Q2 2025 Dick's Sporting Goods Inc Earnings Call

Speaker #1: Well, ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome you to the DICK'S SPORTING GOODS second quarter 2025 earnings conference call.

Lauren Hobart: Hello, ladies and gentlemen. Thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome you to the DICK'S Sporting Goods second quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. I would now like to turn the conference over to Nate Gilch, Senior Director of Investor Relations. Nate, please go ahead.

Speaker #1: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad.

Speaker #1: And if you would like to withdraw your question again, press star one. Thank you. I would now like to turn the conference over to Nathaniel Gilch, Senior Director of Investor Relations.

Speaker #1: Nate, please go ahead.

Speaker #2: Good morning, everyone. And thank you for joining us to discuss our second quarter, 2025 results. On today's call, we'll be Ed Stack, our Executive Chairman; Lauren Hobart, our President and Chief Executive Officer; and Navdeep Gupta, our Chief Financial Officer.

Nate Gilch: Good morning, everyone, and thank you for joining us to discuss our second quarter 2025 results. On today's call will be Ed Stack, our Executive Chairman, Lauren Hobart, our President and Chief Executive Officer, and Navdeep Gupta, our Chief Financial Officer. A playback of today's call will be archived on our Investor Relations website, located at investors.dicks.com, for approximately 12 months. As a reminder, we will be making forward-looking statements, which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. Any such statements should be considered in conjunction with cautionary statements in our earnings release and risk factor discussions in our filings with the SEC, including our last annual report on Form 10-K and our most recent quarterly report on Form 10-Q, as well as cautionary statements made during this call.

Speaker #2: A playback of today's call will be archived in our Investor Relations website, located at investors.dicks.com/for approximately 12 months. As a reminder, we will be making forward-looking statements, which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements.

Speaker #2: Any such statements should be considered in conjunction with cautionary statements in our earnings release and risk factor discussions in our filings with the SEC, including our last annual report on Form 10-K and our most recent quarterly report on Form 10-Q, as well as cautionary statements made during this call.

Speaker #2: We assume no obligation to update any of these forward-looking statements or information. Please refer to our Investor Relations website, find the reconciliation of our non-GAAP financial measures referenced in today's call.

Nate Gilch: We assume no obligation to update any of these forward-looking statements or information. Please refer to our Investor Relations website to find the reconciliation of our non-GAAP financial measures referenced in today's call. Finally, for future scheduling purposes, we are tentatively planning to publish our third quarter 2025 earnings results on November 25, 2025. With that, I will now turn the call over to Ed.

Speaker #2: Finally, for future scheduling purposes, your attentively planning to publish our third quarter, 2025 earnings results, on November 25th, 2025. With that, I will now turn the call over to Ed.

Speaker #3: Thanks, Nate. Good morning, everyone. As announced earlier this morning, we delivered a very strong second quarter with comps of 5%. Our momentum continues to build, which is a clear reflection of the strength of our long-term strategies and investments.

Ed Stack: Thanks, Nate. Good morning, everyone. As announced earlier this morning, we delivered a very strong second quarter with comps of 5%. Our momentum continues to build, which is a clear reflection of the strength of our long-term strategies and investments. We're really in a great lane. The convergence of sport and culture has never been stronger, and we're seeing tremendous momentum and opportunity across our industry. As a company rooted in sport, DICK'S Sporting Goods is uniquely positioned to seize this opportunity. We have a deep understanding of our athletes, and we execute with precision. From our differentiated on-trend product assortment to our industry-leading omnichannel athlete experience, we're operating from a position of strength. Before Lauren and Navdeep take you through the Q2 details, I'd like to provide a brief update on our pending acquisition of Foot Locker. As previously shared, Foot Locker shareholders approved the transaction.

Speaker #3: We're really in a great lane. The convergence of sport and culture has never been stronger, and we're seeing tremendous momentum and opportunity across our industry.

Speaker #3: As a company rooted in sport, DICK'S is uniquely positioned to seize this opportunity. We have a deep understanding of our athletes, and we execute with precision.

Speaker #3: From our differentiated, on-trend product assortment to our industry-leading omnichannel athlete experience, we're operating from a position of strength. Before Lauren and Navdeep take you through the Q2 details, I'd like to provide a brief update on our pending acquisition of Foot Locker.

Speaker #3: As previously shared, Foot Locker shareholders approved the transaction. We have also received all regulatory approvals, and we anticipate the transaction will close on September 8th.

Ed Stack: We've also received all regulatory approvals, and we anticipate the transaction will close on September 8th. We remain very enthusiastic about the strategic benefits from the deal. By bringing together DICK'S Sporting Goods and Foot Locker's iconic brands, we will create a global leader in the sports retail industry to serve a broader set of consumers, strengthen our partnerships with the world's leading sports brands, and meaningfully expand our total addressable market. We look forward to providing more details on our plans for Foot Locker on our third quarter call. I will now turn the call over to Lauren, who will go over our Q2 results and full-year outlook.

Speaker #3: We remain very enthusiastic about the strategic benefits from the deal. By bringing together DICK'S and Foot Locker's iconic brands, we will create a global leader in the sports retail industry, serve a broader set of consumers, strengthen our partnerships with the world's leading sports brands, and meaningfully expand our total addressable market.

Speaker #3: We look forward to providing more details on our plans for Foot Locker on our third quarter call. I will now turn the call over to Lauren, who will go over our Q2 results and full-year outlook.

Speaker #1: Thank you, Ed, and good morning, everyone. We are very pleased with our strong Q2 results. As Ed said, our performance continues to show how well our long-term strategies are working, the strength and resilience of our operating model, and our team's consistent execution.

Lauren Hobart: Thank you, Ed, and good morning, everyone. We are very pleased with our strong Q2 results. As Ed said, our performance continues to show how well our long-term strategies are working, the strength and resilience of our operating model, and our team's consistent execution. Our sustained momentum is powered by our compelling omnichannel athlete experience, differentiated product assortment, best-in-class teammate experience, and our ability to create deep engagement with the DICK'S brand. Today, we're raising our full-year outlook. This updated guidance reflects our strong Q2 results and the ongoing confidence we have in our business, grounded in our team's execution of the four strategic pillars I just mentioned. We now expect comp sales growth for the year to be in the range of 2% to 3.5%, and EPS to be in the range of $13.90 to $14.50.

Speaker #1: Our sustained momentum is powered by our compelling omnichannel athlete experience, differentiated product assortment, best-in-class teammate experience, and our ability to create deep engagement with the DICK'S brands.

Speaker #1: Today, we're raising our full year outlook. This updated guidance reflects our strong Q2 results and the ongoing confidence we have in our business, grounded in our team's execution of the four strategic pillars I just mentioned.

Speaker #1: We now expect comp sales growth for the year to be in the range of 2% to 3.5%, and EPS to be in the range of $13.90 to $14.50.

Speaker #1: Now, moving to our results. Our Q2 comps increased 5%, with growth in average ticket and transactions. These strong comps were on top of a 4.5% increase last year and a 2% increase in 2023.

Lauren Hobart: Now, moving to our results, our Q2 comps increased 5% with growth in average ticket and transactions. These strong comps were on top of a 4.5% increase last year and a 2% increase in 2023, and we continue to gain market share from online only and from omnichannel retailers. Our second quarter gross margin expanded over 30 basis points, and we delivered non-GAAP EPS of $4.38. As we continue to execute against our strategic pillars, we're seeing strong momentum across the three growth areas that we are focusing on for this year. First, we're making great progress repositioning our real estate and store portfolio. This past quarter, we opened one additional House of Sport location, and in Q3, we expect to open 13 more, marking our highest number of House of Sport openings within a single quarter.

Speaker #1: And we continue to gain market share from online-only and omnichannel retailers. Our second quarter gross margin expanded over 30 basis points, and we delivered non-GAAP EPS of $4.38.

Speaker #1: As we continue to execute against our strategic pillars, we're seeing strong momentum across the three growth areas that we are focusing on for this year.

Speaker #1: First, we're making great progress repositioning our real estate and store portfolio. This past quarter, we opened one additional House of Sport location, and in Q3, we expect to open 13 more, marking our highest number of House of Sport openings within a single quarter.

Speaker #1: We continue to expect to open approximately 16 total House of Sport locations this year, which will bring our year-end total to approximately 35. We also added four new Field House locations in Q2.

Lauren Hobart: We continue to expect to open approximately 16 total House of Sport locations this year, which will bring our year-end total to approximately 35. We also added four new Fieldhouse locations in Q2. We expect to open six more in Q3 and are on track to open approximately 15 total for the year, taking us to approximately 42 by year-end. These investments are driving powerful financial results, strong engagement with our athletes, brand partners, and communities, and importantly, they're laying the foundation for sustainable, long-term, profitable growth. Second, supported by our differentiated product access and flagship vertical brands, our focus on driving growth in key categories is fueling significant athlete excitement and demand across our portfolio. In fact, during Q2, more athletes purchased from us, they purchased more frequently, and they spent more each trip compared to the same period last year.

Speaker #1: We expect to open six more in Q3 and are on track to open approximately 15 total for the year, taking us to approximately 42 by year-end.

Speaker #1: These investments are driving powerful financial results, strong engagement with our athletes, brand partners, and communities. Importantly, they're laying the foundation for sustainable long-term profitable growth.

Speaker #1: Second, supported by our differentiated product access and flagship vertical brands, our focus on driving growth in key categories is fueling significant athlete excitement and demand across our portfolio.

Speaker #1: In fact, during Q2, more athletes purchased from us; they purchased more frequently and spent more each trip compared to the same period last year.

Speaker #1: We remain encouraged by the strong product pipeline from our brand partners. And third, our multi-billion dollar, highly profitable e-commerce business is standing out as a growth driver, once again growing faster this quarter than the company overall.

Lauren Hobart: We remain encouraged by the strong product pipeline from our brand partners. Third, our multi-billion dollar, highly profitable e-commerce business is standing out as a growth driver, once again growing faster this quarter than the company overall. Our app has been instrumental in creating a strong launch culture across key categories, driving energy and sell-through. At the same time, our stores are executing at a very high level. They're building an athlete-centric service and selling culture and really bringing our differentiated product assortment to life for our athletes. Lastly, as part of our broader digital strategy, we're harnessing the power of our athlete data and remain very enthusiastic about the long-term growth opportunities we see with GameChanger and the DICK'S Media Network.

