Unfortunately for its shareholders the Vita Group Limited (ASX: VTG) share price has been one of the worst performers on the market today with a sharp decline.
At the time of writing its shares are down a whopping 15% to $2.73.
Today's decline is the result of a report in the Fairfax press which alleges that a leaked internal Telstra Corporation Ltd (ASX: TLS) document reveals that the telecommunications giant could be planning to take back control of some of its retail stores.
According to the report the document identifies 11 Vita Group-operated stores that Telstra believe would be more profitable under its own control. As a result, the telco giant may decide not to renew the dealership agreement for these stores.
While Telstra has not denied the existence of the document, it has stated that it was only an "internal draft developed for discussion purposes". It has denied that there are plans in place to amend its arrangement.
Should you buy the dip?
Whilst it would be tempting to snap up its shares after such a sharp drop, I think investors might be best giving Vita Group a wide berth for the time being.
The potential loss of around 10% of the stores it operates on behalf of Telstra would be a big loss to Vita Group and could make a notable impact on its narrow margins and slowing earnings growth.
For this reason I would suggest investors avoid Vita Group and focus on other retailers such as Premier Investments Limited (ASX: PMV) and Noni B Limited (ASX: NBL).
