The retail landscape is littered with failed mega-mergers, but that’s not stopping Dick’s Sporting Goods from trying its own hand at a big deal.
But it remains to be seen whether or not it can actually pull off that feat—and Wall Street has doubts. Dick’s shares were down 13% on Thursday morning, while Foot Locker shares nearly doubled on investor relief about the potential advantages for a long-declining stock.
GlobalData, a research firm, estimates that Dick’s has an 11.1% share of the U.S. sporting goods market, up 1.6 percentage points from before the pandemic. Foot Locker has about 4.3%, giving Dick’s, which will keep the Foot Locker brand and chain operating separately, a new avenue for growth in the States, but also abroad. But adding their market shares is more than just a matter of simply arithmetic. “If the purchase goes through, Dick’s would be inheriting a business that remains on the back foot,” says GlobalData’s managing director Neil Saunders.
Dick’s CEO Lauren Hobart has been successful in her efforts to improve the retailer’s e-commerce capabilities and also invest in its physical stores. But no matter how talented an executive is, the turnaround of a damaged brand is difficult, distracting and offers no guarantees.
“Can Dicks’ management succeed in improving Foot Locker’s fortunes where a respected and successful executive (Mary Dillon) was unable?,” said John Zolidis of Quo Vadis Capital, an equity research firm. “The Dick’s and FL combination threatens to create even more banner conflict, overlapping real estate, increased dependence on Nike and adds significant operational complexity.”
In other words, Wall Street says don’t do it, Dick’s.
