Dive Brief:

• Dick's Sporting Goods second quarter net sales rose nearly 3.8% year over year to $2.3 billion, with comparable-store sales up 3.2%, the strongest performance on the metric since 2016, the company said Thursday. Digital sales increased 21%.
• Behind the comps were increases in both transactions and average ticket size, Dick's Chairman and CEO Edward Stack said in a statement. "Our key strategies and investments are working, our major headwinds are behind us and we've bent the curve on sales," he said.
• Dick's operating income fell 4.6% as growth in selling and administrative expenses outpaced gross profit growth. Net income fell 5.7% to $112.5 million. During Q2, Dick's bought $159 million in stock back from shareholders.

Dive Insight:

Dick's said it has been investing in its omnichannel growth over the past 12 months (along with buying back more than half a billion dollars worth of its own stock). It has the digital growth to show for it, as well a 1% increase in its digital penetration compared to a year ago, to 12% of total sales in Q2. 

"Our stores have really championed our new service standards, and their efforts are moving the needle by supporting improved conversion rates and our return to positive brick-and-mortar store comps during the second quarter," Dick's President Lauren Hobart said in a press release. The company has also been working to improve the online experience. To that end, it opened up two new e-commerce fulfillment centers that Hobart said would make for "faster and more reliable delivery."

The company's stock increased 11.6% in premarket trading as Dick's beat the FactSet consensus estimates on sales, earnings and comps, according to figures cited by MarketWatch. 

On the heels of the strong Q2, executives lifted their profit estimates for the full fiscal year, and expect a comps increase in the low single digits after a 3.1% decline last year. Those estimates include new tariff increases, which some analysts expected to hit Dick's particularly hard (though at a time when the tariff increase was anticipated to be higher). Executives said on a Thursday conference call that impact from tariffs could take shape next year but that the retailer was working on several strategies to mitigate the import taxes while exchange rates could also reduce some of the pain. 

Q2 marks the second time this year Dick's has beaten quarterly expectations and raised its own for the year. They come against a year in 2018 of falling sales, profits and comps. 

The most recent quarter provides some optimism against long-term concerns around the big-box seller's prospects in a competitive category. Morningstar analyst David Swartz wrote in a May note that Dick's "is struggling to stay relevant as sporting goods are sold through an increasing number of channels." 

While Dick's remains the largest sporting goods specialist chain in the U.S., it faces competition from mass retailers like Amazon and Walmart as well as specialty players like Lululemon and Bass Pro Shops and Cabela's, Swartz said. He added that Dick's efforts in recent years to increase profits by expanding its store base have not panned out as advertised and that its 800-plus stores "limits its flexibility."