Dick'S Sporting Goods, Inc.: Form 10-Q for the period ended Aug 2, 2025

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (including information incorporated herein by reference) contains, and future oral and written statements of the Company and its management may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified as those that may predict, forecast, indicate or imply future results or performance and by forward-looking words such as “believe”, “anticipate”, “expect”, “estimate”, “predict”, “intend”, “plan”, “project”, “goal”, “will”, “will be”, “will continue”, “will result”, “could”, “may”, “might” or any variations of such words or other words with similar meanings. Any statements about our plans, objectives, expectations, strategies, beliefs, or future performance or events constitute forward-looking statements. These statements are subject to known and unknown risks, uncertainties, assumptions, estimates, and other important factors that change over time, many of which may be beyond our control. Our future performance and actual results may differ materially from those expressed or implied in such forward-looking statements. Forward-looking statements should not be relied upon as a prediction of actual results. Forward-looking statements include statements regarding, among other things, the benefits of the Transaction, future financial and operating results and our plans, objectives, expectations, intentions, growth strategies and culture and other statements that are not historical facts.

Factors that could cause the Company’s actual results, performance or achievements to differ materially from those expressed or implied in any forward-looking statements include, but are not limited to:

• Macroeconomic conditions, including inflation and/or prolonged inflationary pressures, elevated interest rates and recessionary pressures, adverse changes in consumer disposable income, consumer confidence and perception of economic conditions, including as a result of new and shifting economic policies, geopolitical conflicts (including the conflicts in Ukraine and the Middle East) and the threat or outbreak of further conflicts, war, terrorism or public unrest; wage and unemployment levels; consumer debt and the cost of basic necessities and other goods; pandemics, epidemics, contagious disease outbreaks and other public health concerns and the effectiveness of measures to mitigate such impact;
• The dependence of our business on consumer discretionary spending, the impact of a decrease in discretionary spending due to inflation or otherwise on our business, and our ability to predict or effectively react to changes in consumer demand or shopping patterns;
• Intense competition in the sporting goods industry and in retail, including competition for talent and the level of competitive promotional activity and technological innovation;
• That our strategic plans and initiatives may initially result in a negative impact on our financial results, or that such plans and initiatives may not achieve the desired results within the anticipated time frame or at all;
• Our ability to grow our DICK’S House of Sport, DICK’S Field House and Golf Galaxy Performance Center stores and execute our overall real estate strategy, including the projected range of capital expenditures and associated costs;
• Fluctuations in product costs and availability due to tariffs, currency exchange rate fluctuations, inflationary pressures, fuel price uncertainty, supply chain constraints, increases in commodity prices, labor shortages and other factors;
• Organized retail crime and our ability to effectively manage inventory shrink;
• Disruptions to our eCommerce platform, including interruptions, delays or downtime caused by high volumes of users or transactions, deficiencies in design or implementation, or platform enhancements;
• Vendors continuing to sell or increasingly selling their products directly to customers or through broadened or alternative distribution channels;
• Our dependence on our suppliers, distributors and manufacturers to provide us with sufficient quantities of quality products in a timely fashion;
• That our investments in omni-channel growth, DICK’S Media Network, or other business transformation initiatives may not produce the anticipated benefits within the expected time frame or at all;
• The impact of an increase to corporate tax rates or other changes in tax laws and regulations;
• Risks associated with our brick-and-mortar retail store model, including our ability to optimize our store portfolio and our distribution and fulfillment network;
• Unauthorized use or disclosure of sensitive or confidential athlete, teammate, vendor or Company information;
• Risks associated with our vertical brand offerings, including product safety and labeling, product liability and product recalls, and specialty concept stores;
• Disruptions or other problems with our information systems, including GameChanger, our sports technology platform;
• Risks and costs relating to changing laws, regulations, interpretations and other guidance affecting our business, including consumer products; firearms and ammunition; tax; foreign trade and tariff structures; labor; data protection; privacy; eCommerce (including AI and machine learning); and environmental, social, and governance issues;
• Compliance and litigation risks for which we may not have sufficient insurance or other coverage;
• Our ability to secure and protect our trademarks and other intellectual property and defend claims of intellectual property infringement;
• Our ability to protect the reputation of our Company and our brands, which may include managing negative reactions from our customers, stockholders or vendors regarding changes to our policies or positions related to social and political issues;
• Our ability to attract, train, engage and retain key teammates and to adequately respond to teammate organizing efforts;
• The impact of wage increases on our financial results, including those related to supply chain disruptions and labor challenges;
• Disruptions to our Customer Support Center and/or distribution and fulfillment network (including supply chain delays), including our ability to optimize our distribution and fulfillment networks to efficiently deliver merchandise to our stores;
• Weather-related risks and seasonal influences and the overall seasonality of certain categories of our business, as well as the current geographic concentration of DICK’S Sporting Goods stores;
• The effects of the performance of professional sports teams within our core regions of operations;
• Our ability to meet market expectations;
• Our pursuit of strategic alliances, investments or acquisitions, including the timing and costs of such investments and acquisitions as well as the potential failure of an alliance, investment or acquisition to produce the anticipated results or inability to successfully integrate acquired companies;
• We are controlled by the holders of our Class B common stock, which includes our Executive Chairman and his relatives, whose interests may differ from those of our other stockholders;
• Obligations and other provisions related to our indebtedness, including the senior notes due 2032 (the “2032 Notes”) and senior notes due 2052 (the “2052 Notes” and together with the 2032 Notes, the “Senior Notes”);
• Our charter’s current anti-takeover provisions, which could prevent or delay a change in control of the Company;
• The issuance of quarterly cash dividends and our repurchase activity, if any, pursuant to our share repurchase programs;
• The availability of adequate capital;
• Our future results of operations and financial condition; and
• Risks related to the Transaction, including risks related to combining our business with Foot Locker’s, the expenses related to the Transaction and the integration of the companies, risks that the Transaction may not occur, risks relating to any litigation related to the Transaction and the risk of dilution caused by the potential issuance of shares of Company common stock in the Transaction.

