U.S. Markets closed

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)

Long-Term Buys You Won't See in the News

The stocks you see in today's headlines may not be in the news tomorrow or next week. If you're looking for profitable long-term investments, you may be interested to see what Zacks Research is recommending to our private members. These moves have double and triple-digit profit potential. Starting now, you can look inside our stocks under $10, home run and value stock portfolios, plus more. Want a peek at this exclusive information? Click here>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Dick's Sporting Goods Inc (DKS): Free Stock Analysis Report
Nike, Inc. (NKE): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research