Speaker #1: Our app has been instrumental in creating a strong launch culture across key categories, driving energy and sell-through. At the same time, our stores are executing at a very high level.

Speaker #1: They're building an athlete-centric service and selling culture, and really bringing our differentiated product assortment to life for our athletes. Lastly, as part of our broader digital strategy, we're harnessing the power of our athlete data and remain very enthusiastic about the long-term growth opportunities we see with Game Changer and the DICK'S Media Network.

Speaker #1: I want to close with a brief comment on how enthusiastic I am about the future growth potential of the DICK'S and Golf Galaxy businesses, as well as the compelling range of opportunities that we see in our acquisition of Foot Locker.

Lauren Hobart: I want to close with a brief comment on how enthusiastic I am about the future growth potential of the DICK'S and Golf Galaxy businesses, as well as the compelling range of opportunities that we see in our acquisition of Foot Locker. We've talked a lot about the strategic and financial benefits of this transaction. As we continue on the path to closing, we remain confident in those benefits and expect a really exciting future for both companies. Before concluding, I'd like to thank all of our teammates across the company for their outstanding efforts and continued commitment to DICK'S Sporting Goods. Their passion and hard work are the driving force behind these results. With that, I'll turn it over to Navdeep to share more detail on our financial results and 2025 outlook. Navdeep, over to you.

Speaker #1: We've talked a lot about the strategic and financial benefits of this transaction. As we continue on the path to closing, we remain confident in those benefits and expect a really exciting future for both companies.

Speaker #1: Before concluding, I'd like to thank all of our teammates across the company for their outstanding efforts and continued commitment to DICK'S Sporting Goods. Their passion and hard work are the driving force behind these results.

Speaker #1: With that, I'll turn it over to Navdeep to share more detail on our financial results and 2025 outlook. Navdeep, over to you.

Speaker #3: Thank you, Lauren, and good morning, everyone. Let's begin with a brief review of our second quarter results. We are very pleased to deliver a consolidated sales increase of 5% to $3.65 billion.

Navdeep Gupta: Thank you, Lauren, and good morning, everyone. Let's begin with a brief review of our second quarter results. We are very pleased to deliver a consolidated sales increase of 5% to $3.65 billion. As Lauren said, our Q2 comps increased 5%, and we continued to gain market share from online only and from omnichannel retailers. This growth represents a 9.5% two-year comp stack and 11.5% three-year comp stack. These strong comps were driven by a 4.1% increase in average ticket and a 0.9% increase in transactions. We saw broad-based strength across our key categories. Gross profit for the second quarter remains strong at $1.35 billion, or 37.06% of net sales, and increased 33 basis points from last year. This increase was driven by higher merchandise margin and leverage on occupancy costs due to higher sales.

Speaker #3: As Lauren said, our Q2 comps increased 5%, and we continue to gain market share from online-only and from omnichannel retailers. This growth represents a 9.5% two-year comp stack and an 11.5% three-year comp stack.

Speaker #3: These strong comps were driven by a 4.1% increase in average ticket and a 0.9% increase in transactions. We saw broad-based strength across our key categories.

Speaker #3: Gross profit for the second quarter remained strong at $1.35 billion, or 37.06% of net sales, and increased 33 basis points from last year. This increase was driven by higher merchandise margin and leverage on occupancy costs due to higher sales.

Speaker #3: On a non-GAAP basis, SG&A expenses increased 9.9% to $864 million and deleveraged by 105 basis points compared to last year's non-GAAP results. As we discussed previously, this year-over-year deleverage was expected and was driven by strategic investments digitally, in-store, and in marketing to better position ourselves over the long term.

Navdeep Gupta: On a non-GAAP basis, SG&A expenses increased 9.9% to $864 million, and de-leveraged 105 basis points compared to last year's non-GAAP results. As we discussed previously, this year-over-year de-leverage was expected and driven by strategic investments digitally, in-store, and in marketing to better position ourselves over the long term. Pre-opening expenses were $12.3 million, an increase of $3.4 million compared to the prior year. Non-GAAP operating income was $475 million, or 13.02% of net sales. This compares to non-GAAP operating income of $480.5 million, or 13.83% of net sales in Q2 of 2024. Non-GAAP EBT was $472.6 million, or 12.96% of net sales. This compares to EBT of $482.3 million, or 13.89% of net sales in Q2 of last year. In total, we delivered non-GAAP earnings per diluted share of $4.38. This compares to earnings per diluted share of $4.37 last year.

Speaker #3: Pre-opening expenses were $12.3 million, an increase of $3.4 million compared to the prior year. Non-GAAP operating income was $475 million, or 13.02% of net sales.

Speaker #3: This compares to non-GAAP AP operating income of $480.5 million dollars, or 13.83% of net sales in Q2 of 2024. Non-GAAP EBT was $472.6 million, or 12.96% of net sales.

Speaker #3: This compares to EBT of $482.3 million, or 13.89% of net sales, in Q2 of last year. In total, we delivered non-GAAP earnings for diluted share of $4.38.

Speaker #3: This compares to earnings for diluted share of $4.37 cents last year. On a GAAP basis, our earnings for diluted shares was $4.71 cents. This includes non-cash gains from non-operating investment in Foot Locker stock, as well as merger and integration and financing costs related to the pending Foot Locker acquisition.

Navdeep Gupta: On a GAAP basis, our earnings per diluted share was $4.71. This includes non-cash gains from non-operating investment in Foot Locker stock, as well as merger and integration and financing costs related to the pending Foot Locker acquisition. For additional details on this, you can refer to the non-GAAP reconciliation tables of our press release that we issued this morning. Now, looking to our balance sheet, we ended Q2 with approximately $1.2 billion of cash and cash equivalents and no borrowings on our new $2 billion unsecured credit facility. Our quarter-end inventory levels increased 7.1% compared to Q2 of last year. As we enter into Q3, we believe our inventory is well-positioned to continue fueling our sales momentum. Turning to our second quarter capital allocation, net capital expenditures were $213 million, and we paid $96 million in quarterly dividends.

Speaker #3: For additional details on this, you can refer to the non-GAAP reconciliation tables of our press release that we issued this morning. Now, looking at our balance sheet, we ended Q2 with approximately $1.2 billion in cash and cash equivalents and no borrowings on our new $2 billion unsecured credit facility.

Speaker #3: Our quarter-end inventory levels increased 7.1% compared to Q2 of last year. As we entered into Q3, we believe our inventory is well-positioned to continue fueling our sales momentum.

Speaker #3: Turning to our second quarter capital allocation, net capital expenditures were $213 million, and we paid $96 million in quarterly dividends. Now, moving to our outlook for 2025, which does not include acquisition-related costs, investment gains, or results from the previously announced Foot Locker acquisition.

Navdeep Gupta: Now, moving to our outlook for 2025, which does not include acquisition-related costs, investment gains, or results from previously announced Foot Locker acquisitions. As Lauren said, we are raising our expectation for comp sales and EPS. Our updated guidance reflects our strong Q2 performance and includes the expected impact from all tariffs currently in effect. Our guidance balances our confidence in the outcomes we are driving through our strategic initiatives and our operational strength against the ongoing complex and dynamic macroeconomic environment. We now expect full-year comp sales growth in the range of 2% to 3.5% compared to our prior expectation of 1% to 3% growth. Consolidated sales are expected to be in the range of $13.75 billion to $13.95 billion compared to our prior expectation of $13.6 billion to $13.9 billion. Driven by the quality of our assortment, we expect to drive gross margin expansion for the full year.

Speaker #3: As Lauren said, we are raising our expectations for comp sales and EPS. Our updated guidance reflects our strong Q2 performance and includes the expected impact from all tariffs currently in effect.

Speaker #3: Our guidance balances our confidence in the outcomes we are driving through our strategic initiatives and our operational strength against the ongoing complex and dynamic macroeconomic environment.

Speaker #3: We now expect full-year comp sales growth in the range of 2% to 3.5%, compared to our prior expectation of 1% to 3% growth.

Speaker #3: Consolidated sales are expected to be in the range of $13.75 billion to $13.95 billion, compared to our prior expectation of $13.6 billion to $13.9 billion.

Speaker #3: Driven by the quality of our assortment, we expect to drive gross margin expansion for the full year. We anticipate this expansion to be offset by SG&A deleverage, as we are making strategic investments digitally, in-store, and in marketing to better position ourselves for the long term.

Navdeep Gupta: We anticipate this expansion to be offset by SG&A de-leverage as we are making strategic investments digitally, in-store, and in marketing to better position ourselves for the long term. We continue to expect full-year pre-opening expenses to be in the range of $65 million to $75 million. For the back half, we expect most of the pre-opening expenses to be concentrated in third quarter to support our 13 planned House of Sport and six Fieldhouse openings. We continue to expect operating margins to be approximately 11.1% at midpoint, and at the high end of our expectations, we continue to expect to drive approximately 10 basis points of operating margin expansion. We now expect EPS in the range of $13.90 to $14.50 compared to our prior expectation of $13.80 to $14.40.

Speaker #3: We continue to expect full-year pre-opening expenses to be in the range of $65 million to $75 million. For the back half, we expect most of the pre-opening expenses to be concentrated in the third quarter to support our 13 planned House of Sport and six Field House openings.

Speaker #3: We continue to expect operating margins to be approximately 11.1% at the midpoint, and at the high end of our expectations, we continue to expect to drive approximately 10 basis points of operating margin expansion.

Speaker #3: We now expect EPS in the range of $13.90 to $14.50, compared to our prior expectation of $13.80 to $14.40. As contemplated in our 2025 annual plan, we expect EPS to decline year-over-year in Q3 and increase in the post-quarter.

Navdeep Gupta: As contemplated in our 2025 annual plan, we expect EPS to decline year over year in Q3 and increase in fourth quarter. Our earnings guidance is based on approximately 81 million average diluted shares outstanding and an effective tax rate of approximately 25% compared to our prior expectation of approximately 24%. We continue to expect net capital expenditures of approximately $1 billion for the full year. In closing, we are very pleased with our second quarter performance and the success of our long-term strategies. We remain very enthusiastic about the future of our business. This concludes our prepared remarks. Thank you for your interest in DICK'S Sporting Goods. Operator, you may now open the line for questions.

Speaker #3: Our earnings guidance is based on approximately 81 million average diluted shares outstanding and an effective tax rate of approximately 25%, compared to our prior expectation of approximately 24%.

Speaker #3: We continue to expect net capital expenditures of approximately $1 billion for the full year. In closing, we are very pleased with our second quarter performance and the success of our long-term strategies.

