By Vibhuti Sharma
(Reuters) - Dick's Sporting Goods (N:DKS) reported a bigger-than-expected drop in quarterly same-store sales on Wednesday and forecast further declines this year, hit by tighter gun controls and a drop in Under Armour sales.
Shares in the company fell as much as 10 percent after it posted a 1.9 percent drop in same-store sales, bigger than analysts' average estimate of a 0.62 percent dip.
Dick's was one of the first retailers to stop selling assault rifles and high-capacity magazines as well as bar the sale of guns to people under age 21 following a massacre at a Florida high school in February.
The company had predicted that its hunting guns business would be pressurized by the change in policy but said the move should also attract more people to its stores.
Dick's said on Wednesday it expected annual same-store sales to decline by 3 percent to 4 percent, compared with a 0.3 percent decline in 2017.
Chief Executive Officer Edward Stack said Under Armour sales fell as a result of the sports apparel maker's decision to expand distribution to a broader range of stores.
Shares in Under Armour Inc (N:UAA), for whom Dick's 700 stores have played a major role in efforts to challenge Adidas (DE:ADSGn) and Nike (N:NKE), fell 6 percent to $19.66.
"We had expected comp weakness in hunting and electronics, as well as continued pressure in Under Armour and less benefit from store maturation, but these trends caused more pressure than anticipated," Telsey analyst Joseph Feldman said.
Still, Dick's said it expects these headwinds to subside and is confident that its sales trajectory will improve next year. It raised its earnings per share forecast for the year ending February 2019 to between $3.02 and $3.20 versus an earlier forecast of $2.92 to $3.12.
"The improvement in the U.S. athletic market should overcome the weakness in hunting, electronics, and Under Armour as we get into 2019," Feldman added.
The company's net income rose 6 percent to $119.40 million, or $1.20 per share. Analysts had estimated $1.06 per share.
Net sales inched up nearly 1 percent to $2.18 billion, below the average Wall Street estimate of $2.24 billion.