As it moves forward with a $2.4 billion acquisition of shoe retailer Foot Locker (FL), Dick’s Sporting Goods (DKS) is standing by its full-year profit guidance.
Morningstar Senior Equity Analyst David Swartz joined The Morning Brief to discuss Dick’s recent stock performance and provide his take on the strategic implications of the Foot Locker deal. Swartz also weighed in on Macy’s (M) and its ongoing efforts to execute a successful turnaround strategy.
When asked how does the Foot Locker acquisition impact how you’re thinking about the valuation of Dicks going forward, Swartz said, “It’s hard to say because it’s still early. The Foot Locker deal was just announced last week and people are still trying to assess how it’s going to impact Dicks in the short term and the long term. Uh, I was probably one of the few that actually thought that Dicks was quite overvalued when it was over $200 a share. I thought it was worth closer to $160. Um, so when the stock fell after the Foot Locker deal, to me that was partly because Dick’s stock was overvalued to begin with. I understand why Dick’s stock was at such a high level because Dicks has been performing extremely well in the last few years.”
He added, “Uh, the business has really transformed and it’s been outperforming everybody, certainly including Foot Locker. And so a lot of people are very unhappy that Dicks is combining with Foot Locker, which realistically is an inferior business, but I think that Dicks is buying it for a very fair price at about two and a half billion dollars for Foot Locker. The Foot Locker stock price has been weighed down. And so, even though Dicks is paying a premium over where the stock had been trading, uh, they’re still, I think, buying it at a fair price, at only about six times depressed EBITDA. And I think from Dick’s management’s perspective, they’re able to buy Foot Locker here for a very attractive valuation.
The deal was finalized on May 15, 2025, for a price of $2.4 billion. The acquisition of Foot Locker aims to expand Dick’s Sporting Goods’ reach in the sports retail market, particularly in areas like sneakers and athleisure.
In a joint press release, Foot Locker CEO Mary Dillon said the acquisition is a “testament” to all of the work her and her team have done to improve the business.
“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,” said Dillon. The CEO added she was “confident this transaction represents the best path for our shareholders and other stakeholders.”
Dick’s CEO Lauren Hobart said on a conference call that the two businesses will be run as separate entities and the consumer “may or may not know that Dick’s and Foot Locker are one.” “The combination of them for the consumer is not the most important thing, it’s making sure that there’s two powerful brands that are meeting all consumer needs, wherever, whenever, however they want to shop,” Hobart remarked.
Dick’s is almost double the size of Foot Locker in terms of revenue. In their most recent fiscal years, Dick’s reported $13.44 billion in revenue, while Foot Locker saw $7.99 billion.
Foot Locker, Inc. is expected* to report earnings on 05/29/2025 before market open. The report will be for the fiscal Quarter ending Apr 2025.
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