The foregoing and additional risk factors are described in more detail in Item 1A. “Risk Factors” of this Quarterly Report and other reports or filings filed or furnished by us with the Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K for the year ended February 1, 2025, filed on March 27, 2025 (our “2024 Annual Report”) and our Quarterly Report on Form 10-Q filed on June 9, 2025. In addition, we operate in a highly competitive and rapidly changing environment; therefore, new risk factors can arise, and it is not possible for management to predict all such risk factors, nor to assess the impact of all such risk factors on our business or the extent to which any individual risk factor, or combination of risk factors, may cause results to differ materially from those contained in any forward-looking statement. The forward-looking statements included in this Quarterly Report on Form 10-Q are made as of the date hereof. We do not assume any obligation and do not intend to update or revise any forward-looking statements whether as a result of new information, future developments or otherwise except as may be required by securities laws.

OVERVIEW

We are a leading omni-channel sporting goods retailer offering an extensive assortment of authentic, high-quality sports equipment, apparel, footwear and accessories. In addition to DICK’S Sporting Goods stores, we own and operate Golf Galaxy, Public Lands and Going Going Gone! specialty concept stores and offer our products online and through our mobile apps. We also own and operate DICK’S House of Sport and Golf Galaxy Performance Center stores, as well as GameChanger, a youth sports mobile platform for live streaming, scheduling, communications and scorekeeping. When used in this Quarterly Report on Form 10-Q, unless the context otherwise requires or specifies, any reference to “year” is to our fiscal year.

Through our strategic pillars of athlete experience, differentiated product, brand engagement and teammate experience, we have transformed our business to drive sustained profitable growth. As part of our strategy, we have meaningfully improved our merchandise assortment through our vertical brands and strong relationships with our key brand partners, which provide access to highly differentiated products. We have also enhanced our store selling culture and service model and incorporated additional experiential elements and technology into our stores to further engage our athletes. Lastly, we continue to innovate our omni-channel athlete experience through our DICK’S House of Sport stores, Golf Galaxy Performance Centers and our DICK’S Field House stores, and believe that a key driver of our future omni-channel growth will include repositioning our store portfolio to grow these stores. In addition to these strategies and foundational improvements, consumers have also made what we believe will be lasting lifestyle changes in recent years, prioritizing sport and maintaining healthy, active lifestyles, which has increased demand for our products.

We believe there is strength and momentum in the sports industry in the United States and expect this trend to continue in the near term, with continued excitement around women’s sports, the 2026 World Cup and the 2028 Olympics. We believe that the convergence of sport and culture has never been stronger and we believe we are well-positioned for this opportunity. From this position of strength, we plan to make investments in digital and in-store opportunities to grow our market share through repositioning our store portfolio, driving continued growth across our key categories and accelerating our eCommerce channel.

