In a significant development in the U.S. sporting goods and footwear industry, Dick’s Sporting Goods has announced its plan to acquire the struggling shoe company Foot Locker for a hefty $2.4 billion. This deal comes on the heels of another major transaction involving a large U.S. footwear maker in recent weeks, as the industry continues to grapple with the far-reaching impact of steep new American tariffs on production.
Dick’s Sporting Goods announced Thursday that Foot Locker will operate independently post – acquisition, preserving brands like Kids Foot Locker, Champs Sports, and atmos.
CEO Lauren Hobart expressed enthusiasm, stating the deal aims to build a global platform. By integrating iconic brands, modernizing stores, enhancing omnichannel shopping, and diversifying products, the combined entity will better meet customer needs. Hobart also stressed the potential for innovation, leveraging Dick’s operational strengths and Foot Locker’s sneaker culture expertise.
The acquisition of Foot Locker is not the only major event in the footwear industry recently. Earlier this month, Skechers announced that it was being taken private by the investment firm 3G Capital in a transaction valued at over $9 billion.
Under the terms of the Dick’s – Foot Locker deal, Foot Locker shareholders have the option to receive either $24 in cash or 0.1168 shares of Dick’s common stock for each Foot Locker share they own. The footwear industry has been growing increasingly worried about the trade war initiated by Mr. Trump, especially with countries like China. Many athletic shoe makers have made significant investments in Asian production facilities.
Shares of sporting goods and athletic shoe companies have faced downward pressure throughout the year. Foot Locker’s stock price, in particular, has plummeted by more than 40% this year. However, on Thursday, before the start of trading, Foot Locker’s shares experienced a remarkable surge of 10.78,or nearly 8423.65. In contrast, Dick’s stock dropped by more than 13% before the market opened.
According to the American Apparel & Footwear Association, about 97% of the clothes and shoes purchased in the U.S. are imported, mainly from Asia. Utilizing overseas factories has helped U.S. companies keep labor costs low. But neither these companies nor their overseas suppliers are likely to bear the brunt of price increases caused by the new tariffs.
Foot Locker offers multiple strategic benefits to Dick’s Sporting Goods. Its global network of 2,400 stores across 20 countries provides Dick’s with a major international presence. Retail analyst Neil Saunders of GlobalData notes that Foot Locker’s 4.3% market share would enhance Dick’s standing, boost its brand leverage, especially in sneakers, and likely yield cost savings due to similar market focuses.
Despite some store overlap, the different formats enable access to new mall locations and customer segments. With Foot Locker’s $8 billion annual global sales, the acquisition holds significant growth potential.
Dick’s Sporting Goods anticipates closing the Foot Locker acquisition in the second half of the year. However, the transaction is still subject to approval from Foot Locker shareholders.