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May 15, 2025
Should Dick’s Sporting Goods Acquire Foot Locker?
Shares of Dick’s Sporting Goods fell about 15% on Thursday on news of its blockbuster deal to acquire Foot Locker, apparently due to investor concerns over turnaround prospects for the long-struggling sneaker chain.
Dick’s agreed to pay $24 per share, or $2.4 billion, a sizable premium compared to Foot Locker’s closing price of $12.87 on Wednesday. Shares of Foot Locker soared 86% on the news. Dick’s plans to keep its stores separate from Foot Locker’s.
The move will enable Dick’s to reach new customers. Dick’s targets a middle- to upper-middle income customer buying gear for playing sports while Foot Locker targets a lower-income household, as well as a younger and more fashion-forward clientele.
Ed Stack, Dick’s’ executive chairman, said on an analyst call, “They’re in places that we’re not going to be able to find 50,000 square feet or 60,000 square feet [for a Dick’s store]. So, they’ve got stores and the consumer that we’re not going to get based on our real estate strategy.”
The deal would give Dick’s its first international presence, with a third of Foot Locker’s locations located outside the U.S.
Finally, the deal would more than double footwear revenue for Dick’s, strengthening its partnerships with Nike and Adidas as well as upstarts such as Hoka and On. Negotiating leverage will also be gained over vendors and landlords.
The merger is projected to deliver cost savings of $100 million to $125 million in the medium term through direct sourcing and procurement efficiencies and be accretive to earnings per share in the first full fiscal year after closing.
Critics see Dick’s taking on too much risk in acquiring Foot Locker, which has seen three straight years of sales decline.
Telsey Advisory Group’s Joe Feldman wrote in a note, “The proposed transaction would mean acquiring a structurally challenged, mall-based retailer with 2,410 small-format stores worldwide… a heavy dependence on one brand [Nike]… and a weak operating margin of 2.5% in 2024 that would be dilutive to Dick’s 11.0% in 2024.”
In downgrading Dick’s shares to “Hold” from “Buy,” TD Cowen analyst John Kernan called the potential acquisition a “strategic mistake,” leaving Dick’s more exposed to streetwear and lifestyle fashion trends, mall-based retailing, and “smaller, more nimble sneaker retailers and marketplaces that are gaining share.” Kernan prefers Dick’s to be focused on House of Sport, its next-generation stores, and the GameChanger youth-sports app, which are “lower risk and higher return on capital investments than purchasing Foot Locker.”
Michael Lasser, at UBS, in a note cited risks around retail integrations, particularly when an outperformer acquires an underperformer, citing Dollar Tree and Family Dollar, General Parts and Advance Auto, Albertsons and Safeway, and Sears and Kmart.
Stack on the call said he expects Dick’s will improve Foot Locker’s results, citing footwear as a “core competency” at Dick’s as well as his confidence in Nike’s new team. He said, “If we didn’t see this clear line of sight to this or we thought that this was going to impact what we’re able to do at Dick’s, we wouldn’t be doing it.”
Discussion Questions
Do you see more potential benefits than risks in Dick’s Sporting Goods acquiring Foot Locker?
How confident are you that Foot Locker’s prospects will improve under Dick’s ownership?
Poll
Loading …BrainTrust
Pamela Kaplan
Principal, PK Consulting
Bob Amster
Principal, Retail Technology Group
Mohamed Amer, PhD
CEO & Strategic Board Advisor, Strategy Doctor
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At present, Dick’s is the largest specialist player in the US sporting goods market with an 11.1% share. It has some headroom for growth, but there are limits. Acquiring Foot Locker gives it an additional 4.3% and exposure to international markets. There will be opportunities for synergistic savings and for better negotiating power with brands like Nike. The downside is that Foot Locker is not totally on the front foot and is still working through a bunch of issues. This will now fall on Dick’s to resolve – and while Dick’s is hugely successful it is not tried and tested in the acquisition and turnaround space. Therefore this is a risk.
Dick’s ownership provides some financial cover for Foot Locker in the short-term, anyway. The upside in a Dick’s purchase here could be in the smaller, limited footage of FL retail spaces where large branded sporting goods stores are unable to go. Each location should be evaluated to determine which ones remain as athletic shoes only, while the others can offer a blended merchandising plan of sporting goods and athletic shoes.