Agreement to Acquire Foot Locker

On May 15, 2025, we announced that we entered into a definitive merger agreement to acquire Foot Locker, a leading footwear and apparel retailer, for a total equity value of approximately $2.4 billion and an enterprise value of approximately $2.5 billion. We anticipate the Transaction will create a global platform that serves a broader set of athletes through differentiated iconic concepts and robust digital experiences, supported by strong brand partnerships as a combined company within the growing sports retail industry. Foot Locker delivered sales of $8 billion in fiscal 2024 and encompasses a portfolio of brands including Foot Locker, Kids Foot Locker, Champs Sports, WSS and atmos with approximately 2,400 total retail stores across 20 countries in North America, Europe, Asia, Australia and New Zealand, and a licensed store presence in Europe, the Middle East and Asia.

On August 22, 2025, Foot Locker’s shareholders voted to adopt the Merger Agreement. Additionally, we have received all required regulatory approvals and expect the Transaction to close on September 8, 2025, subject to the satisfaction or waiver of remaining customary closing conditions. To the degree Foot Locker shareholders do not elect to receive their consideration entirely in shares of our common stock, we intend to finance the Transaction through a combination of cash-on-hand, revolving borrowings and other new debt, and expect the Transaction to deliver between $100 million to $125 million in cost synergies in the medium-term achieved through procurement and direct sourcing efficiencies.

During the 13 weeks ended August 2, 2025, we incurred pre-tax Foot Locker acquisition-related costs of $12.5 million, consisting of $8.0 million in merger and integration costs, which includes legal and regulatory fees and other professional services related to the pending Transaction, as well as $4.5 million of interest expense related to the amortization of $7.9 million in deferred financing fees paid for the Bridge Facility during the current quarter.

Business Environment

The macroeconomic environment in which we operate remains dynamic as a result of numerous factors, including ongoing elevated interest rates, inflationary pressures and changes to international trade policies from taxation and tariffs, all of which could impact pricing, consumer discretionary spending behavior and the promotional landscape in which we operate.

Despite this increasingly complex and dynamic macroeconomic environment, we continue to drive comparable sales growth through execution of our core strategies, and with our strong vendor relationships and operational strength, we believe we are well-positioned for long-term growth.

As a result of our strong performance and confidence in our strategic initiatives, balanced against the macroeconomic environment, we have raised our full year outlook for 2025 and expect comparable sales growth for the year to be in the range of 2.0% to 3.5% and earnings per diluted share to be in the range of $13.90 to $14.50, which does not include acquisition-related costs, investment gains or results from the planned acquisition of Foot Locker.

Overview of current trends affecting 2025

• Driven by the quality of our assortment, we expect to drive gross margin expansion during fiscal 2025.
• We anticipate selling, general and administrative expenses to deleverage in fiscal 2025, driven by strategic investments digitally, in-store and in marketing to better position our business for long-term growth based upon the strength of our business. We expect this deleverage to moderate in the second half of the fiscal year.

Recent Tax Legislation

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”), which includes several measures affecting corporations and other business entities, was signed into law. These measures include modifications and permanent extension of certain expiring provisions of the 2017 Tax Cuts and Jobs Act (“TCJA”). We anticipate that the OBBBA will reduce our federal income tax liability and related tax payments for the current and future years, but will not have a significant impact to our annual effective tax rate for fiscal 2025.

The Company’s current expectations described above are forward-looking statements. Please see the section entitled “Forward-Looking Statements” in this Form 10-Q for information regarding important factors that may cause the Company’s actual results to differ from those currently projected and/or otherwise materially affect the Company.

How We Evaluate Our Operations

Senior management focuses on certain key indicators to monitor our performance, including:

