Cramer sees potential in Dick's Sporting Goods, despite the quarter's decline

CNBC’s Jim Cramer outlined Dick’s Sporting Goods’ disappointing second-quarter results, suggesting that there could be a buying opportunity for investors.
“I think the problems with Dick have now been incorporated into the estimations while long-term growth opportunities are being ignored,” he said.

While CNBC’s Jim Cramer acknowledged that Dick’s Sporting Goods posted a tough quarter, he thinks Wall Street’s reaction was a bit extreme. The company’s stock fell just over 24% during Tuesday’s session.

“I agree it used to be bad, but now it’s down 25%? Oh, that’s wrong,” Cramer said, referring to the stock’s cumulative declines on Tuesday and Wednesday. “I think the issues with Deck have now been incorporated into estimations while long-term growth opportunities are being ignored,” he added.

Dick’s reported earnings of $2.82 per share, well below the $3.81 per share analysts had expected, according to Refinitiv. Revenue came in slightly lower at $3.22 billion versus the expected $3.24 billion. The sporting goods retailer cut its profit forecast for the rest of the year.

During the company’s conference call, CEO Lauren Hobart attributed the company’s disappointing quarter in part to excess inventory and shrinkage, citing a loss of inventory due to theft or internal issues. It was the first reference the retailer made to downsizing in a press release in nearly 20 years.

Cramer stressed that the decline in Dick’s share price is not a reason alone to buy. Investors need a strong thesis to own the company, and he believes there is potential. It is currently trading at around $100 a share.

Cramer mentioned Dick’s growing business in “Galaxy Golf” and the new “House of Sport” stores that include shoe racks, batting cages for baseball products, golf putt bays, as well as rock climbing walls. He said he believes Dick’s new app GameChanger could be a boon for the company. The app is dedicated to children’s sports, and can help with scorekeeping, live broadcasts and team management.

“These are not just stores, these are experiences,” he said. “They also adjust it to the region. For example, at one Dick’s House of Sport location in Minnesota, they focus on fishing gear.”