Speaker #3: We remain very enthusiastic about the future of our business. This concludes our prepared remarks. Thank you for your interest in DICK'S SPORTING GOODS. Operator, you may now open the line for questions.

Speaker #1: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue.

Lauren Hobart: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, again, press star one. We also ask that you limit yourself to one question and one follow-up. Your first question comes from the line of Brian Nagel with Oppenheimer. Please go ahead.

Speaker #1: And if you would like to withdraw your question again, press star one. We also ask that you limit yourself to one question and one follow-up.

Speaker #1: Your first question comes from the line of Brian Nagel with Oppenheimer. Please go ahead.

Speaker #4: Good morning. Nice quarter. Congratulations.

Analyst: Morning. Nice quarter. Congratulations.

Speaker #3: Thank you.

Ed Stack: Thank you.

Speaker #4: I want to focus on the central account of DICK'S business. I want to focus on your pending acquisition of Foot Locker. As you know, Foot Locker reported results just recently, which are in stark contrast to DICK'S.

Analyst: I want to focus, and this has to probably come with DICK'S business. I want to focus on your pending acquisition in Foot Locker. Foot Locker reported results just recently, stark contrast to DICK'S. I mean, much, much weaker. The question I want to ask is, as you're thinking about this acquisition, which will close shortly, any update on how you plan to revitalize, if you will, that Foot Locker business under DICK'S ownership and the timing of your key initiatives there?

Speaker #4: I mean, much, much weaker. So, the question I want to ask is, I mean, is your thinking about, you know, this acquisition, which will close shortly? Any update on, you know, how you plan to revitalize, if you will, that Foot Locker business under DICK'S ownership?

Speaker #4: And the timing of your key initiatives there?

Speaker #3: Sure. Brian, thank you.

Ed Stack: Sure, Brian. Thank you.

Speaker #5: Actually, it looks like we may have lost Ed. Ed is actually in Europe visiting some Foot Locker stores. Ed, are you there?

Lauren Hobart: Actually, it looks like we may have lost Ed. Ed is actually in Europe visiting some Foot Locker stores. Ed, are you there?

Speaker #6: I'm here. Can you hear me?

Speaker #5: Nope, we can't hear you. So, I will answer the question, Brian, and we'll work to get Ed's line restored. Ed, try one more time.

Ed Stack: I'm here. Can you hear me?

Lauren Hobart: Nope, we can't hear you. I will answer the question, Brian, and we'll work to get Ed's line restored. Ed, try one more time. Nope. Thank you for the question. We really appreciate it. We see a tremendous opportunity with the Foot Locker business. We think this acquisition is going to be great for our consumers, our employees, our vendor partners, and also our shareholders. The more time that we spend with the Foot Locker team, both at their various headquarters and also in the stores with the stripers, we are increasingly optimistic. This is a team that really, really wants to win. What we plan to do, we are going to be working with our brand partners, who are very excited about the opportunity to turn the business around, who are already sharing really strong insights. We plan to invest in stores.

Speaker #6: Can you hear me?

Speaker #5: Nope. Okay. So, thank you for the question. We really appreciate it. We see a tremendous opportunity with the Foot Locker business. We think this acquisition is going to be great for our consumers, our employees, our vendor partners, and also our shareholders.

Speaker #5: And the more time that we spend in our meetings with the Foot Locker team, both at our various headquarters and also in the stores with the stripers, we are increasingly optimistic. This is a team that really, really wants to win.

Speaker #5: What we plan to do is work with our brand partners, who are very excited about the opportunity to turn the business around and are already sharing really strong insights.

Speaker #5: We plan to invest in stores; we plan to invest in marketing, and we know that there are opportunities from a core merchandising standpoint. We're excited about apparel opportunities and also bringing in a new assortment of products.

Lauren Hobart: We plan to invest in marketing, and we know that there are opportunities from a core merchandising standpoint. We're excited about apparel opportunities and also bringing in a new assortment of products. Across the board, we're very excited. Brian, I would say we haven't closed the transaction yet. We are on September 8th moving toward doing that, and we will be back to you at our Q3 call with more specific details. Rest assured, we are very excited about the opportunity that we see in Foot Locker, and we are moving forward with a lot of enthusiasm.

Speaker #5: So, across the board, we're very excited. Brian, I would say we haven't closed the transaction yet. So, on September 8th, we are moving toward doing that, and we will be back to you at our Q3 call with more specific details.

Speaker #5: But rest assured, we are very excited about the opportunity that we see in Foot Locker, and we are moving forward with a lot of enthusiasm.

Speaker #3: Thank you, Lauren. Appreciate the details. And then if I can just focus a big picture, but on more, I guess, on the DICK's business, just, you know, the topic just your, if you will, tariffs.

Analyst: Thank you, Lauren. I appreciate the details. If I can just focus big picture, but more, I guess, on the DICK'S business, just the top of the issue, if you will, the tariffs. To what, to where is DICK'S on the, within the tariff conversation, your mitigation efforts, and to the extent that either DICK'S or your supply partners have started to adjust prices? Have you seen any action or any impacts upon demand on the part of your consumers?

Speaker #3: You know, so where is DICK's on the within the tariff conversation, your mitigation efforts? And to the extent that, you know, either DICK's or your supply partnerships started to adjust prices, have you seen any action or any impacts upon demand on the part of your consumers?

Speaker #5: Thanks, Brian. We actually come off a quarter where we had 5% comps, and we're feeling really strong about all aspects of our business.

Lauren Hobart: Thanks, Brian. We actually come off a quarter where we had 5% comps, and we're feeling really strong about all aspects of our business. Our long-term strategies are clearly working, everything from the differentiated assortment that we have in the stores, our athlete experience, which we continue to invest in and reinvent in our stores, our online business, our app, but also in our reinvention of our product portfolio, of our portfolio of stores with our House of Sport and our Fieldhouse concept. I would point to the execution of our team, which has just been absolutely extraordinary, and their passion to win and their passion to produce results are really driving so much of our business. As you look to the back half, we just did take up our top line and bottom line guidance, and that includes all of the impact of tariffs that we see.

Speaker #5: Our long-term strategies are clearly working. Everything from the differentiated assortment that we have in the stores, our athlete experience, which we continue to invest in and reinvent in our stores, our online business, our app, but also in our reinvention of our product portfolio, of our portfolio of stores with our House of Sport and our Field House concept.

Speaker #5: I would point to the execution of our team, which has just been absolutely extraordinary. Their passion to win and their passion to produce results are really driving so much of our business.

Speaker #5: As you look to the back half, we just did take up our top-line and bottom-line guidance, and that includes all of the impact of tariffs that we see.

Speaker #5: We did also just come off of a Q2 where our gross margin expanded, and we are navigating very well through an uncertain tariff environment.

Lauren Hobart: We did also just come off of a Q2 where our gross margin expanded, and we are navigating very well through an uncertain tariff environment. We've seen some sporadic price increases, but they are surgical and not across the board, and we're seeing our consumer, obviously, with a 5% comp, we're seeing the consumer respond really well. I'm very pleased that we are navigating well and still increasing our guidance and our gross margin for the back half.

Speaker #5: We've seen some sporadic price increases, but they are surgical, and not across the board, and we're seeing our consumer obviously with a 5% comp, we're seeing the consumer respond really well.

Speaker #5: So, I'm very pleased that we are navigating well and still increasing our guidance and our gross margin for the back half.

Speaker #3: Yeah, it's very helpful. I appreciate it. Thank you.

Analyst: That's very helpful. I appreciate it. Thank you.

Speaker #5: Thank you.

Lauren Hobart: Thank you.

Speaker #1: Your next question comes from the line of Simeon Gutman with Morgan Stanley. Please go ahead.

Conference Operator: Your next question comes from the line of Simeon Gutman with Morgan Stanley. Please go ahead.

Speaker #6: Hey, good morning, everyone. So, Lauren, you mentioned the business is vibrant. Can you talk about the second half comp assumptions? Are there any signs that the consumer is slowing in any categories?

Analyst: Good morning, everyone. Lauren, you mentioned the business is vibrant. Can you talk about the second half comp assumptions? Are there any signs that the consumer is slowing in any categories? Is there some just caution because of comparison and maybe tariff impact that the consumer could face?

Speaker #6: Is there some just caution because of comparison and maybe tariff impacts that the consumer could face?

Speaker #5: Yes, thanks for the question, Simeon. We are not seeing any signs of slowdown with the consumer. In fact, one of the most exciting things about the quarter that we just delivered is the broad-based nature of the growth that we saw.

Lauren Hobart: Yes, thanks for the question, Simeon. We are not seeing any signs of slowdown with the consumer. In fact, one of the most exciting things about the quarter that we just delivered is the broad-based nature of the growth that we saw. We saw growth across all of our key segments. Footwear, apparel, team sports, and golf, all doing really, really well. We do not see signs that the consumer is slowing. I would say, if anything, if you look to the assortment and the partnership that we have with our key brands, there is a trend toward innovation and newness in the products that are coming down the pike that are keeping the consumer really, really energized, and they're responding very well to some of that technicity that's all in the product, both, again, hard lines and soft lines.

Speaker #5: We saw growth across all of our key segments—footwear, apparel, team sports, and golf—all doing really, really well. So, we do not see signs that the consumer is slowing.

Speaker #5: I would say, if anything, if you look at the assortment and the partnership that we have with our key brands, there is a trend toward innovation and newness in the products that are coming down the pike. These products are keeping the consumer really energized, and they're responding very well to some of that technicity that's all in the product, both, again, hard lines and soft lines.

Speaker #5: So, we're seeing it with VAT launches, as well as apparel, as well as technical running and the new running constructs that are out in the market.

Lauren Hobart: We are seeing it with bat launches, as well as apparel, as well as technical running and the new running constructs that are out in the market. We think we are going to be navigating really well. We did just take our comp assumptions up for the back half. We are confident we can deliver that guidance.

Speaker #5: So, we think we're going to be navigating really well. We did just take our comp assumptions up for the back half, so we are confident we can deliver that guidance.

Speaker #3: Yeah, Simeon, just to build on what Lauren said, as you can imagine, the overall macroeconomic situation continues to remain dynamic. That's the reason we continue to have in the range of an outlook that we have provided. But the things that we can control are the core strategy, the assortment that we have access to, and how well our inventory is positioned for the back half.

