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Dick's Sporting Goods to buy Foot Locker for $2.4 billion
Foot Locker is the second major U.S. shoe company to be acquired in recent weeks as tariffs hit footwear industry.
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MoneyWatch
Retailers brace for tariff fallout
Dick's Sporting Goods is buying ailing shoe company Foot Locker for $2.4 billion, the second deal for a large U.S. footwear maker in recent weeks as the industry grapples with the impact of steep new American tariffs on their production.Â
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.
Skechers announced that it was being taken private earlier this month by the investment firm by 3G Capital in a transaction worth more than $9 billion.
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.
The footwear industry has been growing increasingly concerned over Mr. 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 price has tumbled more than 40% this year. The company's shares surged $10.78, or nearly 84%, to $23.65 before the start of trade on Thursday.Â
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 offers Dick's a lot of potential, namely its huge real estate footprint, and would give the Pittsburgh company its first foothold overseas.
"The addition of Foot Locker, with its 4.3% share of the sporting goods market, would produce an immediate boost," retail industry analysts Neil Saunders, managing director at GlobalData, said in an email. "It would also give Dick's substantially more bargaining power with national brands, especially in the sneaker space. As the chains operate in a similar segment there would also likely be scope for synergistic savings."
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.
"While there is some overlap between the locations, the nature of the stores is different, and Foot Locker would give Dick's access to a wider selection of malls and customers," Saunders said.Â
Dick's said that it expects to close 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 13% before the market open, while shares of Foot Locker surged more than 82%.
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