• Comparable sales performance – Our management considers comparable sales, which includes digital revenue, to be an important indicator of our current performance. Comparable sales results are important to leverage our costs, which include occupancy costs, store payroll and other store expenses. Comparable sales also have a direct impact on our total net sales, net income, cash and working capital. A store is included in the comparable sales calculation during the fiscal period that it commences its 14th full month of operations. Relocated stores are included in the comparable sales calculation from the open date of the original location. Stores that were permanently closed during the applicable period have been excluded from comparable sales results. Our digital revenue includes all eCommerce sales, including omni-channel transactions which are fulfilled by our stores, GameChanger subscriptions as well as revenue from our DICK’S Media Network. For further discussion of our comparable sales refer to the “Results of Operations and Other Selected Data” section herein.
• Earnings before taxes and the related operating margin – Our management views operating margin and earnings before taxes as key indicators of our performance. The key drivers of earnings before taxes are comparable sales, gross profit and our ability to control selling, general and administrative expenses.
• Cash flows from operating activities – Cash flow generation supports our general liquidity needs and funds capital expenditures for our omni-channel platform, which include investments in new and existing stores and our eCommerce channel, distribution and administrative facilities, continuous improvements to information technology tools, potential strategic acquisitions or investments that may arise from time-to-time and stockholder return initiatives, including cash dividends and share repurchases. We typically experience lower operating cash flows in our first and third fiscal quarters due to the timing of inventory purchases in advance of our peak selling periods and anticipated higher cash flows during our second and fourth fiscal quarters. For further discussion of our cash flows refer to the “Liquidity and Capital Resources” section herein.
• Quality of merchandise offerings – To measure effectiveness of our merchandise offerings, we monitor sell-throughs, inventory turns, gross margins and markdown rates at the department and style level. This analysis helps us manage inventory levels to reduce working capital requirements and deliver optimal gross margins by improving merchandise flow and establishing appropriate price points to minimize markdowns.
• Store productivity – To assess store-level performance, we monitor various indicators, including sales per square foot, store operating contribution margin and store cash flow.

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

As discussed in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s 2024 Annual Report, we consider our policies on inventory obsolescence, inventory shrink, goodwill and intangible assets, and impairment of long-lived assets to be the most critical in understanding the judgments that are involved in preparing our consolidated financial statements. There have been no significant changes to the Company’s critical accounting policies and estimates from those disclosed in the Company’s 2024 Annual Report.

RESULTS OF OPERATIONS AND OTHER SELECTED DATA

Executive Summary

• Net sales increased 5.0% to $3.65 billion in the current quarter from $3.47 billion during the second quarter of 2024, which includes a 5.0% increase in comparable sales, following a 4.5% increase in the same period last year.
• In the current quarter, we reported net income of $381.4 million, or $4.71 per diluted share, compared to $362.2 million, or $4.37 per diluted share, during the second quarter of 2024.
• Net income for the current quarter includes non-cash gains from an investment in Foot Locker equity securities of $36.8 million, net of tax, or $0.45 per diluted share. The current quarter net income also includes $10.3 million, net of tax, or $0.13 per diluted share, of Foot Locker acquisition-related costs.
• During the second quarter of 2025, we:
• Declared and paid a quarterly cash dividend in the amount of $1.2125 per share of our common stock and Class B common stock;
• Terminated our $1.6 billion Existing Credit Facility and entered into a new $2.0 billion Credit Facility maturing on June 6, 2030.
• The following table summarizes store activity in fiscal 2025:

(1) In some markets, we operate DICK’S Sporting Goods stores adjacent to our specialty concept stores on the same property with a pass-through for our athletes. We refer to this format as a “combo store” and include combo store openings within both the DICK’S Sporting Goods and specialty concept store reconciliations, as applicable. As of August 2, 2025, the Company operated 15 combo stores.

(2) Beginning store count and square footage were updated to reflect one DICK’S Field House location that opened in fiscal 2024, which was previously reflected as a DICK’S store.

(3) As of August 2, 2025, includes 30 Golf Galaxy Performance Centers, with six new openings during fiscal 2025, three of which were conversions of prior Golf Galaxy store locations.

(4) Beginning store count and square footage were updated to reflect Warehouse Sale locations as described in the Company’s Current Report on Form 8-K, filed with the SEC on March 11, 2025. As of February 2, 2025, beginning amounts now include 29 Warehouse Sale locations and 1.3 million of related square footage.

(5) Reflects stores converted between concept or prototype through store relocations or remodels as part of the Company's strategy to reposition its store portfolio. Including stores that converted between concepts, the Company relocated or remodeled six stores during the current year period.

(6) Includes square footage as of August 2, 2025 related to five Public Lands store closures as we plan to convert three into DICK’S House of Sport and two into DICK’S Field House stores during fiscal 2025 and early 2026.

(7) Columns may not recalculate due to rounding.

The following tables present selected information from the unaudited Consolidated Statements of Income as a percentage of net sales and the changes in the percentage of net sales from the comparable 2024 period, and other data, and are provided to facilitate a further understanding of our business. These tables should be read in conjunction with Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the accompanying unaudited Consolidated Financial Statements and related notes thereto.