Navdeep Gupta: Yeah, Simeon, just to build on what Lauren said, as you can imagine, the overall macroeconomic situation continues to remain dynamic, and that's the reason we continue to have in the range of an outlook that we have provided. The things that we control, the core strategy, the assortment that we have access to, how well our inventory is positioned for the back half, we are really excited about all the opportunities that we continue to see ahead of us.

Speaker #3: We are really excited about all the opportunities that we continue to see ahead of us.

Speaker #6: Okay, and then my follow-up is on margin. There's maybe a near-term component and then a medium-term. The near-term gross... the language in the presentation changed a little bit, and I didn't know if you mentioned merch margin in Q2.

Nate Gilch: Okay, and then my follow-up, it's on margin. There's maybe like a near-term component and then a medium term. The near-term gross, the language in the presentation changed a little bit, and I don't know if you mentioned merch margin in Q2. Some clarification on the level of expansion you expect, plus what happened in Q2. The medium-term question is more on expenses within the margin. At what point does the leverage threshold of the business change, meaning you have the curve of House of Sport expense, technology, whatever else you're dealing with in SG&A, when does that level off such that the comp leverage point actually moderates or at least stabilizes?

Speaker #6: So, some clarification on the level of expansion you expect, plus what happened in Q2. And then the medium-term question is more on expenses within the margin.

Speaker #6: At what point does the leverage threshold of the business change? Meaning, you have the curve of house of sport expense, technology, whatever else you're dealing with in SG&A. When does that level off such that the comp leverage point actually moderates or at least stabilizes?

Speaker #3: Yeah, so Simeon, let me— I think there are three questions there, and I'll try to answer all three of them. Let me know if I missed something.

Navdeep Gupta: Yeah, Simeon, I think there are three questions there, and I'll try to answer all three of them. Let me know if I missed something. The first, starting with Q2, like Lauren indicated, we were very pleased with the business here in Q2. Not only did we deliver a 5% comp, 9.5% two-year stack, but we delivered that on strong gross margin and merch margin expansion. Our margins expanded 33 basis points, gross margins, and the merch margin expanded by 18 basis points. The drivers of that expanded merch margin continue to be consistent with what we have been talking about, about the quality of our assortment, the favorable mix that we continue to see from the core categories that are performing exceedingly well, as well as some of the early benefits that we have started to see from GameChanger and DICK'S Media Network.

Speaker #3: So, the first, starting with Q2, like Lauren indicated, we were very pleased with the business here in Q2. Not only did we deliver a 5% comp and a 9.5% two-year stack, but we delivered that on strong gross margin and merchandise margin expansion.

Speaker #3: So, our margins expanded 33 basis points; gross margins and the merch margin expanded by 18 basis points. The drivers of that expanded merch margin continue to be consistent with what we have been talking about regarding the quality of our assortment, the favorable mix that we continue to see from the core categories that are performing exceedingly well, as well as some of the early benefits that we have started to see from Game Changer and DICK'S Media Network.

Speaker #3: And as we look to the back half, those three drivers will continue to remain the drivers of our expanded gross margin outlook that we have shared on a year-over-year basis for the full year as well.

Navdeep Gupta: As we look to the back half, those three drivers will continue to remain the drivers of our expanded gross margin outlook that we have shared on a year-over-year basis for the full year as well. In terms of the leverage point, we're not sharing the long-term rubric here, but the way we have consistently said in the past, we believe that we can deliver a kind of a leverage on the SG&A at a low single-digit comp, and that will be balanced between the margin outlook that we share as well as the SG&A investment opportunity. What we have been saying is you can continue to look to us to drive consistently the strong top line and the strong bottom line momentum on a top line and an EPS basis.

Speaker #3: In terms of the leverage point, so we're not sharing the long-term rubric here, but the way we have consistently said in the past, we believe that, you know, we can deliver a kind of a leverage on the SG&A at a low single-digit comp.

Speaker #3: And that will be balanced between the margin outlook that we share, as well as the SG&A investment opportunities. But what we have been saying is you can continue to look to us to drive consistently the strong top line and the strong bottom line momentum on top line and EPS basis. We will continue to balance that between the opportunity that we see to create long-term differentiating opportunities like Game Changer, DICK'S Media Network, and some of the work that our technology team has been doing in personalization and RFID.

Navdeep Gupta: We will continue to balance that between the opportunity that we see to create long-term differentiating opportunities like GameChanger and DICK'S Media Network, some of the work that our technology team has been doing in personalization, RFID. These are the differentiating capabilities that we are investing in that are driving sustained top line results as well as strong profitability growth.

Speaker #3: These are the differentiating capabilities that we are investing in that are driving sustained top line results as well as strong profitability growth.

Speaker #6: Okay, thank you very much. Good luck.

Nate Gilch: Okay, thank you very much. Good luck.

Speaker #1: Your next question comes from the line of Adrian Yee with Barclays. Please go ahead.

Conference Operator: Your next question comes from the line of Adrienne Yih with Barclays. Please go ahead.

Speaker #7: Yes, thank you. Good morning, and I'll add my congratulations. Well done.

Adrienne Yih: Yes, thank you. Good morning, and I'll add my congratulations. Well done.

Speaker #6: Thank you, Adrian.

Speaker #7: Lauren, you're welcome. Lauren, so my question is sort of a higher-level kind of what we're seeing in the industry overall. You know, athleisure, apparel, and even performance footwear have generally, right, been under some pressure year to date.

Nate Gilch: Thank you, Adrienne.

Adrienne Yih: Lauren, you're welcome. Lauren, my question is sort of higher level, kind of what we're seeing in the industry overall. You know, athleisure apparel and even performance footwear, they generally have been under some pressure year to date. Seemingly, the retail channel, the wholesale part of their business is doing better than maybe their own DTC. You have the deal with Foot Locker, which makes you a bigger presence for Nike. It just feels like to me some of the balance of power might be shifting in your favor, and I'm wondering if you can discuss that from a broad, long-term perspective. Navdeep, can you talk about how much of your comp came from current day price increases? What do you foresee for third and fourth quarter? You're working on spring orders.

Speaker #7: Seemingly, the retail channel, the wholesale part of their business, is doing better than maybe their own DPC. Then you have, kind of, your deal with Foot Locker, which makes you a bigger presence for Nike.

Speaker #7: So, it just feels like to me some of the balance of power might be shifting in your favor and I'm wondering if you can discuss that from a broad, you know, long-term perspective.

Speaker #7: And then, Navdeep, can you talk about how much of your comp came from current day price increases? What do you foresee for the third and fourth quarters?

Speaker #7: And then you're working on, you know, spring orders. So, are brands raising prices because there's this rolling impact of the tariffs in the spring season, more intensively than fall?

Adrienne Yih: Are brands raising prices because there's this rolling impact of the tariffs in the spring season more intensively than fall? Thank you.

Speaker #7: Thank you.

Speaker #5: Okay, Adrian, thanks for the question. So, starting with what we're seeing in the industry and overall, we are seeing, as I just mentioned, we're a growth across all aspects of our business.

Lauren Hobart: Okay, Adrienne, thanks for the question. Starting with what we're seeing in the industry and overall, we are seeing, as I just mentioned, growth across all aspects of our business. That's footwear and that's apparel and that's also team sports as well as golf. We are finding growth in all of those. You're right, as Foot Locker becomes part of the DICK'S family, we are an even more important brand to our wholesale partners. That's part of the thesis and the strategy, that we want to be involved in that long-term, just long-term insight sharing, trend identification, product development. We're very, very focused on that. I don't know if I would say the balance of power would shift. What I would say is our strategic relationship is very, very strong.

Speaker #5: So, that's footwear and that's apparel and that's also team sports as well as well as golf. So, we are finding growth in all of those.

Speaker #5: And you're right. As Foot Locker becomes part of the DICK'S family, we are an even more important brand to our wholesale partners.

Speaker #5: And that's part of the thesis, and the strategy is that we want to be involved in that long-term, just long-term insight sharing, trend identification, and product development. So, we're very, very focused on that.

Speaker #5: I don't know if I would say the balance of power would shift. I think what I would say is our strategic relationship is very, very strong.

Speaker #5: And as the consumer continues to vote with, you know, into the categories that we serve, be it the high-heat footwear as well as the fats and all of the newness and the innovation that are coming down the pike, we feel terrific.

Lauren Hobart: As the consumer continues to vote with, you know, into the categories that we serve, be it all, be it, you know, the high-heat footwear as well as the bats and all of the newness and the innovation that are coming down the pike, we feel terrific. We are rooted in sport. Our brand partners are rooted in sport. We're very optimistic about the future. Navdeep, I'll turn it to you.

Speaker #5: We are rooted in sport. Our brand partners are rooted in sport. And we are very optimistic about the future. Navdeep, I'll turn it to you.

Speaker #3: Yeah, Adrian, in terms of just drivers of the business, when you look at the comp, you know, almost 1% of our comp came from the increase in transactions, and the remaining came from the overall basket increase.

Navdeep Gupta: Yeah, Adrienne, in terms of just drivers of the business, when you look at the comp, almost 1% of our comp came from the increase in transactions, and the remaining came from the overall basket increase. As Lauren indicated, we are seeing really strong affinity towards the innovation as well as newness that is available in the products. That continues to be a big driver of the overall basket selling. The work that our teams are doing in stores and helping sell a much more comprehensive basket means more units per transaction. That is also a driver in addition to the product mix as well. It's a combination of all three of those things that we are seeing a continued improvement in our basket selling as well as continued increase in transactions.

Speaker #3: As Lauren indicated, we are seeing really strong affinity towards the innovation as well as the newness that is available in the products. That continues to be a big driver of the overall basket selling.

Speaker #3: And the work that our teams are doing in stores is helping sell a much more comprehensive basket, which means more units per transaction.

Speaker #3: That is also a driver, in addition to the product mix as well. So, it's a combination of all three of those things that we are seeing a continued improvement in our basket selling, as well as a continued increase in transactions.

Speaker #3: In terms of the outlook for 3Q and 4Q, we typically don't break that out between at that level of detail. So, I won't do that right now.

Navdeep Gupta: In terms of the outlook for Q3 and Q4, we typically don't break that out between that level of detail. I won't do that right now. As far as the outlook for the spring season, we will share that in the new course of time. As you can imagine, we are working very closely with the national brand partners and our own vertical brands to come up with a plan for 2026.

Speaker #3: And then, as far as the outlook for the spring season, we will share that in the new course of time. As you can imagine, we are working very closely with the national brand partners and our own vertical brands to come up with a plan for 2026.

