Dick’s Sporting Goods – A pre-earnings peep

Dick’s Sporting Goods is set to report its earnings for the holiday quarter on Tuesday before the opening bell and analysts have set an EPS target of $1.20. Though the sports retailer had previously guided for weakness in earnings, the recent tax reform might partly offset this expected weakness.

The stock has increased 5.4% YTD in 2018.

The company has been facing pressure on its gross margins due to growth investments and this is likely to continue. Last month, Dick’s had announced the opening of four new stores bringing its total store count across the country to 721.

The company had recently made news with its decision to stop sale of all assault-style rifles and to raise the minimum age for purchase of firearms to 21 years. The retailer stated that it no longer wanted to be part of the shooting epidemic in America, which garnered mixed responses.

What is worth noting is that apart from criticism, there have been a number of lawsuits piling up against the company. The most recent one is from 18-year old Tristin Fulton, who is suing the company for not selling a firearm due to “age discrimination”. He is seeking $25,000 in damages. Last week, 20-year old Tyler Watson filed a lawsuit against Dick’s on the same grounds.

Dick’s has also seen employee resignations over its new policies. Griffin Mccullar and Alexander Degarmo, both 20-year old employees at separate locations, quit their jobs with Dick’s Sporting Goods stating that they could not support the new rules due to infringement of personal rights. It is not yet clear how the new policies will affect Dick’s Sporting Goods’ sales as it carves out certain parts of its merchandise. The company is attempting to put restrictions on a part of its customer population, and that population is not taking it well.

Whether the company will be forced to change its policies or adopt some sort of a relaxation to them is worth watching in the earnings report, as well as the call.