20

(A) Column does not add due to rounding.

(1) Revenue from retail sales is recognized at the point of sale, net of sales tax. Revenue from eCommerce sales, including vendor-direct sales arrangements, is recognized upon shipment of merchandise. A provision for anticipated merchandise returns is provided through a reduction of sales and cost of goods sold in the period that the related sales are recorded. Revenue from gift cards and returned merchandise credits (collectively the “cards”) is deferred and recognized upon the redemption of the cards. The cards have no expiration date. Subscription revenue from our GameChanger platform is recognized ratably over the subscription period with our customers.

(2) Cost of goods sold includes: the cost of merchandise and services (inclusive of vendor allowances, inventory shrinkage and inventory write-downs for the lower of cost or net realizable value and GameChanger costs); freight; distribution; shipping; and store occupancy costs. We define merchandise margin as net sales less the cost of merchandise and services sold. Store occupancy costs include rent, common area maintenance charges, real estate and other asset-based taxes, general maintenance, utilities, depreciation and certain insurance expenses.

(3) Selling, general and administrative expenses include payroll and fringe benefits for our stores, field support, administrative and our GameChanger platform, advertising, bank card charges, operating costs associated with our internal eCommerce platform, technology, other store expenses and all expenses associated with operating our customer support center.

(4) Merger and integration costs include legal and regulatory fees and other professional services related to the planned acquisition of Foot Locker.

(5) Pre-opening expenses, which consist primarily of rent, marketing (including grand opening advertising costs), payroll, recruiting and other store preparation costs are expensed as incurred. Rent is recognized within pre-opening expense from the date the Company takes possession of a site through the date of store opening and during periods when stores are closed for remodeling.

(6) Beginning in fiscal 2025, we revised our method for calculating comparable sales to include Warehouse Sale locations beginning in the stores’ 14th full month of operations, similar to our other store locations. Prior year information has been revised to reflect this change for comparability purposes. See additional details as furnished in Exhibit 99.2 of the Company’s Current Report on Form 8-K, filed with the SEC on March 11, 2025.

13 Weeks Ended August 2, 2025 Compared to the 13 Weeks Ended August 3, 2024

Net Sales

Net sales increased 5.0% to $3,646.6 million in the current quarter from $3,473.6 million for the quarter ended August 3, 2024, due primarily to a $170.1 million, or 5.0%, increase in comparable sales. The remaining increase in net sales was primarily attributable to new stores, including DICK’S Field House, DICK’S House of Sport and Golf Galaxy Performance Center locations. The increase in comparable sales includes a 4.1% increase in sales per transaction and a 0.9% increase in transactions, and reflects growth in footwear, athletic apparel, golf and team sports, partially offset by declines in outdoor equipment.

Income from Operations

Income from operations decreased to $452.2 million in the current quarter compared to $470.1 million for the quarter ended August 3, 2024.

Gross profit increased to $1,351.3 million in the current quarter from $1,275.7 million for the quarter ended August 3, 2024 and increased as a percentage of net sales by 33 basis points. Merchandise margins as a percentage of net sales increased 18 basis points as a result of the quality of our assortment. Occupancy costs, which after the cost of merchandise represents the largest item within our cost of goods sold, are generally fixed on a per store basis and fluctuate based on the number of stores that we operate, increased $11.1 million and leveraged eight basis points as a percentage of net sales. The remaining increase in gross profit as a percentage of net sales was driven by lower eCommerce shipping and fulfillment costs.

Selling, general and administrative expenses increased 10.3% to $878.7 million in the current quarter from $796.7 million for the quarter ended August 3, 2024, and increased as a percentage of net sales by 117 basis points. The $82.0 million increase in current quarter expense is primarily due to strategic digital and in-store investments across technology and talent, and marketing compared to the quarter ended August 3, 2024. The current quarter also includes a $4.3 million expense increase related to changes in the investment values of our deferred compensation plans, which is fully offset in Other Income.

Merger and integration costs were $8.0 million in the current quarter ended August 2, 2025. These costs include legal and regulatory fees and other professional services related to the planned acquisition of Foot Locker.

Pre-opening expenses increased to $12.3 million in the current quarter from $8.9 million for the quarter ended August 3, 2024. Pre-opening expenses in any period typically fluctuate depending on the timing and number of new store openings and relocations.

