Dick’s Sporting Goods is buying the struggling footwear chain Foot Locker for about $2.4 billion, the second buyout of a major footwear company in as many weeks.
Dick’s said Thursday that it expects to run Foot Locker as a standalone unit and keep the Foot Locker brands, which include Kids Foot Locker, Champs Sports, WSS and Japanese sneaker brand atmos.
“Sports and sports culture continue to be incredibly powerful, and with this acquisition, we’ll create a new global platform that serves those ever evolving needs through iconic concepts consumers know and love, enhanced store designs and omnichannel experiences, as well as a product mix that appeals to our different customer bases,” Dick’s CEO Lauren Hobart said in a statement.
Both companies are led by women. Hobart became CEO at Dick’s in 2021, while Mary Dillon has served as CEO of Foot Locker since 2022.
Related:Foot Locker’s bringing 200-plus workers to new tech hub in northwest Dallas
Foot Locker announced a turnaround plan in 2023 in part to help improve its relationship with big brands. Speaking at the J.P. Morgan Retail Round Up Conference last month, Dillon said that Foot Locker is working closely with Nike, specifically in categories including basketball, sneaker culture and kids.
Earlier this month Skechers announced that it was being taken private by the investment firm by 3G Capital in a transaction worth more than $9 billion.
The retail industry has been growing increasingly concerned over President Donald Trump‘s trade war with other countries, particularly China. Athletic shoe makers have invested heavily in production in Asia.
Shares of sporting goods and athletic shoe companies have been under pressure all year. Foot Locker’s stock has plunged 41% this year. It is also facing pressure elsewhere, with major athletic companies like Nike and Adidas shifting their sales strategies.
Skechers had fallen almost 8% this year.
About 97% of the clothes and shoes purchased in the U.S. are imported, predominantly from Asia, according to the American Apparel & Footwear Association. Using factories overseas has kept labor costs down for U.S. companies, but neither they nor their overseas suppliers are likely to absorb price increases due to new tariffs.
Foot Locker, based in New York City, offers Dick’s a lot of potential, namely its huge real estate footprint, and would give the Pittsburgh company its first foothold overseas.
Foot Locker has about 2,400 retail stores across 20 countries in North America, Europe, Asia, Australia and New Zealand. It also has a licensed store presence in Europe, the Middle East and Asia. The company had global sales of $8 billion last year.
Jefferies analyst Jonathan Matuszewski said that about 33% of Foot Locker’s sales come from outside the United States. He anticipates that the combined company would generate approximately 12% of sales internationally on a pro forma basis.
The deal also broadens Dick’s customer base, with sneaker collectors anxiously anticipating new drops from Foot Locker.
Neil Saunders, managing director of GlobalData, said in an emailed statement that Foot Locker, which has a 4.3% share of the sporting goods market, would give an immediate boost to Dick’s.
“It would also give Dick’s substantially more bargaining power with national brands, especially in the sneaker space,” he added.
Foot Locker shareholders can choose to receive either $24 in cash or 0.1168 shares of Dick’s common stock for each Foot Locker share that they own.
Dick’s said that it anticipates closing on the Foot Locker deal in the second half of the year. The transaction still needs approval from Foot Locker shareholders.
Dick’s stock dropped more than 10% before the market open, while shares of Foot Locker surged more than 82%.