Speaker #7: Thank you very much. Best of luck.

Adrienne Yih: Thank you very much. Best of luck.

Speaker #3: Thank you.

Navdeep Gupta: Thank you.

Speaker #1: Your next question comes from the line of Robbie Owens with Bank of America. Please go ahead.

Conference Operator: Your next question comes from the line of Ravi Owens with Bank of America. Please go ahead.

Speaker #8: Hey, good morning, guys. You know, great quarter. I was wondering if, you know, Lauren, we could get a little more color on what you're seeing from your customers.

Analyst: Hey, good morning, guys. Great quarter. I was wondering if, Lauren, we could get a little more color on what you're seeing from your customer. You gave us a lot already, but I think you're seeing, it sounds like, more shifting to online versus in stores. Could you tell us how back to school went for you guys and how you think you did there versus last year? Are you seeing your customer gravitating more towards promotions or things like that?

Speaker #8: You gave us a lot already, but I think you're seeing it sounds like we're shifting to online versus in-stores, could you tell us how back to school went for you guys and how you think you did there versus last year?

Speaker #8: And are you seeing your customer gravitating more towards promotions or, you know, things like that?

Speaker #5: Thanks, Robbie. Thanks for the question. We are seeing strength with our consumer across the board. Our consumer is responding to our assortment, they're responding to the athlete experience, and we're seeing growth.

Adrienne Yih: Thanks, Ravi. Thanks for the question. We are seeing strength with our consumer across the board. Our consumer is responding to our assortment. They're responding to the athlete experience, and we're seeing growth. We've been saying that we are outperforming in e-commerce, but we're seeing incredibly strong growth in all of our channels. It's not a shift as much as it is just overall consumer demand. We feel terrific about back to school. A lot of those sales are in Q3, and we will be reporting on back to school when we come back to you in a few months. Between the amazing footwear that we have, the apparel, the backpacks, the lunch boxes, we have a terrific, terrific assortment. Promotional activity hasn't been an enormous factor for us. We are navigating, as we always do.

Speaker #5: We've been saying that we are outperforming in e-commerce, but we're seeing incredibly strong growth in all of our channels. So, it's not a shift as much as it is just overall consumer demand.

Speaker #5: We feel terrific about back to school. A lot of those sales are in Q3, and we will be reporting on back to school when we come back to you in a few months.

Speaker #5: But between the amazing footwear that we have, the apparel, the backpacks, and the lunchboxes, we have a terrific, terrific assortment. And, you know, promotional activity hasn't been an enormous factor for us.

Speaker #5: We are navigating, as we always do, we're surgical, and the differentiated assortment that we have enables us to really lean into newness and innovation rather than a deep promotional cycle.

Adrienne Yih: We're surgical, and the differentiated assortment that we have enables us to really lean into newness and innovation rather than a deep promotional cycle. I just would point to, I think our consumer across the board is doing so well, and you see that in the fact that we don't, we're not seeing trade down from best to better or better to good. We're seeing growth across all income demographics. We have products for absolutely every consumer, and that's taking us into the back half.

Speaker #5: So, I just would point to, I think our consumer across the board is doing so well, and you see that in the fact that we don't, we're not seeing trade down from best to better or better to good.

Speaker #5: We're seeing growth across all income demographics. We have products for absolutely every consumer, and that's taking us into the back half.

Speaker #3: That sounds great. Thank you.

Ed Stack: That sounds great. Thank you.

Speaker #5: Thank you.

Adrienne Yih: Thank you.

Speaker #1: Your next question comes from the line of Michael Lasser with UBS. Please go ahead.

Conference Operator: Your next question comes from the line of Michael Lasser with UBS. Please go ahead.

Speaker #8: Good morning. Thank you so much for taking my question. My name is feedback and assessment. I am under a bit of pressure. That is probably related to some of the commentary around the gross margin, where previously there was an explicit expectation that it was going to be up 75 basis points for the year, and now the expectation is simply that it's going to be up.

Analyst: Good morning. Thank you so much for taking my question. Back with a number of pressure, that is probably related to some of the commentary around the gross margin where previously there was an explicit expectation that it was going to be up 75 basis points for the year, and now the expectation is simply that it's going to be up. A, what is the most realistic expectation you anticipate now for your gross margin? B, why would it be less than up 75 basis points like it was before? Thank you so much.

Speaker #8: So, A, what is the most realistic expectation you anticipate now for your gross margin? And B, why would it be less than up 75 basis points like it was before?

Speaker #8: Thank you so much.

Speaker #3: Yeah, Michael, thanks for that question. I think it was part of your question, broker, but I think your question is around the gross margin, and the outlook that we have for the full year.

Navdeep Gupta: Yeah, Michael, thanks for that question. I think the first part of your question broke up, but I think your question is around the gross margin and the outlook that we have for the full year. We still expect the gross margin to expand on a full-year basis, and that has been shared as part of the updated outlook. As you can imagine, we are balancing several puts and takes as we navigate the landscape that we have in front of us between tariffs, our consistent focus on keeping our inventory really vibrant because that inventory and the assortment is what is driving this consistent top line momentum that we have been delivering six straight quarters of over 4% comp. You can also imagine the pricing and the promotion landscape always remains very dynamic.

Speaker #3: So, we still expect the gross margin to expand on a full year basis. And that has been shared as part of the updated outlook.

Speaker #3: As you can imagine, we are balancing several puts and takes as we navigate the landscape in front of us between tariffs. Our consistent focus on keeping our inventory really vibrant is crucial, because that inventory and the assortment are what is driving this consistent top-line momentum that we have been delivering: six straight quarters of over 4% comp.

Speaker #3: And you can also imagine that the pricing and promotion landscape always remains very dynamic. So, we're trying to balance all of those different drivers as we look to the back half.

Navdeep Gupta: We are trying to balance all of those different drivers as we look to the back half and balance that against our SG&A expectations from an investment perspective. What we have also reiterated is that at the high end of the guidance, we still expect our operating margins to expand by 10 basis points, which is very consistent with what we had been talking as we thought about the full year. Really excited about the overall outlook we have shared, expanded top line expectation, expanded bottom line expectation, and still continue to expect gross margin expansion driven by the new drivers like GameChanger and DICK'S Media Network, but predominantly driven by the differentiated product assortment and balancing that against the SG&A investment opportunities we see.

Speaker #3: And balance that against our SG&A expectations from an investment perspective, because what we have also reiterated is that at the high end of the guidance, we still expect our operating margins to expand by 10 basis points, which is very consistent with what we had been discussing as we thought about the full year.

Speaker #3: So, I’m really excited about the overall outlook we have shared. Expanded top-line expectation, expanded bottom-line expectation, and we still continue to expect gross margin expansion driven by new drivers like the game changer DMN.

Speaker #3: But predominantly driven by the differentiated product assortment and balancing that against the SG&A investment opportunities we see. Thank you for that. My follow-up question is, given the performance of your stock price, it's likely that you'll have to issue more shares now for the Foot Locker deal than what was maybe previously anticipated.

Analyst: Thank you for that. My follow-up question is, given the performance of your stock price, it's likely that you'll have to issue more shares now for the Foot Locker deal than what was maybe previously anticipated. How does that impact the potential flow-through that you're going to get from the deal in the first year after you acquire it? Would you still expect it to be accretive given those additional shares you may have to deliver?

Speaker #3: So, how does that impact the potential flow-through that you're going to get from the deal in the first year after you acquire it? And would you still expect it to be accretive given those additional shares you may have to deliver?

Speaker #3: Yeah, Michael, great question. As you know, the shareholder election is on the 29th, so, based on the consideration mix between the stock and cash, that will determine the level of accretion.

Navdeep Gupta: Yeah, Michael, great question. As you know, the shareholder election is on the 29th. Based on the consideration mix between the stock and cash, that will determine the level of accretion. All of that we are working through right now. Once we are on the other side of September 8th, we'll be having our own detailed evaluation of the opportunities that we see with the core business. We talked again about the synergies and the confidence we have of $100 to $125 million of synergy and balancing that against the consideration mix. Much more to come as we share the outlook as part of the Q3 call.

Speaker #3: And all of that, we are working through right now. Once we are on the other side of September 8th, we'll be having our own detailed evaluation of the opportunities that we see with the core business.

Speaker #3: We talked again about the synergies and the confidence we have of $100 to $125 million of synergies, and balancing that against the consideration mix.

Speaker #3: So, much more good questions, and much more to come as we share the outlook as part of the Q3 call.

Speaker #8: Okay, thank you very much, and best of luck.

Analyst: Okay, thank you very much, and best of luck.

Speaker #3: Thanks, Michael.

Navdeep Gupta: Thanks, Michael.

Speaker #1: Your next

Conference Operator: Your next question comes from the line of Mike Baker with DA Davidson. Please go ahead.

Analyst: Great, thanks. I wanted to ask about GameChanger. Sometimes you get some statistics in terms of users and the like. Any update on any of those GameChanger type numbers?

Speaker #8: thanks. I wanted to ask about game changer. Sometimes it gets so statistics in terms of users and the like. Any update on any of those game changer type numbers?

Speaker #5: Yeah, thanks, Mike. Great question. GameChanger continues to do incredibly well—highly profitable, fast-growing software as a subscription business. And in Q2, that continued.

Lauren Hobart: Yeah, thanks, Mike. Great question. GameChanger continues to do incredibly well, highly profitable, fast-growing software as a subscription business. In Q2, that continued. We have served 7.4 million unique active users in Q2, and on average, 5.5 million monthly active users were in the app. That's up 16% year over year. We're still on track for the growth numbers. We hit over $100 million last year, and we're on track for almost a 50% revenue growth on that. Everything is going great with GameChanger. I would say one of the more exciting things that's happening also is that DICK'S and the GameChanger businesses are working closer than ever on things like what we're calling a live experience called Bat Lab, where we're working with bringing in top, top athletes and rating all of the new equipment for the year.

Speaker #5: We have seen 7.4 million unique active users in Q2. On average, 5.5 million monthly active users were in the app, which is up 16% year over year.

Speaker #5: We're still on track for the growth numbers we hit over 100 million last year, and we're on track for almost a 50% revenue growth on that.

Speaker #5: And so, everything is going great with game changer. I would say one of the more exciting things that's happening also is that the DICK's and the game changer businesses are working closer than ever on things like what we're calling a live experience called BatLab, where we're rating with premium top-top athletes and rating all of the new equipment for the year.

