Dick’s Sporting Goods Bet Big on Sneakers With Foot Locker. It Backfired.

Dick's Sporting Goods reported a stronger-than-expected holiday quarter, but provided weak profit guidance for fiscal 2026, largely due to its acquisition of Foot Locker. The company expects adjusted earnings per share for fiscal 2026 to be between $13.50 and $14.50, which is lower than the $14.67 analysts anticipated. This guidance reflects the ongoing challenges and costs associated with integrating Foot Locker, which Dick's acquired in September 2025 in a $2.5 billion deal.

The acquisition significantly boosted Dick's sales, with fourth-quarter revenue rising to $6.23 billion, up from $3.89 billion a year earlier. However, net income declined by 57% to $128.3 million, or $1.41 per share, from $299.97 million, or $3.62 per share, in the prior year. Excluding one-time acquisition-related items, adjusted earnings were $3.45 per share, surpassing the $2.87 expected by analysts. The lower profit margin from the Foot Locker segment, which operated at 0.98% compared to Dick's segment at 10.69%, was a primary factor in the consolidated gross profit margin decline.

Dick's is undertaking costly efforts to turn Foot Locker around, including clearing stale inventory and closing unproductive stores. These integration efforts are expected to cost between $500 million and $750 million, with approximately $390 million recorded in fiscal 2025 and more anticipated in the current fiscal year. In fiscal 2025, 57 Foot Locker, Champs, Kids Foot Locker, and WSS stores were shuttered globally. Despite these short-term financial headwinds, Dick's leadership, including Executive Chairman Ed Stack and CEO Lauren Hobart, expressed confidence that Foot Locker will return to both profit and sales growth in 2026, with initiatives like the "Fast Break" pilot program showing encouraging early results.

Analysts have mixed views on the acquisition's long-term impact. While some see Dick's as a dominant sports retailer temporarily penalized for a well-timed acquisition, others are skeptical due to the dilution and the time it will take for Foot Locker's earnings to catch up. Truist raised its target to $270 with a Buy rating, while Jefferies raised its target to $224 with a Hold rating. The market's reaction saw Dick's stock fall after its Q1 2026 earnings due to the dilution from 9.6 million new shares issued as part of the deal.