Other Income

Other income totaled $73.7 million in the current quarter compared to $25.8 million for the prior year quarter. The $47.9 million increase was primarily driven by non-cash gains from an investment in Foot Locker equity securities of $49.7 million and a $4.3 million expense decrease compared to the prior year from changes in our deferred compensation plan investment values driven by performance in equity markets. The Company recognizes investment income or investment expense to reflect changes in deferred compensation plan investment values with an offsetting charge or reduction to selling, general and administrative costs for the same amount. Increases in other income were partially offset by a $10.0 million decrease in interest income as a result of lower average cash and cash equivalents and lower average interest rates during the current quarter.

Income Taxes

Our effective tax rate increased to 25.2% in the current quarter from 24.9% for the quarter ended August 3, 2024.

26 Weeks Ended August 2, 2025 Compared to the 26 Weeks Ended August 3, 2024

Net Sales

Net sales increased 5.1% to $6,821.3 million in the current period from $6,492.0 million for the prior year period ended August 3, 2024, due primarily to a $302.0 million, or 4.7%, increase in comparable sales. The remaining increase in net sales was primarily attributable to new stores, including DICK’S Field House, DICK’S House of Sport and Golf Galaxy Performance Center locations. The increase in comparable sales includes a 3.9% increase in sales per transaction and a 0.8% increase in transactions, and reflects growth in footwear, athletic apparel, licensed merchandise, golf and team sports, partially offset by declines in outdoor equipment.

Income from Operations

Income from operations increased to $818.3 million in the current period, compared to $800.9 million for the prior year period.

Gross profit increased to $2,516.4 million in the current period from $2,371.0 million for the prior year period and increased as a percentage of net sales by 37 basis points. Merchandise margins as a percentage of net sales increased 27 basis points as a result of the quality of our assortment. Occupancy costs, which after the cost of merchandise represents the largest item within our cost of goods sold, are generally fixed on a per store basis and fluctuate based on the number of stores that we operate, increased $27.2 million and leveraged two basis points as a percentage of net sales. The remaining increase in gross profit as a percentage of net sales was driven by lower eCommerce shipping and fulfillment costs.

Selling, general and administrative expenses increased 8.1% to $1,664.3 million in the current period from $1,540.1 million for the prior year period, and increased as a percentage of net sales by 68 basis points. The $124.2 million increase in current period expense is primarily due to strategic digital and in-store investments across technology and talent, and marketing compared to the quarter ended August 3, 2024. The current period also includes a $5.1 million expense decrease related to changes in the investment values of our deferred compensation plans, which is fully offset in Other Income.

Merger and integration costs were $8.0 million for the current period ended August 2, 2025. These costs include legal and regulatory fees and other professional services related to the planned acquisition of Foot Locker.

Pre-opening expenses decreased to $25.8 million in the current period from $30.0 million for the prior year period. Pre-opening expenses in any period typically fluctuate depending on the timing and number of new store openings and relocations.

Other Income

Other income totaled $67.5 million in the current period compared to $51.1 million for the period ended August 3, 2024. The $16.4 million increase was primarily driven by non-cash gains from an investment in Foot Locker equity securities of $35.9 million, partially offset by a $19.2 million decrease in interest income as a result of lower average cash and cash equivalents and lower average interest rates during the current period and a $5.1 million expense increase compared to the prior year period from changes in our deferred compensation plan investment values driven by performance in equity markets. The Company recognizes investment income or investment expense to reflect changes in deferred compensation plan investment values with an offsetting charge or reduction to selling, general and administrative costs for the same amount.

Income Taxes

Our effective tax rate increased to 24.7% in the current period from 22.7% for the same period last year. The effective tax rate for the prior year period was favorably impacted by a higher number of employee equity awards exercised, which resulted in $17.1 million of higher excess tax benefits in the prior year period compared to the current period.

LIQUIDITY AND CAPITAL RESOURCES

Our cash on hand as of August 2, 2025 was $1.2 billion. We believe that our current cash position, and cash flows from operations, supplemented by funds available under our unsecured $2.0 billion Credit Facility and access to long-term debt capital markets, if necessary, are sufficient to operate our business for the next twelve months and to complete our planned acquisition of Foot Locker. In addition, we believe that we have the ability to obtain alternative sources of financing, if necessary.

The following sections describe the potential short and long-term impacts to our liquidity and capital requirements.

Agreement to Acquire Foot Locker

On May 15, 2025, we announced that we entered into a definitive merger agreement to acquire Foot Locker. Under the terms of the Merger Agreement, Foot Locker shareholders will elect to receive either (i) $24.00 in cash or (ii) 0.1168 shares of DICK’S common stock for each share of Foot Locker common stock.

