Dick’s Sporting Goods announced on Thursday its intention to acquire competitor Foot Locker, aiming to broaden its international reach, attract a new demographic of consumers, and dominate the Nike sneaker segment.
As part of the agreement, Dick’s will finance the $2.4 billion acquisition through a mix of existing cash and new debt. Shareholders of Foot Locker can choose to receive either $24 in cash—offering a significant 66% premium based on the average share price over the past two months—or opt for 0.1168 shares of Dick’s stock.
Foot Locker’s Chief Executive Officer, Mary Dillon, has been spearheading a major turnaround for the footwear retailer. Despite some positive trends, the company has struggled against broader market factors such as tariff challenges and tepid consumer demand, which have negatively impacted its stock value. Foot Locker shares experienced a 41% decline so far this year as of Wednesday’s closing.
In a shared statement, Dillon characterized the acquisition as a validation of the improvements her team has implemented at Foot Locker.
“By joining forces with DICK’S, Foot Locker will be even better positioned to expand sneaker culture, elevate the omnichannel experience for our customers and brand partners, and enhance our position in the industry,” Dillon explained.
She expressed confidence that the transaction represents the optimal path forward for shareholders and stakeholders alike.
While the two companies have historically been rivals in selling similar brands, Dick’s nearly doubles Foot Locker’s revenue, with Dick’s reporting $13.44 billion in revenue compared to Foot Locker’s $7.99 billion in their latest fiscal years.
Dick’s has indicated that it intends to maintain Foot Locker as a separate business unit, preserving its distinct brands, including Foot Locker Kids, WSS, Champs, and atmos.
Dick’s CEO Lauren Hobart clarified during a conference call that the two businesses will operate independently, stating that customers “may or may not know that Dick’s and Foot Locker are one.”
“The combination of them for the consumer is not the most important thing; it’s ensuring that there are two powerful brands meeting consumer needs across all shopping preferences,” Hobart added.
This merger unites two well-established names in the sports retail industry and equips Dick’s with a substantial edge in the wholesale sneaker market, particularly regarding Nike products.
At present, Nike’s principal wholesale partners include Dick’s, Foot Locker, and JD Sports. If the merger receives approval, the new entity could significantly strengthen its foothold in the market at a time when Nike is increasingly dependent on wholesale partners.
“Dick’s Sporting Goods and Foot Locker are two of the most storied and respected brands in our industry and have been our valued partners for decades,” said Nike CEO Elliott Hill in a statement. “Each has their own loyal consumer following and deep understanding of the needs of athletes. I am confident that together, they will help elevate sport and continue to accelerate the growth of our industry.”
The acquisition will also enable Dick’s to venture into international markets, leveraging Foot Locker’s presence, which spans 2,400 retail locations across 20 countries. This expansion allows Dick’s to tap into a segment of consumers that typically does not frequent its stores. The typical Dick’s customer is characterized as affluent, suburban, and older, whereas Foot Locker attracts a younger, urban customer base, often from lower- to middle-income households. Engaging this demographic is crucial for Dick’s long-term growth and competitiveness.
While Hobart noted that the company is not prioritizing international expansion at this moment, the potential market Dick’s is entering could grow from $140 billion to $300 billion thanks to Foot Locker’s global operations.
The merger does raise significant antitrust concerns, but observers on Wall Street predict that the current Federal Trade Commission under President Donald Trump’s administration may be more supportive of mergers.
Hobart expressed optimism, stating that the companies “are not expecting any regulatory concerns” from the FTC.
Following the announcement of the deal, Foot Locker’s stock surged over 80%, while shares of Dick’s dropped approximately 15%, as investors voiced concerns about the merger’s potential impact on financial outcomes.
Despite these concerns, Dick’s anticipates that the acquisition will positively affect earnings in the first full fiscal year post-closing, with projections of $100 million to $125 million in cost synergies. However, Foot Locker has been facing longer-term challenges, particularly with a large number of mall-based stores that expose it to economic fluctuations, especially given its customer demographic.
Foot Locker has reviewed its store locations and indicated that certain closures may occur, but Hobart reassured stakeholders that the number of shutdowns would not be “significant.”
In a Thursday note, TD Cowen characterized the deal as a “strategic mistake,” downgrading Dick’s shares from buy to hold. Analyst John Kernan noted that the acquisition is likely to yield low returns and present clear risks regarding synergies, integration, and the structural integrity of Foot Locker’s operations. He anticipates low capital returns and heightened balance sheet risks.
“There is little to no precedent of M&A at scale creating value for shareholders within Softlines Retail. In our view, there are numerous examples of M&A diminishing billions in value in this sector,” Kernan remarked.
Dick’s Executive Chairman Ed Stack acknowledged that skepticism about the merger is expected but emphasized the confidence both companies have in their ability to navigate the integration process successfully.
“We’re pretty conservative. We don’t have a lot of big egos here,” Stack stated. “If we didn’t see this clear line of sight, or if we thought this would impact what we’re able to do with Dick’s, we wouldn’t be doing it.”
Both businesses released their anticipated fiscal first-quarter results concurrently with the merger announcement. Foot Locker reported a 2.6% decline in comparable sales from the previous year, primarily due to a slowdown in international markets, and projected a net loss of $363 million for the period, compared to a net income of $8 million from the previous year. This loss reflects $276 million in charges mainly related to trademark and goodwill impairments.
Conversely, Dick’s reported a 4.5% growth in comparable sales and earnings per share of $3.24.
“We are very pleased with our strong start to the year and our demonstrated sustained growth,” said Hobart. “The strength of our business puts us in a great position for our proposed acquisition of Foot Locker — a transformative step to accelerate our global reach and drive significant value for our athletes, teammates, partners, and shareholders.”
