In five years, the Dick's stock price has soared over 500%, driven by a winning strategy: large stores on the outskirts of cities and innovative customer experiences, such as climbing walls in some concept stores. Foot Locker, meanwhile, is suffering from the decline of shopping malls and a broken business model: its sales have been stagnant since 2022.

The deal, worth $2.5bn, enables Foot Locker shareholders to choose between $24 in cash per share or 0.1168 Dick's shares. The immediate result: Foot Locker's share price, which had been stagnating at around $12 since the tariffs were imposed, has skyrocketed 85%.

A bet on complementarity

Dick's makes no secret of its ambition of becoming a global player. Thanks to Foot Locker's 2,400 stores in 24 countries, the group is expanding its market from 140 million to 300 million customers. It also sees geographical complementarity: Dick's stores are often located outside city centers, while Foot Locker is firmly rooted in downtown areas.

The positioning of the two brands is also seen as complementary: Dick's targets athletic performance, while Foot Locker cultivates a more lifestyle-oriented image. This is a way for the American giant to attract a younger audience.

Nike in its sights

Dick's management says it consulted with major brands, including Nike, before launching the initiative. This is a significant detail: Dick's and Foot Locker are among the three leading distributors of the swoosh brand. As Nike partially reverses its direct sales strategy to reinvest in wholesale, Dick's hopes to gain a competitive advantage and even a more favorable bargaining position in the future.

Synergies and caution

The group estimates the synergies at $125m in the medium term, thanks in particular to its strengthened bargaining power with suppliers such as Nike and Hoka. It also sees strong growth potential in clothing sales, which are still under-exploited at Foot Locker.

No changes are planned for consumers: both brands will remain separate and Foot Locker will retain its autonomy. Dick's says it has "clear visibility" on the turnaround of its target.

Some analysts hail the acquisition as timely, made possible by Foot Locker's low valuation. Others point to the risks of integrating a struggling group and are concerned about the difficulty of delivering on the promised synergies. John Kernan, TD Cowen There are countless examples of mergers and acquisitions destroying billions of dollars of value since we have covered the sector. He believes that investments in Foot Locker will be less profitable than developing its stores.

The group is trying to be reassuring: the transaction, financed through a mix of debt, shares, and cash, could have been financed entirely through debt without significantly weakening its balance sheet.