Speaker #5: Game Changer and DICK'S were working on sharing data so that we can be more personalized. Game Changer is a huge piece of our DICK'S Media Network, where we have live sports and can tap into people who are fully engaged in the moment while they're watching their kids or their grandkids play sports in a highly personalized way.

Lauren Hobart: GameChanger and DICK'S are working on sharing data so that we can be more personalized. GameChanger is a huge piece of our DICK'S Media Network, where we have actually live sports where we can tap into people who are fully engaged in the moment while they're watching their kids, their grandkids play sports in a highly personalized way. GameChanger is doing fantastic.

Speaker #5: So, game changer is doing fantastic.

Speaker #3: Yeah, Michael, just building on what Lauren said, I think we want to give a shout-out to the Game Changer team, as they have been driving some of the most sustained and differentiated results in the overall youth sports industry.

Navdeep Gupta: Yeah, Mike, I'll just build on what Lauren said. I think we want to give a shout out to the GameChanger team as they have been driving some of the most sustained and differentiated results in the overall youth sports industry. In Q1, hopefully, you all got a chance to see the first time that we actually did a brand advertising for GameChanger because we feel the brand awareness is another unique opportunity that we see with the GameChanger business. Couldn't be more excited about the results the team is driving and how sustained and differentiated those results are.

Speaker #3: And in Q1, hopefully you all got a chance to see the first time that we actually did brand advertising for Game Changer, because we feel brand awareness is another unique opportunity that we see with the Game Changer business.

Speaker #3: Couldn't be more excited about the results the team is driving and how sustained and differentiated those results are. Yep, sounds great. One more follow-up, and you'll probably punt this to the third quarter, but just on Foot Locker, the more you've gotten to know them and see them and visit them, etc., any change to those synergy numbers?

Ed Stack: Yep, sounds great. One more follow-up, and you'll probably punt this to the third quarter, but just on Foot Locker, the more you've gotten to know them and see them and visit them, et cetera, any change to those synergy numbers? I believe in the past they didn't really include any revenue synergies, but you're talking about ways to improve the assortment, et cetera. As part of the deal being approved, I didn't see anything on divestitures. Are there going to be any required divestitures?

Speaker #3: I believe in the past they didn't really include any revenue synergies, but you're talking about ways to improve the assortment, et cetera. And as part of the deal being approved, I didn't see anything on divestitures.

Speaker #3: Are there going to be any required divestitures?

Speaker #5: No, it's too soon for us to comment on all that. We are not changing the synergy numbers. We had said $100 million to $125 million in synergies.

Lauren Hobart: No, it's too soon for us to comment on all that. We are not changing the synergy numbers. We had said $100 to $125 million in synergies, and that is, we're still very much going after that. We will be diving in once we get past the transaction on September 8 and be back to you in Q3. You are right.

Speaker #5: And that is, we're still very much going after that. We will be diving in once we get past the transaction on September 8th and will be back to you in Q3.

Speaker #5: So, you are right.

Speaker #3: Okay, fair enough.

Ed Stack: Okay, fair enough.

Speaker #5: Yep.

Lauren Hobart: Yep.

Speaker #1: Your next question comes from the line of Chris Horvers with JP Morgan. Please go ahead.

Conference Operator: Your next question comes from the line of Christopher Horvers with JP Morgan. Please go ahead.

Speaker #8: Thanks, and good morning. I wanted to follow up on the share count question. In the original release, you did talk about the expectation that the deal would be accretive on an earnings basis, I believe, in the first full year post-acquisition.

Analyst: Thanks, and good morning. I wanted to follow up on the share count question. In the original release, you did talk about, you know, they expected that the deal would be accretive on an earnings basis, I believe, in the first full year post-acquisition. Is the answer that, you know, because I think it's about 11 million shares, obviously, you know, Foot Locker stock's price moving here, but to the extent that you get a full share conversion, would you expect it to still be accretive on an earnings basis, or is that more of like it'll be accretive but on an operating profit dollar basis?

Speaker #8: Is the answer that, you know, because I think it's about 11 million shares? Obviously, you know, Foot Locker's stock price is moving here, but to the extent that you get a full share conversion, would you expect it to still be accretive on an earnings basis, or is that more of like it'll be accretive but on an operating profit dollar basis?

Speaker #3: Yeah, Chris, those are all great questions. As you can imagine, there are multiple moving pieces when you're trying to understand the accretion dilution. Share count just happens to be one of them.

Navdeep Gupta: Yeah, Chris, all are great questions. As you can imagine, there are multiple moving pieces when you're trying to understand the accretion dilution. Share count just happens to be one of them. Like Lauren indicated, synergy expectation, the timing of synergy would be another driver. The core business performance would be another driver. There is definitely more work to be done, but what we continue to remain confident is that this would be accretive, but the level of accretion will be depending based on the consideration mix. That is the work that is ahead of us. Once we are past September 8, we'll be working very closely as a collective company to refine those expectations and share a deeper outlook as part of our Q3 and Q4 call.

Speaker #3: Like Lauren indicated, synergy expectation and the timing of synergy would be another driver. The core business performance would be another driver. So, there is definitely more work to be done, but what we continue to remain confident in is that this would be accretive; however, the level of accretion will depend on the consideration mix.

Speaker #3: But that is the work that is ahead of us. Once we are past September 8th, we'll be working very closely as a collective company to refine those expectations and share a deeper outlook as part of our Q3 and Q4 call.

Speaker #8: Got it, makes sense. And then, as you think about the momentum that you've seen in the business, the excitement around the newness, what seems to be a pretty good back-to-school season, and the implied comps in the back half are— I understand you mentioned you raised them, but, you know, it does signal a sharp deceleration.

Analyst: Got it. Makes sense. As you think about the momentum that you've seen in the business, the excitement around the newness, which seems to be a pretty good back-to-school season, the implied comps in the back half are, I understand you mentioned you raised them, but it does signal a sharp deceleration. Is that just more caution around what might happen with the consumer sort of in between events, given the uncertainty with tariffs?

Speaker #8: So, is that just more caution around what might happen with the consumer, sort of in between events, given the uncertainty with tariffs?

Speaker #5: Thanks, Chris. Yeah, we are balancing the incredible momentum that we have in the business with just some appropriate caution about the uncertain macroeconomic environment.

Lauren Hobart: Thanks, Chris. Yeah, we are balancing the incredible momentum that we have in the business with just some appropriate caution about the uncertain macroeconomic environment. We've now included tariffs and everything we know about tariffs in. Keep in mind, we're also lapping second half comp sales that are aggressive, 50 basis points stronger than the first half. We are really confident. We never guide to the highest possible outcome, but we have a tremendous momentum and are just appropriately cautious as we guide.

Speaker #5: We've now included tariffs and everything we know about tariffs in. And keep in mind, we're also lapping second-half comps that are aggressive—50 basis points stronger than the first half.

Speaker #5: So, we are really confident. We never guide to the highest possible outcome, but we have tremendous momentum and are just appropriately cautious as we guide.

Speaker #3: Yeah, because Chris, just as a reminder, what Lauren is alluding to is the fact that we actually delivered a 6.4% comp in Q4. So, that has also been contemplated as we gave the second half outlook.

Navdeep Gupta: Yeah, so Chris, just as a reminder, what Lauren is alluding to is the fact that we actually delivered a 6.4% comp in Q4. That has also been contemplated as we gave the second half outlook. Like you rightly pointed out, we raised our second half outlook versus our prior guidance based on the strength of the core strategies, strength of the assortment that we have, as well as how well our teams are executing.

Speaker #3: But, unlike you rightly pointed out, we raised our second-half outlook versus our prior guidance based on the strength of the core strategies, the strength of the assortment that we have, as well as how well our teams are executing.

Speaker #8: Understood. Have a great back-to-school season. Thank you.

Analyst: Understood. Have a great back-to-school season. Thank you.

Speaker #3: Thanks, Chris.

Navdeep Gupta: Thanks, Chris.

Speaker #1: Your next question comes from the line of Joe Feldman with Kelsey Advisory Group. Please go ahead.

Conference Operator: Your next question comes from the line of Joe Feldman with Telsey Advisory Group. Please go ahead.

Speaker #8: Yeah, hi, good morning, guys. Thanks for taking the question. Lauren, I think you mentioned customers are responding to category or to innovation and technology in some of the products, and I was wondering if you could share a little more color on that and maybe which categories you're seeing the most innovation in or just which products and what people are looking at there.

Analyst: Yeah, hi, good morning, guys. Thanks for taking the question. Lauren, I think you mentioned customers are responding to category or to innovation and technology in some of the products. I was wondering if you could share a little more color on that and maybe, you know, which categories you're seeing the most innovation in or just which products and what people are looking at there. Thanks.

Speaker #8: Thanks.

Speaker #5: Yep. Thank you. We are seeing, as I said, growth across the entire business. We are absolutely seeing consumers lean into innovation and the technical aspects of the product and performance.

Lauren Hobart: Thank you. We are seeing, as I said, growth across the entire business, and we are absolutely seeing consumers lean into innovation and technical aspects of the product and performance. You see it in the running construct from Nike, for example, doing really well. You see it, as I've mentioned, in some of the hardline categories. We're actually having tremendous excitement in the license category, and we've got small tests going on with trading cards that are doing very well. There is excitement. I think it speaks to the fact that the consumer, sport, and culture are intertwined in ways that have never been this powerful, and the consumer is very, very interested in newness, the lifestyle of sport, and the performance of sport, and we're carrying those products.

Speaker #5: So, you see it in the running category from Nike, for example, doing really well. You see it, as I've mentioned, in some of the hardline categories where we're actually having tremendous success. We have excitement in the licensed category, and we've got small tests going on with trading cards that are doing very well.

Speaker #5: There is excitement. I think it speaks to the fact that consumer sport and culture are intertwined in ways that have never been this powerful, and the consumer is very, very interested in newness.

Speaker #5: That is the lifestyle of sport and the performance of sport. And we're carrying those products. So, I could point to the entire portfolio and say there are areas of incredible excitement and things that we're very excited about coming down the pike.

Lauren Hobart: I could point to the entire portfolio and say there are areas of incredible excitement and things that we're very excited about coming down the pike.

Speaker #8: That's great. Thanks. And maybe a quick separate sort of question, which is, can you talk a little bit about how you guys are incorporating new technologies into the business, like AI, computer vision, and machine learning?