I’m wondering about the resources to be set aside to turnaround & then run FL as separate stores. How patient are investors?
Good point. Time may not be on their side to do this properly.
Acquiring Foot Locker gives Dick’s Sporting Goods a global footprint for continued growth. Communities of sports lovers remain a bright spot in retail even in 2025’s rocky market. Women’s leagues and major global events will drive traffic over the coming years.
There is definitely an inherent risk here, but the growth opportunities are very strong. I think this is a smart move If Dick’s business plan is to go international and have a heavier shoe assortment, as well as acquire new customers. Having this positioning will certainly help with Landlord and vendor negotiations to potentially bring down costs. They need to tread softly to ensure they didn’t bite off more than they can chew. Footlocker was struggling for awhile, I’m excited to see what Dick’s can do.
I think the issue here is really the price, more than purchase, per se: Foot Locker may be a struggling retailer, maybe even a has-been, but it still has a recognizable name, many customers, and many locations. At worst they’re buying inventory and hiring staff.. apparently the “Market” fears that’s all they’re getting.
This is a tricky situation, but Dick’s executive team are conservative, and if they’re doing it, the the deal must have a high probability of being accretive. If there’s little demographic and geographic overlap, then it may be worth the risk. But things can go side-ways in a hurry (e.g. tariffs), and mall-based, streetwear stores is not what Dick’s has experience with. I appreciate Dick’ management taking a swing at this – but I wonder if, given all the uncertainty – the timing is not ideal.
The acquisition of Foot Locker by Dick’s Sporting Goods represents a bold and strategic leap towards international expansion and capitalizing on the booming sneaker market. However, this move carries considerable risks, primarily due to the high premium paid for Foot Locker. While this acquisition opens doors to market expansion, a diversified customer base, and enhanced vendor relationships, it also presents significant financial and operational hurdles, particularly given Foot Locker’s current challenges and the complexities of integrating two distinct corporate cultures.
For this acquisition to succeed, Dick’s must confront the challenges posed by Foot Locker’s reliance on mall-based stores while placing its confidence in the potential success of Foot Locker’s “Lace Up Plan” revitalization strategy. Additionally, navigating tariff uncertainties, merging corporate cultures seamlessly, and capitalizing on the complementary customer demographics will be crucial—without compromising the core strengths of either brand.
Ultimately, the strategic intent behind this acquisition outweighs immediate financial concerns. It appears that Dick’s board is intentionally positioning the company for long-term transformation into a global leader in sports retail, rather than solely focusing on short-term profits. This vision could redefine the industry landscape if executed successfully.
The vast majority of mergers are failures. The culture of the acquired company disappears and the acquiring company often doesn’t know what they acquired. The reality is that it’s rare to see to see successful mergers.
Questionable at best, and the question is: what and how much can DSG infuse into Foot Locker to turn it into a successful business? Experience? Savvy management? Efficiency of scale? Money? Foot Locker is the equivalent of one department in a DSG store, but catering to a different demographic.
There are synergies between big-box Dick’s stores and smaller Foot Locker stores. Savings and negotiating opportunities with brands are one thing, but the biggest opportunity is the reach to more customers. As Dick’s grows and expands, the goal is to be the “go-to” retailer for anything sports-related. This acquisition could make it easier for customers to join the Dick’s family of customers.
So does this hold… “ Dick’s plans to keep its stores separate from Foot Locker’s” ??
In my opinion, this deal gives Dick’s a real chance to grow in ways that match their long-term goals. It helps them connect with a younger, more sneaker-focused audience, which is different from their usual customer base. Foot Locker also strengthens Dick’s standing in the footwear market, by giving them opportunity to partner with brands like Nike, Adidas, Hoka, and On.
They also have an opportunity to reduce costs by combining their buying and sourcing efforts, which should help increase profits over time. Foot Locker’s smaller stores give Dick’s better access to high-traffic urban areas where large stores aren’t practical. On top of that, the international store network gives Dick’s a global presence without the time and cost of building from scratch.
By bringing their expertise to Foot Locker, Dick’s can enhance the product selection and strengthen relationships with key brands. From a market strategy viewpoint, I think the potential benefits justify taking on the risks involved.