From “A Position Of Strength” (May 2025):
“One notable deal signal is the aforementioned ‘cheap’ price tag. At Foot Locker’s 2023 Investor Day, management detailed a long-term plan to reach >$800 million in FY26e EBIT; needless to say, if they were truly confident in that vision, they would not have sold the business for anywhere close to ~$2.4 billion. The more plausible answer is that Foot Locker’s financial struggles were expected to persist – and, from Dick’s perspective, that the expected future benefits are dependent upon their influence and ownership.”
In early 2025, the Dick’s investment thesis was a simple one: a management team with a clear long-term strategic vision for their business, along with straightforward capital allocation priorities. The company had meaningfully improved its unit economics, and was evolving its store footprint to the “House Of Sport” and “Field House” experiential prototypes. In addition, they’d repurchased ~$2.5 billion of stock in the preceding four years, which was meaningfully reducing the share count. It was a straightforward strategic vision, and the financial results suggested it was going according to plan.
Then they decided to change course.
In May 2025, they announced the ~$2.4 billion acquisition of Foot Locker. While management argued this was similar to deals like Galyan’s in the early 2000s, there were two key differences: first, it nearly quadrupled their total store count, and second, it gave them a significant international presence.
On the Foot Locker deal call, Chairman Ed Stack said they’d long considered this move: “It’s something we’ve looked at and thought about for a long time.”
It’s looking like they should’ve thought about it even more.