Analyst: That's great. Thanks. Maybe a quick separate sort of question, which is, can you talk a little bit about how you guys are incorporating new technologies into the business, like AI or computer vision and machine learning, and how that's maybe going to help on the back end and the front end? Thanks.

Speaker #8: And you know how that’s maybe going to help on the back end and the front end? Thanks.

Speaker #5: Yeah, that's a great question. As you know, we have been investing in SG&A for some time now, and a lot of that is in marketing, but also in technical tools that are really enabling our business.

Lauren Hobart: Yeah, that's a great question. As you know, we have been investing in SG&A for some time now, and a lot of that is in marketing, but also technical tools that are really enabling our business. We've been investing in things like the digital businesses to make our e-commerce and the GameChanger business even stronger. We're investing in the marketing stack so that we can even be more personalized. We're investing in tools for our teammates so that they use RFID to help find products around the store and to be able to send products faster to athletes. We have AI embedded in many of these tools. We've got search functions, supercharged search on e-com that is based on AI enablement, as is teammate scheduling and product and merch assortment planning.

Speaker #5: And we've been investing in things like digital businesses to make our e-commerce and the game changer business even stronger. We're investing in the marketing stack so that we can be even more personalized. We're investing in tools for our teammates so that they can use RFID to help find products around the store and send products faster to athletes.

Speaker #5: And we have AI embedded in many of these tools. We've got a search function, supercharged search on e-commerce that is based on AI enablement. And as is teammate scheduling and product and merchandise assortment planning.

Speaker #5: So, early innings with AI, but the tools that we are building are powered by them and will continue to be more so.

Lauren Hobart: Early innings with AI, but the tools that we are building are powered by them and will continue to be more so. This is a very significant part of how we're driving productivity and also empowering our teammates to spend more time with athletes in a sales and service mode rather than, you know, on tasking.

Speaker #5: And this is a very significant part of how we're driving productivity and also empowering our teammates to spend more time with athletes in a sales and service mode rather than on tasking.

Speaker #8: That's great. Thanks. Good luck with this next quarter.

Analyst: That's great. Thanks. Good luck with this next quarter.

Speaker #5: Thank you.

Lauren Hobart: Thank you.

Speaker #1: Your next question comes from the line of John Kiernan with TD Cowan. Please go ahead.

Conference Operator: Your next question comes from the line of John Kernan with TD Cowen. Please go ahead.

Speaker #8: Thanks for taking my question. Congrats on a nice quarter. Lauren, can you talk to the athletic footwear cycle? Where do you think we are? Prices seem to be moving a little bit higher and probably will so through the first half of next year.

Analyst: Thanks for taking my question and congrats on a nice quarter. Lauren, can you talk to the athletic footwear cycle where you think we are? Prices seem to be moving a little bit higher and probably will do so through the first half of next year. How do you think the consumer's ability to absorb these price increases stands? I have a quick follow-up after that. Thank you.

Speaker #8: How do you think the consumer's ability to absorb these price increases stands? And I got a quick follow-up after that. Thank you.

Speaker #5: Yes, yes. Well, as I said, the footwear business continues to be very, very strong. There have been some selective price increases, but we and our brand partners are very surgical about when, where, and how much we can bring in some minor price increases to offset some of the tariffs.

Lauren Hobart: Yes, yes. As I've said, the footwear business continues to be very, very strong. There have been some selective price increases, but we and our brand partners are very surgical about when, where, and how much we can bring in some minor price increases to offset some of the tariffs. We are always conscious of what the consumer will be able to afford and the profitability of the business. With a 5% comp, we have not seen the consumer having any issue with the price increases, the small level of price increases that have gone in, and we're seeing incredible demand for footwear.

Speaker #5: But we are always conscious of what the consumer will be able to afford and the profitability of the business. So, with a 5% comp, we have not seen the consumer having any issue with the price increases—the small level of price increases that have gone in.

Speaker #5: And we're seeing incredible demand for footwear.

Speaker #8: Got it. Then, Navdeep, maybe a quick question for you. Just the tariff impacts on cost of goods sold and gross margin in the back half, what are your assumptions and how do you think this will trend into the first half of next year?

Analyst: Got it. Navdeep, maybe a quick question for you. Just the tariff impacts on cost of goods sold and gross margin in the back half. What are your assumptions and how do you think this will trend into the first half of next year? Thank you.

Speaker #8: Thank you.

Speaker #3: Yeah, John, you know, minimal impact from tariffs in Q2. There is a small impact in the second half that has been contemplated in our outlook that we shared.

Navdeep Gupta: Yeah, John, you know, minimal impact from tariffs in Q2. There is a small impact in the second half that has been contemplated into our outlook that we shared for the margin as well as the full-year profitability. We'll share much more around the FY 2026 in due course, but as you can imagine, this is an active body of work between us, with our manufacturers, with the national brand partners, and also looking at the pricing and promotion opportunities that we see. Plenty of work that is still ahead of us. Feel great about the outlook and how our teams have been managing through this situation.

Speaker #3: For the margin as well as the full-year profitability, you know, we'll share much more around the FY 2026 in due course. But as you can imagine, this is an active body of work between us, with our manufacturers, with the national brand partners, and also looking at the pricing and promotion opportunities that we see.

Speaker #3: So, plenty of work that is still ahead of us. I feel great about the outlook and how our teams have been managing through this situation.

Speaker #8: Got it. Best of luck in the fall.

Analyst: Got it. Best of luck in the fall.

Speaker #3: Thank you.

Navdeep Gupta: Thank you.

Speaker #1: Your next question comes from the line of Joseph Savello with Truist. Please go ahead.

Conference Operator: Your next question comes from the line of Joseph Savello with Truist. Please go ahead.

Speaker #8: Hey, good morning, guys. I was wondering if you could talk a little bit about how traffic compares between Field House and House of Sports stores versus the chain average.

Analyst: Hey, good morning, guys. I was wondering if you could talk a little bit about how traffic compares between Fieldhouse and House of Sport stores versus the chain average, and how you're thinking about the dynamics between ticket and transactions moving forward.

Speaker #8: And how are you thinking about the dynamics between ticket and transactions moving forward?

Speaker #3: Yeah, so if we don't break that level of details out, I won't do that right now. As you can imagine, we’ve continued to remain really, really enthusiastic about the performance that we are seeing from House of Sports stores and the Field House stores, not just from a traffic perspective but overall basket-building opportunity. The work that our teams are doing in fully servicing these athletes that are walking into these locations is impressive.

Navdeep Gupta: Yeah, Joe, we don't break that level of details out, so I'll not do that right now. As you can imagine, we've continued to remain really, really enthusiastic about the performance that we are seeing from House of Sport stores, the Fieldhouse stores, not just from a traffic perspective, but overall basket building opportunity, the work that our teams are doing in fully servicing these athletes that are walking into these locations, the experiences that we are able to provide. Traffic probably is a very niche way to look at it, and we are looking at the overall aggregate level of performance coming out of these stores. As we have shared, we are very excited about the top line momentum as well as the bottom line momentum. More importantly, how well these are resonating with our brand partners is a very differentiating capability that we are excited about.

Speaker #3: The experiences that we are able to provide. So, you know, traffic probably is a very niche way to look at it, and we are looking at the overall aggregate level of performance coming out of these stores.

Speaker #3: And as we have shared, we are very excited about the top-line momentum, as well as the bottom-line momentum. More importantly, how well these are resonating with our brand partners is a very differentiating capability that we are excited about.

Speaker #3: In terms of the dynamics.

Navdeep Gupta: In terms of the dynamics.

Speaker #8: And if we could.

Speaker #3: Yeah, tickets and transactions, you know, we won't guide at that level. As you can consistently see over the last several quarters, you know, our growth in comp sales has been consistently coming from more transactions.

Analyst: If we could.

Navdeep Gupta: Yeah, tickets and transactions, you know, we won't guide at that level. As you can consistently see over the last several quarters, our growth in comp sales has been consistently coming from more transactions as well as tickets, and that goes back to continue to being the case where DICK'S Sporting Goods is seen as the right destination for sport and culture. That's what gets us really excited as we look to the balance of the year this year.

Speaker #3: As well as tickets, that goes back to continuing to be the case where DICK'S is seen as the right destination for sports and culture.

Speaker #3: And that's what gets us really excited as we look to the balance of the year this year.

Speaker #8: Got it. Makes sense. And then, if I could just squeeze in one more, I just wanted to ask about the recent retail media investments and how we should think about that business scaling through this year. And then, maybe how we're thinking about it in 2026 versus 2025.

Analyst: Got it. Makes sense. If I could just squeeze in one more, I just wanted to ask about the recent retail media investments and how we should think about that business scaling, I guess, through this year and then maybe how we're thinking about it in 2026 versus 2025.

Speaker #5: Yeah, we are thrilled with our DICK'S Media Network. We have been building it for some time now. It is getting increasingly more powerful as we leverage the automation of the data and the reporting.

Lauren Hobart: Yeah, we are thrilled with our DICK'S Media Network. We have been building it for some time now. It is getting increasingly more powerful as we leverage the automation of the data and the reporting. Our brand partners and non-endemic partners are very excited, but we are still in early innings. We haven't broken out exactly how much we are expecting from the retail media network this year nor next year, but I would look to this as being a long-term growth, profitability driver, margin driver, and revenue. We're very, very pleased. We have a unique network here where we have access to youth sports and actually live sports. If you look at the GameChanger platform, it's something that is being recognized as being very unique in the industry.

Speaker #5: Our brand partners and non-endemic partners are very excited. But we are still in the early innings, so we haven't broken out exactly how much we are expecting from the retail media network this year nor next year. However, I would look at this as being a long-term growth, profitability driver, margin driver, and revenue. We're very, very pleased.

Speaker #5: We have a unique network here where we have access to youth sports and actually live sports. If you look at the GameChanger platform, it's something that is being recognized as being very unique in the industry.

Speaker #3: Yeah, Joe, I'll actually connect your last question and this question on DMN because there is a very unique opportunity that exists at the intersection of Field House and House of Sports with DICK'S Media Network as well.

Navdeep Gupta: Yeah, Joe, I'll actually connect your last question and this question on DICK'S Media Network because there is a very unique opportunity that exists at the intersection of Fieldhouse and House of Sport with DICK'S Media Network as well, where we are able to activate the brands, both endemic and non-endemic, and really, really showcase those brands in front of the athletes while they are visiting House of Sport and Fieldhouse. That's one of the unique opportunities that we see between GameChanger and the retail location, as well as some of the online platforms that we have.

