Strategy

Dick’s Sporting Goods to Drop 20% of Vendors

The retailer is pursuing a new merchandising strategy to "stay ahead of consumer trends and differentiate us from the competition."
Matthew HellerMarch 9, 2017
Dick’s Sporting Goods to Drop 20% of Vendors

Despite gaining market share as competitors have gone bankrupt, Dick’s Sporting Goods is forecasting lower-than-expected earnings this year and will drop about 20% of its vendors.

In an earnings call, Dick’s CEO Ed Stack didn’t name any of the brands being dropped but said they will include minor labels rather than its top 10 best sellers and the retailer will expand its in-house brands, which generate $1 billion a year in sales. It currently has 1,600 vendors.

“It’s difficult to tell people we have done business with for a long time that we are not going to do business going forward,” Stack said on the call. But he added: “It’s the right thing to do long-term for the business.”

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As Fortune reports, Dick’s, the country’s largest sporting goods retailer, has taken advantage of the bankruptcies of such chains as Sports Authority and Golfsmith by acquiring their intellectual property, customer databases and store leases. For the fourth quarter, revenue rose 11% to $2.48 billion while same-store sales were up 5%.

But profit fell 30% to $90.2 million, or 81 cents a share and, in the current quarter, Dick’s expects adjusted earnings of 50 cents to 55 cents a share, well below Wall Street analysts’ projections for 61 cents. Same store sales are expected to increase about 2% to 3% this year, compared with an increase of 3.5% in 2016.

“In 2017, we will continue to be aggressive and evolve our business,” Stack said in a news release. “We will implement a new merchandising strategy aimed at rationalizing our vendor base and optimizing our assortment to deliver a more refined offering for our customers.”

“This strategy, combined with our efforts to enhance our digital capabilities, will enable us to stay ahead of consumer trends and differentiate us from the competition,” he added.

Dick’s has already started eliminating some vendors and identified the merchandise that doesn’t fit the new strategy, resulting in a $46 million pre-tax charge.

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