On August 22, 2025, Foot Locker shareholders approved the merger. Additionally, we have received all required regulatory approvals and expect the Transaction to close on September 8, 2025, subject to the satisfaction or waiver of remaining customary closing conditions. To the degree Foot Locker shareholders do not elect to receive their consideration entirely in shares of our common stock, we intend to finance the Transaction through a combination of cash-on-hand, revolving borrowings and other new debt.

In connection with the Transaction, we entered into a Bridge Facility for the purpose of financing all or a portion of the Transaction and related costs and expenses, which has $1.75 billion available as of August 2, 2025, subject to the consummation of the Transaction in accordance with the Merger Agreement and certain other customary closing conditions. Additionally, on June 6, 2025 we announced our offer to exchange any and all outstanding Foot Locker Notes for up to $400 million aggregate principal amount of DICK’S Notes and in certain instances, cash and the related solicitation of consents to adopt certain proposed amendments to the indenture relating to the Foot Locker Notes. As of August 26, 2025, 94.94% of Foot Locker Notes have been validly tendered and not validly withdrawn. The deadline for eligible holders to tender Foot Locker Notes was extended to September 9, 2025. Refer to Part I. Item 1. Financial Statements, Note 7 – Planned Acquisition of Foot Locker, Inc. for further information.

Leases

We lease substantially all of our stores, three of our distribution centers, and certain equipment under non-cancellable operating leases that expire at various dates through 2042. Approximately three-quarters of our DICK’S Sporting Goods stores will be up for lease renewal at our option over the next five years, and we plan to leverage the significant flexibility within our existing real estate portfolio to capitalize on future real estate opportunities. Refer to Part I. Item 1. Financial Statements, Note 4 – Leases for further information.

Revolving Credit Facility

During the second quarter, we terminated our $1.6 billion Existing Credit Facility and entered into a new $2.0 billion Credit Facility, of which $75 million is available for letters of credit. Loans under the Credit Facility bear interest at an alternate base rate or an adjusted SOFR plus, in each case, an applicable margin percentage. We had no revolving Credit Facility borrowings at any point during the second fiscal quarter of 2025, and as of August 2, 2025, there were no borrowings outstanding under the Credit Facility. We have total remaining borrowing capacity, after adjusting for $19.9 million of standby letters of credit, of $1.98 billion. We were in compliance with all covenants under the Credit Facility agreement at August 2, 2025. Refer to Part I. Item 1. Financial Statements, Note 5 – Revolving Credit Facility for further information.

Senior Notes

As of August 2, 2025, we have $750 million principal amount of senior notes due 2032 (the “2032 Notes”) and $750 million principal amount of senior notes due 2052 (the “2052 Notes” and together with the 2032 Notes, the “Senior Notes”) outstanding. Cash interest accrues at a rate of 3.15% per year on the 2032 Notes and 4.10% per year on the 2052 Notes, each of which are payable semi-annually in arrears on January 15 and July 15.

As of August 2, 2025, our Senior Notes have long-term credit ratings by Moody’s and Standard & Poor’s rating agencies of Baa2 and BBB, respectively.

Capital Expenditures

Our capital expenditures are primarily allocated toward the development of our omni-channel platform, including investments in new and existing stores and eCommerce technology, while we have also invested in our supply chain and corporate technology capabilities. Capital expenditures for the 26 weeks ended August 2, 2025 totaled $526.1 million on a gross basis and $455.5 million on a net basis, inclusive of construction allowances provided by landlords.

We anticipate fiscal 2025 capital expenditures of approximately $1.0 billion, net of construction allowances provided by landlords. As we continue to reposition our store portfolio, these investments will be concentrated in store growth, relocations and improvements in our existing stores. We plan to open approximately 16 DICK’S House of Sport locations in 2025 and expect to begin construction on approximately 15 locations scheduled to open throughout 2026. By the end of 2027, we expect to have between 75 to 100 DICK’S House of Sport locations across the country. We also plan to open approximately 15 DICK’S Field House and approximately 8 Golf Galaxy Performance Center locations in 2025. By leveraging our real estate flexibility, we expect approximately two-thirds of our 2025 store openings will be relocations or remodels of existing store locations, which will increase our square footage in 2025 by approximately 2% to 3%.

