Dick's Sporting Goods

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Dick's Sporting Goods ( DKS) has done a good job of holding onto its "league leader" status in the last few years. With just shy of 500 big box stores spread throughout the U.S. and another 81 Golf Galaxy locations under its belt, Dick's has a clear scale advantage over its competitors.

And in retail, scale matters.

Size means that DKS can negotiate favorable contracts with suppliers that typically have the pricing power in the relationship. It also means that the firm can reap major supply chain benefits and absorb costs across its entire store network, a factor that makes merchandising improvements that much more attractive.

Better still, despite the size advantages at DKS, there's still a whole lot more room for this chain to expand at this point.

Dick's focuses on higher-priced sports apparel and accessories, a niche that provides some protection from having to compete with cost leaders like Wal-Mart (WMT). In the next few years, private label brands on Dick's shelves should help to expand net margins and step the company away from selling overly commoditized products.

I also featured Dick's, one of the top-yielding specialty retail stocks, in " 7 Hot Stocks on Traders' Radars."

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