DICK'S Sporting Goods Acquires Foot Locker in $218 Billion Merger

DICK'S Sporting Goods entered into an Agreement and Plan of Merger with Foot Locker, with Merger Sub merging into Foot Locker, resulting in Foot Locker becoming a wholly owned subsidiary of DICK'S Sporting Goods. The unaudited pro forma condensed combined financial information reflects the transaction's impact on the companies' financial statements.

DICK'S Sporting Goods (NYSE: DKS) reported its Q2 2025 financial results, showcasing a 5% year-over-year increase in net sales to $3.65 billion, with non-GAAP earnings per share (EPS) remaining flat at $4.38 [1]. The company also raised its full-year guidance following the strong quarter, projecting comparable sales growth of 2.0% to 3.5% and EPS of $13.90 to $14.50. This outlook reflects the company's confidence in its strategic initiatives, including the upcoming acquisition of Foot Locker.

The quarter was marked by record sales and higher gross margins, with gross margin improving by 0.33 percentage points compared to Q2 2024. This growth was driven by higher transaction volume and average purchase value, supported by the company's omni-channel model, which allows for flexible inventory management and convenient customer experiences. However, operating expenses rose by 10.3% year-over-year, primarily due to pre-opening expenses and merger and integration costs related to the pending Foot Locker acquisition. This led to a narrowing of the operating margin by 1.13 percentage points compared to the previous year.

The company's cash and cash equivalents decreased to $1.23 billion from $1.69 billion in the previous year, primarily due to share repurchases, higher dividends, and capital expenditures. Inventory levels increased by 7%, indicating strong demand for the company's products. DICK'S also declared a quarterly dividend of $1.2125 per share, continuing its trend of stable and rising shareholder returns.

The acquisition of Foot Locker, valued at $2.4 billion, is expected to help grow the company's footwear category and provide new opportunities for expansion into premium market segments. The merger aims to combine 4,200 stores and digital capabilities but faces integration risks, including cultural clashes and Foot Locker’s $38M 2025 losses [2]. The projected annual synergies of $100–$125 million underscore the financial logic of the deal. However, investors remain skeptical, with the stock dropping by 13% post-announcement due to concerns over debt and execution risks.

Investors should monitor how DICK'S Sporting Goods manages its rising cost structure, especially as SG&A outpaces revenue gains. The closing and integration of the Foot Locker acquisition will be a major variable for both risks and potential growth, introducing new complexity to operations. Management has not provided pro-forma guidance inclusive of Foot Locker at this stage, so the real impact will only become evident as the transaction closes and integration progresses.

References:
[1] https://www.aol.com/finance/dicks-sporting-goods-sales-5-112740170.html
[2] https://www.ainvest.com/news/dick-sporting-goods-earnings-beat-foot-locker-acquisition-catalyst-long-term-growth-2508/