Share Repurchases

From time-to-time, we may opportunistically repurchase shares of our common stock under our current $2.0 billion five-year share repurchase program authorized by our Board of Directors on December 16, 2021. During the 26 weeks ended August 2, 2025, we repurchased 1.4 million shares of our common stock at a cost of $298.7 million. As of August 2, 2025, the available amount remaining under the December 2021 share repurchase program is $212.9 million. On March 10, 2025, our Board of Directors authorized an additional five-year share repurchase program of up to $3.0 billion of our common stock. The Company plans to continue to purchase under the 2021 program until it is exhausted or expired.

Any future share repurchase programs are subject to authorization by our Board of Directors and will be dependent upon future earnings, cash flows, financial requirements and other factors.

Dividends

During the 26 weeks ended August 2, 2025, we paid $196.1 million of dividends to our stockholders. On August 27, 2025, our Board of Directors authorized and declared a quarterly cash dividend in the amount of $1.2125 per share of common stock and Class B common stock, payable on September 26, 2025 to stockholders of record as of the close of business on September 12, 2025.

The declaration of future dividends and the establishment of the per share amount, record dates and payment dates for any such future dividends are subject to authorization by our Board of Directors and will be dependent upon multiple factors including future earnings, cash flows, financial requirements and other considerations.

Supply Chain Financing

We have entered into supply chain financing arrangements with certain third-party financial institutions, whereby suppliers have the opportunity to settle outstanding payment obligations early at a discount. We do not have an economic interest in suppliers’ voluntary participation and we do not provide any guarantees or pledge assets under these arrangements. Supplier invoices are settled with the third-party financial institutions in accordance with the original supplier payment terms and our rights and obligations to our suppliers, including amounts due and scheduled payment terms, are not impacted by these arrangements. Liabilities associated with the funded participation in these arrangements, which are presented within accounts payable on the Consolidated Balance Sheets, were $37.9 million, $49.6 million and $49.8 million as of August 2, 2025, February 1, 2025 and August 3, 2024, respectively.

Cash Flows

Changes in cash and cash equivalents are as follows (in thousands):

Operating Activities

Cash flows provided by operating activities increased $109.5 million for the 26 weeks ended August 2, 2025 compared to the same period in the prior year, primarily driven by the timing of income tax deductions following the enactment of provisions in the OBBBA and an increase from changes in inventory levels and accounts payable following last year’s investment in key merchandise categories to support our sales growth.

Investing Activities

Cash used in investing activities increased $282.0 million for the 26 weeks ended August 2, 2025 compared to the same period in the prior year. Gross capital expenditures increased $154.0 million, primarily driven by investments in new and future DICK’S House of Sport stores and DICK’S Field House stores, as well as the construction of our sixth distribution facility and higher investments in remodels or other store enhancements. Cash used in investing activities for the current period also includes $119.5 million in purchases of investments, which included $69.5 million of Foot Locker equity securities. Refer to Part I. Item 1. Financial Statements, Note 3 – Fair Value Measurements for further information.

Financing Activities

Financing activities have historically consisted of capital return initiatives, including share repurchases and cash dividend payments, cash flows generated from stock option exercises and cash activity associated with our Credit Facility or other financing sources. Cash used in financing activities increased $177.6 million for the 26 weeks ended August 2, 2025, compared to the same period in the prior year, primarily due to higher share repurchases in the current year.

There have been no material changes in the Company’s market risk exposures from those reported in the Company’s 2024 Annual Report.

During the second quarter of fiscal 2025, there were no changes in the Company’s internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of August 2, 2025, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q, August 2, 2025.

There are inherent limitations in the effectiveness of any control system, including the potential for human error and the circumvention or overriding of the controls and procedures. Additionally, judgments in decision making can be faulty and breakdowns can occur because of simple errors or mistakes. An effective control system can provide only reasonable, not absolute, assurance that the control objectives of the system are adequately met. Accordingly, our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our control system can prevent or detect all errors or fraud. Finally, projections of any evaluation or assessment of effectiveness of a control system to future periods are subject to the risks that, over time, controls may become inadequate because of changes in an entity’s operating environment or deterioration in the degree of compliance with policies and procedures.

There have been no material changes to the risk factors affecting the Company from those disclosed in Part I, Item 1A. “Risk Factors” of the Company’s 2024 Annual Report and in Part II, Item 1A. “Risk Factors” of the Company’s Form 10-Q filed with the SEC on June 9, 2025.