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Dick's Sporting Goods Stock Dives on Plan to Cut Brands by 20%

Benjamin Rains

Dick's Sporting Goods, Inc.’s DKS stock closed down 8.61% on Tuesday to $48.08 per share. The sporting goods giant announced plans to start carrying more of its private-label as it is set to drop 20% of the brands it currently carries.

Dick’s did not specify what brands it plans to drop to make it to its 20% cut. But Dick’s did make it clear it would not cut any of its 10 best-selling brands. “We have decided that we have got to pull the trigger, we’ve got to do this,” CEO Edward Stack said on Tuesday during a call with analysts.

“And it’s difficult to do. 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.”

The Pittsburgh-based retailer also announced Dick’s commitment to increase inventory from industry leaders Nike NKE and Adidas ADDYY. Dick’s recently reported a $46 million charge to write down inventory.

Dick’s plans to bolster its Carrie Underwood in-house brand Calia. The company also plans to launch two more private-label brands in 2017.

In the fourth quarter of 2016, Dick’s posted a profit of $90.2 million, down from $129 million in the same period in 2015. Revenue climbed 11% to $2.48 billion overall. Same-store sales are expected to rise between 3% to 4% in the first quarter of 2017.

Many of Dick’s major competitors have closed or filed for bankruptcy recently, including Golfsmith and Sports Authority. Still, Dick’s is fighting a similar uphill battle that is raging across the retail industry.

Dick’s stock has fallen from near its all-time of just over $60 per share in Dec. 2016 to its current $48.08 per share price. Dick’s is currently a Zacks Rank #3 (HOLD)

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