On the heels of Skechers’ $9 billion go-private deal, all eyes are now on Dick’s Sporting Goods Inc.’s move to acquire Inc. — with Nike potentially becoming the big beneficiary.
Dick’s said it plans to acquire Foot Locker for $2.4 billion, or $24 a share, representing an acquisition multiple of 6.1 times fiscal 2024 adjusted EBITDA (earnings before interest, taxes, depreciation and amortization. The per-share price represents a 66 percent premium to the Foot Locker’s 60-trading day volume weighted average price. Foot Locker shareholders can elect to receive either $24 in cash or 0.1168 shares of Dick’s common stock for each share of Foot Locker common stock. The transaction, subject to Foot Locker shareholder approval and other customary closing conditions, including regulatory approvals. It is expected to close in the second half of 2025.
“We believe there is meaningful opportunity for growth ahead. By applying our operational expertise to this iconic business, we see a clear path to further unlocking growth and enhancing Foot Locker’s position in the industry,” Dick’s chairman Ed Stack said. “Together, we will leverage the complementary strengths of both organizations to better serve the broad and evolving needs of global sports retail consumers.”
“We look forward to welcoming Foot Locker’s talented team and building upon their expertise and passion for their business, which we intend to honor and amplify together,” Lauren Hobart, Dick’s president and CEO, added in a statement.
Foot Locker CEO Mary Dillon said that by joining forces with Dick’s, “Foot Locker will be even better positioned to expand sneaker culture, elevate the omnichannel experience for our customers and brand partners, and enhance our position in the industry.”
Both retailers said the combined entity allows Dick’s to reach new customers across the U.S. through Foot Locker’s store portfolio, as well as internationally. The combined entity also can reach a broader range of consumers from performance-focused athletes to sneakerheads, while learnings from Dick’s House of Sports and Foot Locker’s Reimagined Concept stores can provide customers with an immersive and innovating retail experience.
One key benefit for both will be stronger relationships with key brand partners through multiple platforms for both established and emerging brands to showcase their assortments, connect with athletes and increase visibility on a global level.
Jefferies analyst Randal J. Konik on Wednesday said in a research note that the acquisition of Foot Locker by Dick’s Sporting Goods is a “positive development for Nike,” which has strong partnerships with both retailers. “Dick’s is widely regarded as a highly capable and efficient operator, and its ownership could bring operational improvements to Foot Locker,” he concluded.
Konik said that as Nike CEO Elliott Hill strengthens an already robust relationship with Dick’s, the consolidation of the two retailers “could enhance Nike’s retail presence and brand consistency.” He noted that Nike leads footwear sales at Dick’s, a key growth category that accounts for 28 percent of the sporting goods retailer’s business, while the Swoosh represents half of Foot Locker’s sales, “underscoring the strategic importance of both channels to Nike’s wholesale strategy.
Moreover, a better run Foot Locker under Dick’s leadership would be a net benefit for Nike by reinforcing its distribution strategy and solidifying its position in athletic retail, Konik said.
Konik’s colleague Jonathan Matuszewski said the 6 times EBITDA multiple is at the low end for retail transactions, with 9 times the median and nearly 12 times at the high end. He that Dick’s has “clean balance sheet” and the $1.7 billion in cash means Dick’s won’t have to add too much debt to it books.
He saw five strategic benefits from the deal. One big one? Greater negotiating leverage with suppliers.
The analyst said Dick’s stocks 1,400 vendors, with Nike Inc. representing 25 percent of cost of goods sold (COGS). Last year, 59 percent of Foot Locker’s COGS were connected to Nike. A combined entity could translate to about $8 billion in total sales from Nike. “Naturally, we believe the larger entity could also realize indirect procurement savings, improved ad and media buying terms, and shared services efficiencies,” Matuszewski said.
From a competitive point of view, another strategic benefit of the deal could be pressure on smaller players through consolidation of industry share. Matuszewski said Dick’s defines its total addressable market as $175 billion, and that it has a 7.7 percent market share on a standalone basis. When combined, the revenue base for Dick’s and Foot Locker is more than $21 billion and the immediate broadening of Dick’s total market would give it a U.S. market share of about 11 percent. The combined entity would also have more than 3,200 stores, generating more than $10 billion in footwear and more than $5 billion in apparel revenue annually.
Dick’s targets the middle- to upper-middle income customer, while Foot Locker’s shopper earns a below-average household income — giving the new entity a broader range of consumers to target.
In addition, the deal could pave the way for the expansion of Dick’s nameplate overseas. Foot Locker operates 33 percent of its store network outside of U.S.
What’s more, the combined company could potentially leverage GameChanger, the youth sports app Dick’s acquired in 2016 that offers free sport team management, streaming and scorecard, and which Dick’s has grown to $100 million in revenue and could grow higher with a Foot Locker tie-in.
Matuszewski didn’t think there would be other bidders, even thought the multiple is on the low end, and that’s because Dick’s can drive greater synergies than others.
Corey Tarlowe, a Jefferies colleague who also covers Foot Locker, said: “Given Dick’s and Foot Locker’s category overlap and Foot Locker’s recent diversification strategy, we believe this deal is strategically sound.” He noted that Foot Locker’s efforts connected to its strategic turnaround plan “Lace Up,” launched in 2023, have “underwhelmed.”