Dick’s Sporting Goods (DKS.N), opens new tab, has reached an agreement to acquire Foot Locker (FL.N), opens new tab, for $2.4 billion.
This transaction is the second significant footwear transaction of the month, following the acquisition of Skechers. The retailers are currently navigating turbulent demand and global trade uncertainties.
Dick’s gains a stronger foothold in the sneaker industry with over 3,200 stores and an entry into international markets as a result of the $24-per-share offer, which was announced by both companies on Thursday. This offer represents an 86% premium to Foot Locker’s most recent close.
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At a time when the Trump administration’s steep tariffs threaten to raise supply-chain costs for U.S. retailers and discourage consumer spending, the combined company could also benefit from better negotiating power with key vendors such as Nike (NKE.N), Adidas (ADSGn.DE), and Puma (PUMG.DE).
Joel Brock, a partner at the global business consulting firm West Monroe, stated, “Tariffs may be compel (the companies’) hand to a certain extent; however, this is also a strategic opportunity to enhance their buying power and acquire additional scale in the footwear market.”
On the news, Foot Locker’s shares increased by 85% to $23.81, following a 40% decline in the year to date. Dick’s Sporting Goods experienced a 14% decline.
According to John Kernan, an analyst at TD Cowen, the transaction would be a “strategic error” for Dick’s, as the company will be required to increase its investments in order to further scale and resolve Foot Locker.
In recent years, Foot Locker has experienced a decline in market share as a result of the rapid expansion of direct-to-consumer (DTC) businesses by brands such as Nike. Sales have also been affected by decreased consumer traffic to malls, where the majority of its stores are situated.
“The relationship between Foot Locker and Nike was a significant factor in the pressure they were experiencing,” Dick’s Chairman Ed Stack stated during a call with analysts. He was alluding to Nike’s transition to direct-to-consumer (DTC) under the leadership of former CEO John Donahoe.
Nike has now reverted to its previous approach under the leadership of new CEO Elliott Hill, prioritizing its partnerships with retailers.
The statement indicates that Dick’s anticipates operating Foot Locker as a separate business unit within its portfolio and preserving the Foot Locker brands.
In 2024, Foot Locker generated $8 billion in worldwide sales across 20 countries, including North America, Europe, and Asia.
In the past week, Skechers entered into a $9.42 billion acquisition agreement with private equity firm 3G, exiting the public markets after 26 years. This decision was made in response to the significant impact of U.S. tariffs on the popular shoe brand.
Dick’s anticipates financing the transaction with a combination of new debt and cash on hand, with the expectation that it will be finalized in the latter half of 2025.
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