Dick's Sporting Goods takes on major risk with $2.4 billion bet on Foot Locker

Dick's Sporting Goods' (DKS) large stake for Foot Locker (FL) whitethorn person plentifulness of pitfalls.

The institution announced connected Thursday a definitive statement to acquisition the sneaker concatenation for $24 per share, oregon $2.4 billion, a sizable premium compared to Foot Locker's closing terms of $12.87 connected Wednesday.

"With macro trends similar the increasing convergence of athletics and civilization ... we judge the semipermanent manufacture tailwinds stay beardown and that this expanded level is good positioned for semipermanent growth," CEO Lauren Hobart told investors connected a call.

While immoderate accidental this could bring successful caller customers, fortify Dick's concern with large brands similar Nike (NKE), and springiness the institution an planetary presence, others connected Wall Street aren't arsenic wide-eyed.

"The projected transaction would mean acquiring a structurally challenged, mall-based retailer with 2,410 small-format stores worldwide ... a dense dependence connected 1 marque [Nike] ... and a anemic operating borderline of 2.5% successful 2024 that would beryllium dilutive to Dick's 11.0% successful 2024," Telsey Advisory Group's Joe Feldman wrote successful a enactment clients.

Foot Locker posted a same-store income diminution of 2.6% successful preliminary archetypal 4th results, versus Dick's 4.5% growth. It has struggled with income maturation successful caller years and has been partially banking its turnaround connected a renewed narration with Nike. Roughly 60% of Foot Locker purchases are from Nike.

Foot Locker's banal surged implicit 80% connected Thursday, portion Dick's Sporting Goods sank 14% arsenic investors stewed implicit the fiscal risks.

"The manufacture is dealing with ongoing shifts toward direct-to-consumer distribution," Felman added, "and Foot Locker has been experiencing brushed request since 2018, but for the Covid twelvemonth successful 2021 ... Dick's is already positioned to execute powerfully with its existent signifier and strategical initiatives."

Retailers person been struggling successful 2025 with sinking user sentiments and Trump's tariff warfare with cardinal manufacturing countries similar China and Vietnam. Foot Locker's banal was down much than 40% twelvemonth to day anterior to the announcement.

Read more: What Trump's tariffs mean for the system and your wallet

The little valuation whitethorn person enticed buyers. The acquisition follows caller retail deals similar Skechers' (SKX) buyout by 3G Capital, Versace's merchantability from Capri Holdings (CPRI) to Prada (1913.HK), and Nordstrom's (JWN) take-private woody with its founding family.

However, "retail integrations thin to beryllium challenging," UBS expert Michael Lasser said successful a note. He pointed to examples specified arsenic "Family Dollar and Dollar Tree, General Parts and Advance Auto, Albertson's and Safeway, and adjacent Sears and Kmart."