This is why Dick’s Sporting Goods is buying Foot Locker for $2.4 billion and why investors think it’s a huge risk
Here is why Dick’s Sporting Goods has made the decision to buy the huge footwear chain.
As is the way with the world in the modern age, the uncertainty surrounding Donald Trump and his rash financial decisions are causing chaos for markets across the globe. The latest firm to take the leap in the depths, past the knowable, and see what lies on the other side of Einstein’s equations is Dick’s Sporting Goods, who have plotted a huge deal to secure footwear chain Foot Locker.
Dick’s Sporting Goods are set to buy up rival Foot Locker in a $2.4 billion deal in a move that is aimed to future-proof them from Trump’s terrible tariffs.
Dick’s themselves said the transaction will help the store internationally for the first time; their plan is to maintain the Foot Locker name and run the shoe stores as a standalone business. It also added that it expects to continue to operate its 2,400 stores that span 22 countries as normal.
Trump tariffs causing chaos for fashion brands
However, the multi-billion dollar deal poses some significant risks. Foot Locker has been under pressure from the decline in America’s shopping malls and, along with the rest of the fashion business, is already struggling hugely due to the tariffs placed on almost every country in the world, many of which contribute to the production of materials.
Trump’s turbulent tariff policies cast a long shadow over the deal. According to the Footwear Distributors and Retailers of America, about 99% of shoes and sneakers sold in the U.S. are imported—primarily from China and Vietnam; the tariffs pose a serious risk to global supply chains and could lead to higher footwear prices for the American people, who will ultimately pay the price for Trump’s tantrums.
Despite a recent reboot and image overhaul, Foot Locker continues to swirl around the plughole. In March, they said their total fourth-quarter sales were down 5.8% year-over-year. The good news is that Foot Locker’s (FL) stock shot up 80% in premarket trading following the new and Thursday’s transaction marks a 66% premium of Foot Locker’s stock.
“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”, said Ed Stack, executive chairman for Dick’s.
Neil Saunders, managing director of GlobalData, said that “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.”
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