Despite increasing comparable store sales 5.0% in Q4 and continuing its rapid e-Commerce growth, DICK’S Sporting Goods is slashing 20% of its 1,600 vendors to focus more on its private label brands. The company will launch two new private brands in Spring 2017, and expects the private label business to reach $1 billion in sales this year.
To close Q4, the retailer reported:
However, DICK’S now expects comparable store sales to increase at a slower pace throughout 2017 — approximately 2%to 3%— alarming investorsabout the brand’s futurerevenueprospects.
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DICK’Salready has seen some of its investments eat into profit. The retailer had $93 million in pre-tax charges, including $46 million in unsold inventory and another $47 million related to store closing charges and costs to convert former Sports Authority and Golfsmith stores.
The merchandising pivot signals that the brand may not be content with its positioning within the sporting goods sector.While the bankruptcies at Sports Authority, Golfsmith, Sport Chalet and most recently Eastern Outfitters have fortified Dick’s position as the top sporting goods retailer, the brand is playing its cards as if the sector’s problems will affect them down the line.
“We’d like to see how the whole thing shakes out,” said Ed Stack, Chairman and CEO of Dick’s Sporting Goods in a conference call.“There seems to be more consolidation probable in the marketplace that we see. I think this consolidation is not over yet and we’ve got to get through it all before we’re going to make any long-term targets.”
With the company expecting to open approximately 43 DICK’S Sporting Goods stores, nine Golf Galaxy stores and eight Field & Stream stores in 2017, it must continue an upward sales trajectory to justify the investment. DICK’S already has set sights on capturing displaced market share, with new store growth intended to focus on underpenetrated markets historically served by Sports Authority and Sport Chalet.
