Dick’s Sporting Goods Inc. struck a deal to buy Foot Locker Inc. for $2.4 billion as the retail market sees strategic players emerge amid increasing macroeconomic uncertainty.
Foot Locker will bring 2,400 stores in 20 countries, along with additional doors handled by licensees, once the deal closes in the second half of this year. The shoe retailer had total sales of $8 billion last year across.
The Foot Locker portfolio also includes Kids Foot Locker, Atmos, Champs and WSS.
Dick’s will use cash and debt to fund the purchase, which equates to $24 per share. The acquisition reflects a multiple of 6.1x the Foot Locker’s adjusted earnings before interest, taxes, depreciation and amortization.
Pittsburgh-based Dick’s gains a significantly larger physical retail footprint with Foot Locker. Dick’s, in comparison, counts 850 doors across its namesake business, Golf Galaxy, Public Lands, Going Going Gone! and Dick’s House of Sport.
Dick’s Executive Chairman Ed Stack called out Foot Locker’s “cultural significance and brand equity” in Thursday’s announcement on the deal. Stack made clear, Dick’s “operational expertise” would be used to grow Foot Locker.
Dick’s, which started in 1948, has scaled through a series of acquisitions.
On the West Coast, that’s included the Southern California retailer Chick’s Sporting Goods, which it paid $71 million for in 2007.
In 2016, the company bought Colorado-based Sports Authority’s intellectual property out of bankruptcy. That same year, San Diego-based sports management technology company Affinity Sports agreed to be sold to Dick’s. Financial terms of that deal were not disclosed.
Can Dick’s Help Foot Locker?
Foot Locker CEO Mary Dillon said the deal marks a “new chapter” for Foot Locker as it aims to reposition itself as the go-to for “sneaker culture.”
It’s been a long path to reach that goal.
The shoe retailer’s made attempts to improve its stores and digital experiences. Still, the highly promotional environment coming out of the pandemic, when retailers and brands were sitting on too much apparel, hasn’t helped.
The company said Thursday in preliminary results for its fiscal first quarter ended May 3 that it missed the mark on expectations as traffic to stores and online slowed.
“We continued to manage our promotional levels and maintain inventory and expense discipline, and we have taken actionable steps to advance these efforts and remain nimble and well positioned in an uncertain macroeconomic backdrop,” Dillon said in a statement on the financial results.
Same-store sales fell 2.6 percent. North America same-store sales fell by half a percent.
The company said it expects to record a net loss of $363 million in the May quarter, swinging into the red after generating net income of $8 million in the year-ago period.
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