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Dive Brief:
Dick’s Sporting Goods and Foot Locker continued on their recent trajectories in Q2, ahead of their planned merger set to close on Sept. 8. Dick’s saw sales grow 5% in the quarter, while Foot Locker’s sales fell 2.4% in the period.
Comps at Dick’s were up 5%, while they declined 2% at Foot Locker. Nevertheless, Dick’s Executive Chairman Ed Stack said on a conference call that the company is “very enthusiastic about the strategic benefits from the deal” and will share more plans for the retailer it’s acquiring in Q3.
On the back of the strong results at Dick’s, the retailer raised its full-year guidance, now calling for comps to increase from 2% to 3.5%, up from a previous range of 1% to 3%. Foot Locker did not provide guidance or hold a conference call given the pending acquisition.
Dive Insight:
While Foot Locker’s shareholders approved its deal to merge with Dick’s Sporting Goods and the deal has passed all regulatory hurdles, the retailers have provided few details about their plans going forward.
Dick’s CEO Lauren Hobart on Thursday said that the retailer plans to invest in Foot Locker’s stores and marketing, and said brand partners were excited about the opportunity to help turn Foot Locker around. Otherwise, she said that Dick’s has become more optimistic about the deal the longer that the teams work together.
“This is a team that really wants to win,” Hobart said of Foot locker.
For Foot Locker’s part, the retailer has seen “sequential momentum” and had a positive start to the back-to-school season, with comps coming in positive for the North America region, CEO Mary Dillon said in the earnings announcement.The retailer opened 11 of its reimagined stores in the quarter and conducted 52 store refreshes.
“At the same time, our results reflect a challenging operating environment and soft store traffic trends, particularly in our WSS and international businesses,” Dillon said in a statement.
The $2.4 billion deal, announced in May, will create a $21 billion business that will include around 3,200 stores globally. Although some analysts have expressed skepticism about Dick’s ability to turn around Foot Locker, others have noted that it’s largely dependent on Nike’s turnaround — and a change of fortunes there could boost Foot Locker considerably.
GlobalData Managing Director Neil Saunders said in emailed comments that Foot Locker “will provide a new growth vector” for Dick’s and give it experience internationally.
“However, it will be a test for Dick’s management as they will need to integrate Foot Locker at the same time as turning the firm around, all while keeping the core Dick’s business motoring,” Saunders said. “The challenge is keeping all balls in the air at the same time.”