Dick's Sporting Goods (NYSE: CMG) is one of the last chains standing in a niche that has been devastated by the rise of e-commerce.
Its nearest competitor, Sports Authority, went out of business last year, and even that hasn't made the company's path to success any smoother. In its continuing effort to remain competitive, the largest remaining sporting-goods chain has evaluated its merchandise, and it has reached an interesting decision.
Dick's has decided to drop up to 20% of its vendors, Fox Business reported. CEO Edward Stack said pairing down its vendor list will "deliver a more refined offering for our customers" and enable Dick's stores to "stay ahead of consumer trends."
He made the remarks during a call with analysts March 7 to discuss the chain's fourth-quarter results. Stack also said that none of the company's 10 largest vendors would be cut, and noted that the products supplied by some vendors will be replaced by private-label brands to increase profitability.
Dick's has been doing well
While the company is making changes, it's worth noting that Dick's had a solid Q4. Income came in below Dick's own forecasts at $0.81 a share ($1.15 to $1.27 a share was the range expected). That number, however, was dragged down by $0.51 per share due to charges relating to the change in merchandising strategy noted above.
Sales, however, were up nearly 11% for the quarter and same-store sales increased by 5%.
"We are very pleased with our strong fourth quarter results...driven by strong comp sales and gross margin expansion. We realized meaningful market share gains and saw growth across each of our three primary categories of hardlines, apparel and footwear," said Stack in the earnings release. "In 2016, we capitalized on opportunities in the marketplace, and further solidified our leadership position by enhancing the shopping experience in our stores, building brand equity and successfully relaunching our eCommerce business on our own web platform."
The chain has obviously learned the lesson from Sports Authority's collapse that it never pays to be complacent, even when things seem to be going well. Cutting vendors and making major inventory changes is never easy, but Dick's clearly has a willingness to make tough choices.
These moves will cause some short-term pain, but in the long run should pay off. The retailer needs to constantly evaluate its operations and adjust as the market changes if it wants to maintain its leadership position in the market.
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