Dick’s Sporting Goods has promised a rapid overhaul of Foot Locker after its executive chair delivered a rather sobering assessment of the sneaker chain’s recent performance, accusing the former management team of abandoning basic retail discipline.
Speaking after Dick’s reported third-quarter results, Edward Stack said that since closing the $2.5bn all-share-and-cash acquisition of Foot Locker in September, the new owner had found more problems than it expected – but also more opportunity. “We’re doing all that our shareholders would expect us to do to make the Foot Locker business accretive in 2026,” he told investors, adding that as the largest shareholder he was “excited about the progress we’re making and the opportunities ahead.”
“Let me be candid,” Stack told investors. “Foot Locker strayed from Retail 101 and did not execute the fundamentals.” The chain, he said, had been slow to adjust to post-pandemic demand shifts and had leaned into the wrong product, carrying too much slow-moving stock and not enough of what customers actually wanted.
Dick’s has moved quickly to impose its own strategy. The group has launched what Stack described as an effort to “clean out the garage” at Foot Locker: clearing excess inventory, shutting weak stores and writing down assets that no longer fit with the new strategy.
The company has begun discounting unwanted stock more aggressively, a process that started late in the third quarter and will accelerate through the holiday period. The inventory clean-up, combined with store closures and integration expenses, is expected to result in pre-tax charges of $500m to $750m.
Foot Locker’s performance underlines the scale of the task. On a pro forma basis, comparable sales fell 4.7 per cent in the third quarter, with a 10.2 per cent decline in international markets. By contrast, the core Dick’s business delivered a 5.7 per cent increase in like-for-like sales, driven by both higher average transaction values and more frequent visits.
Stack said that after “looking even deeper under the hood” since the deal closed, his conviction in a turnaround had only strengthened. “We will bring our operational excellence, our supplier relationships and our merchandise expertise to return Foot Locker to its rightful place as a top player in the specialty athletic channel,” he said. He has called the deal a “transformative moment for Dick’s”, saying the combined group is building “a global platform at the intersection of sport and culture” that can “redefine sports retailing.”
Dick’s has already reconstituted Foot Locker’s leadership team. Former Nike executive Ann Freeman has been appointed to run Foot Locker North America, while global retail specialist Matthew Barnes will take charge of international operations from December. The changes have coincided with the departure of Foot Locker’s former chief executive Mary Dillon and president Franklin Bracken.
The new owners are also revisiting the group’s portfolio of banners, which includes Champs Sports, WSS and Japanese streetwear retailer Atmos. Stack signalled that these “non-core” assets will be scrutinised as part of the rightsizing process, though he stopped short of detailing which brands or regions might be scaled back or sold.
Plans to relocate Foot Locker’s headquarters to Florida have already been abandoned, one of the first visible reversals of the previous strategy.
To sketch out what the revamped chain will look like, Dick’s has launched an 11-store pilot. “We’re moving with urgency and have already kicked off an 11-store pilot to begin testing changes in product and the in-store presentation,” Stack said. “It’s early, but we’re encouraged by what we’re seeing and learning.” The trial focuses on tighter assortments, revamped in-store presentation and a more assertive push into branded apparel – a category Stack said the previous Foot Locker regime had “walked away from”.
He argued that the retailer had leaned too heavily on private-label lines at the expense of global sportswear brands that both drive higher average selling prices and attract younger, fashion-driven consumers. Under Dick’s ownership, national brands are set to regain prominence, particularly in apparel.
The group is at pains to keep Foot Locker distinct from its own big-box outlets. Stack described the acquired chain as “a bit more basketball inspired, a bit more trend inspired, definitely more urban than the Dick’s business”. Dick’s itself, he said, would remain “more sport-led, along with lifestyle product… a more suburban concept.”
The near-term financial impact of the overhaul will be uncomfortable. Dick’s expects Foot Locker’s fourth-quarter gross margin to fall by 1,000 to 1,500 basis points versus the same period last year, as markdowns and inventory actions bite. Pro forma comparable sales at Foot Locker are forecast to decline by the mid- to high-single digits in the period, and even excluding restructuring costs, management only expects the business to be “slightly negative” at the operating level in the final quarter of 2025.
Stack’s ambition is to have the “vast majority” of inventory charges taken by the end of the year, allowing Foot Locker to enter 2026 with a clean balance sheet. The company is targeting the crucial US back-to-school season in 2026 as an inflection point – the moment when new assortments, store concepts and vendor partnerships should start to show through in sales and profit.
Key suppliers, including global sportswear brands, have been briefed and are “fully aligned” with the new vision for Foot Locker, Stack said.
Despite the drag from the newly acquired chain, Dick’s core business remains robust enough for management to upgrade guidance.
For the quarter to November 1, group net sales rose 36.3 per cent year on year to $4.17bn, largely reflecting the addition of Foot Locker. On a consolidated GAAP basis, net income fell to $75m from $228m, hurt by merger and integration costs, with reported earnings per share dropping to $0.86 from $2.75.
Stripping out Foot Locker and related items, the Dick’s business alone generated non-GAAP earnings of $2.78 per diluted share, slightly ahead of the same period a year earlier. The company raised full-year 2025 guidance for the Dick’s business to earnings of $14.25 to $14.55 per diluted share, on net sales of up to $14bn and comparable sales growth of 3.5 to 4 per cent.
Chief executive Lauren Hobart highlighted the continued roll-out of the company’s experiential formats as a driver of growth. Dick’s opened 13 new House of Sport stores and six Field House locations in the quarter, bringing the total store count across the combined group to more than 3,200.
“These innovative formats are delivering powerful financial results,” Hobart said, adding that growth in the core business was coming from more customers shopping more often and spending more per trip.
For now, investors are being asked to tolerate a period of elevated costs and weaker margins as Dick’s digests its largest acquisition to date. The bet is that once the clean-up is complete, the group will control a global sports retail platform spanning suburban big-box stores and urban sneaker boutiques – and that Foot Locker, after a crash course in “Retail 101”, can be restored to something closer to its former influence in sneaker culture.
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