. Shares fell as much as 8 % on March 13 morning before rebounding.
The decision didn’t affect the quarterly results just released, but it will weigh on the future. In a call with analysts, Chief Executive Ed Stack acknowledged that the new policy is “not going to be positive from a traffic and sales standpoint.”
It is difficult to say just how extensive the impact will be. Assault rifles were previously sold at three dozen of the company’s Field & Stream stores. Mr. Stack says the company has already seen pushback. “Some of those customers that buy firearms [from Dick’s] buy other things also.” They may not shop at Dick’s at all anymore, he said.
That loss is reflected in the company’s outlook. It expects same-store sales will range from flat to a single-digit decline this year. It also said that it will no longer provide analysts and investors with a quarterly outlook, underscoring the sense that the company is troubled.
Much of that is unrelated to guns, of course. Although Dick’s looked poised to enjoy its status as the last national sports retailer after Sports Authority’s collapse in 2016, it has struggled to compete with Amazon.com and non-specialty retailers. Meanwhile, brands such as Nike and Under Armour have focused on selling directly to consumers, undercutting Dick’s. Shares have fallen more than 37% from a year ago.
Despite some praise the company has received for its new gun policy, it is only likely to hurt it further. Long after the glow of a socially-conscious move fades, investors’ focus on the bottom lines remains.