Speaker #3: We are able to activate the brands, both endemic and non-endemic, and really showcase those brands in front of the athletes while they are visiting the House of Sport and Field House.

Speaker #3: So, that's the unique opportunity that we see between Game Changer, the retail location, as well as some of the online platforms that we have.

Speaker #8: Great, thanks so much.

Analyst: Great, thanks so much.

Speaker #1: Your next question comes from the line of Paul Lajez with City. Please go ahead.

Conference Operator: Your next question comes from the line of Paul Lejuez with Citi. Please go ahead.

Speaker #8: Hey, thanks, guys. Sorry if I missed it, but did you talk about the performance of your private brands this quarter? And then, just along those lines?

Analyst: Hey, thanks, guys. Sorry if I missed it, but did you talk about the performance of your private brands this quarter? Just along those lines, from a tariff perspective, curious what kind of cost increases you're seeing due to tariffs on the product to redirect import and what your plans are with price for those items. The same question for national brands. The price increases that you are seeing, what's happening with price? Are you looking to maintain margin? We're looking to maintain profit dollars? Thanks.

Speaker #8: From a tariff perspective, I'm curious about what kind of cost increases you're seeing due to tariffs on the products that you directly import, and what your plans are regarding pricing for those items.

Speaker #8: And then same question for national brands. For the price increases that you are seeing, what's happening with price? Are you looking to maintain margin or are you looking to maintain profit dollars?

Speaker #8: Thanks.

Speaker #5: Great, Paul. Thanks for the question. I'll start off. Our vertical brands continue to do very, very well. I would specifically point to our flagship apparel brands, DSG, Clea, and Versed, doing very well and meeting a consumer need in our stores for products that are not being covered elsewhere.

Lauren Hobart: Great. Paul, thanks for the question. I'll start off. Our vertical brands continue to do very, very well. I specifically would point to our flagship apparel brands, DSG, CALIA, and Versed, doing very well and meeting a consumer need in our stores for products that are not being covered elsewhere. It's really a great incremental opportunity. Our vertical brands also still have 700 to 900 basis points higher margin than the average national brand. We are the number one or two vendor in a lot of key categories for ourselves: accessories, athletic apparel, fitness, golf, team sports. Across the board, vertical brands are doing very well. I'll turn it to Navdeep to answer the second part of your question.

Speaker #5: It's really a great incremental opportunity. Our vertical brands also still have 700 to 900 basis points higher margin than the average national brand.

Speaker #5: And we are the number one or two vendor in a lot of key categories for ourselves: accessories, athletic apparel, fitness, golf, and team sports. So, across the board, vertical brands are doing very well.

Speaker #5: I'll turn it to Navdeep to answer the second part of your question.

Speaker #3: Yeah, so Paul, just to build on the tariff question as well as pricing, you know, as you can imagine, we have seen some of the brand partners, as we manage our business, they are managing theirs, and there is a little bit of an increase in prices that we have seen both on the vertical brand side as well as from the national brand partners.

Navdeep Gupta: Yeah, so Paul, just to build on the tariff question as well as pricing, as you can imagine, we have seen some of the brand partners, as we manage our business, they are managing theirs, and there is a little bit of an increase in prices that we have seen both on the vertical brand side as well as from the national brand partners. However, consistent with what we have been doing for a few years now, as well as if you look at the prior cycles, we take a very surgical and a flexible approach to pricing. We are consistently working very closely with our manufacturers and our brand partners, trying to make the right decision that balances the needs of their athletes so that we continue to drive the top line momentum, at the same time balance against the profitability of their aspect of the business.

Speaker #3: However, you know, consistent with what we have been doing for a few years now, as well as if you look at the prior cycles, we take a very surgical and flexible approach to pricing.

Speaker #3: We are consistently working very closely with our manufacturers and our brand partners trying to make the right decision that balances the needs of their athlete so that we continue to drive the top line momentum at the same time balance against the profitability of that of the business.

Speaker #3: And this all has been contemplated in the updated outlook that we provided for the second half.

Navdeep Gupta: This all has been contemplated in the updated outlook that we provided for the second half.

Speaker #1: Your next question comes from the line of Justin Kleber with Baird. Please go ahead.

Conference Operator: Your next question comes from the line of Justin Kleber with Baird. Please go ahead.

Speaker #8: Hey, good morning, everyone. Thanks for taking the question. I just wanted to follow up on Paul’s vertical brand question and ask it in a bit different way.

Analyst: Hey, good morning everyone. Thanks for taking the question. Just wanted to follow up on Paul's vertical brand question and ask it in a bit different way, specifically as it relates to how you envision leveraging your success in vertical brands and perhaps introducing some of these into the Foot Locker stores.

Speaker #8: Specifically, as it relates to how you envision leveraging your success in vertical brands and perhaps introducing some of these into the Foot Locker stores.

Speaker #5: Justin, it's too soon for us to talk about that. We have to immerse ourselves in the business. We haven't closed yet. We don't know. We think there's a lot of merchandising opportunities.

Lauren Hobart: Justin, it's too soon for us to talk about that. We have to immerse into the business. We haven't closed yet. We don't know. We think there's a lot of merchandising opportunities. We think there's apparel opportunities over in Foot Locker, but vertical brands, way too soon to tell.

Speaker #5: We think there are apparel opportunities over in Foot Locker, but for vertical brands, it’s way too soon to tell.

Speaker #8: Okay, and then just one clarification. The new comp and sales guide, does that just flow through the first half upside? Or I thought, Lauren, I heard you mention that you did take up your second half assumptions, so just wanted to clarify that.

Analyst: Okay, and then just one clarification. The new comp sales guide, does that just flow through the first half upside? I thought, Lauren, I heard you mention that you did take up your second half assumptions. Just wanted to clarify that. Thank you.

Speaker #8: Thank you.

Speaker #5: Yes, we did take up the second half assumptions. Modestly, Navdeep, do you want to give some specifics?

Lauren Hobart: Yes, we did take up the second half assumptions modestly. Navdeep, do you want to give some specifics?

Speaker #3: Yeah, absolutely. Justin, like Lauren indicated, we flowed through the beat on Q2 against our own internal expectations, and we have modestly raised our second half comp expectations for the back half.

Navdeep Gupta: Yeah, absolutely. Justin, like Lauren indicated, we flowed through the beat on Q2 against our own internal expectations, and we have modestly raised our second half comp expectations modestly also for the back half.

Speaker #8: All right. Thank you, guys. Best of luck.

Analyst: All right. Thank you, guys. Best of luck.

Speaker #5: Thank you.

Lauren Hobart: Thank you.

Speaker #3: Thanks, Justin.

Analyst: Thanks, Justin.

Speaker #1: Your next question comes from the line of Eric Cohen with Gordon Haskett. Please go ahead.

Conference Operator: Your next question comes from the line of Eric Cohen with Gordon Haskett. Please go ahead.

Speaker #9: Hi, thanks for the question, and great quarter. Historically, DICK'S has had a pretty diversified offering across categories of footwear, apparel, and hardlines. However, post the Foot Locker acquisition, your footwear category is going to become a much more meaningful part of the business.

Analyst: Hi, thanks for the question and great quarter. Historically, DICK'S Sporting Goods has had a pretty diversified offering across categories for footwear, apparel, and hard lines. After the Foot Locker acquisition, your footwear category is going to become a much more meaningful part of the business. I guess how do you ease concerns that the business is not going to have incremental inherent risk by being much more tied to a single category than you have been in the past?

Speaker #9: So, I guess, how do you ease concerns that the business is not going to have incremental inherent risk by being much more tied to a single category than you have been in the past?

Speaker #5: Thanks, Eric. Footwear is the engine that pulls the train. We have always said the outfit starts with the footwear. Footwear is key for performance.

Lauren Hobart: Thanks, Eric. Footwear is the engine that pulls the train. We always have said the outfit starts with the footwear. Footwear is key for performance. It's key for sport lifestyle. As sport and culture continue to intertwine, footwear is the key product. We are quite confident we're serving different consumers, both at DICK'S and at the Foot Locker banners, and we are going to be delivering them what they need in a category that we think is very important, both short term and long term.

Speaker #5: It's key for sport lifestyle. As sport and culture continue to intertwine, footwear is the key product. So, we are quite confident. We're serving different consumers both at DICK'S and at the Foot Locker banners.

Speaker #5: And we are going to be delivering them what they need in a category that we think is very important both long term and short term and long term.

Speaker #9: Great. And just as you continue to open up, have opened up more House of Sport and different market sizes and locations within markets, have you seen any difference in sort of the sales productivity or how they ran?

Analyst: Great. Just as you continue to open up, have opened up more House of Sport in different market sizes and locations within markets, have you seen any difference in sort of the sales productivity or how they ran? Certainly, as you know, you are going to accelerate the openings. Anything to think about, just if those performance should just be consistent as you expand more?

Speaker #9: Because certainly, as you know, you're going to accelerate the openings. Any thoughts to consider regarding performance should just be consistent as you expand further?

Speaker #3: Yeah, Eric, we are very happy with the performance that we are seeing. We are actually excited about the fact that even some of the smaller markets are able to support House of Sport locations very, very productively.

Navdeep Gupta: Yeah, Eric, we are very happy with the performance that we are seeing. Actually, excited also by the fact that, you know, even some of the smaller markets are able to support a House of Sport location very, very productively. That actually expands the opportunities for us to think broadly about the House of Sport strategy as we look to the next few years.

Speaker #3: So, that actually expands the opportunities for us to think broadly about the House of Sport strategy as we look to the next few years.

Speaker #9: Great. Thanks a lot.

Analyst: Great, thanks a lot.

Speaker #5: Thank you.

Lauren Hobart: Thank you.

Speaker #1: And that concludes our question and answer session. I will now turn it back over to Lauren Hobart, President and CEO, for closing comments.

Conference Operator: That concludes our question and answer session. I will now turn it back over to Lauren Hobart, President and CEO, for closing comments.

Speaker #5: Thank you all for your time today and for your interest in exporting goods. A shout-out to our teams across the country, and a welcome to our new Foot Locker teammates.

Lauren Hobart: Thank you all for your time today and for your interest in DICK'S Sporting Goods. A shout out to our teams across the country and a welcome to our new Foot Locker teammates. We're excited to get going after September 8th. Thank you all very much.

Speaker #5: We're excited to get going after September 8th. Thank you all very much.

Conference Operator: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.