Does Dick's $2.4B Foot Locker Buyout Justify a Buy Decision Today?
DICK'S Sporting Goods, Inc. DKS is acquiring another big athletic footwear retailer Foot Locker, Inc. FL. Will this impact Dick's Sporting Goods' focus and business alignment? Should you consider buying DKS stock now? Let's find out –
Dick's Sporting Goods, recently, decided to acquire Foot Locker for almost $2.4 billion. In the buyout deal, Foot Locker shareholders may receive $24 in cash or 0.1168 shares of Dick's common stock in place of each share held. The cash offer is 66% higher than Foot Locker's 60-day average price.
Dick's Sporting Goods plans to finance the deal through a combination of new debt and cash. Both parties expect the transactions to be completed by mid-2025. The acquisition is expected to boost earnings per share (EPS) in the first full fiscal year after closing and generate $100-125 million in cost synergies in the medium term, added Dick's Sporting Goods.
Dick's Sporting Goods chairman Ed Stack stated that the merger would enable both athletic footwear retailers to unlock growth and strengthen their position among shoe enthusiasts. The acquisition of Foot Locker would consolidate Dick's Sporting Goods' market position in the footwear industry, providing the company with the capability to perform on a larger scale. Lest we forget, Foot Locker had around 2,400 stores in 26 countries by the end of last year.
Dick's Sporting Goods agreed to buy Foot Locker at a high price, causing Foot Locker's shares to soar 85% on Thursday, its largest increase ever. And why not? Foot Locker received a significant payout, a silver lining for the company whose shares had plummeted 70% since reaching a high of $79.20 on Dec. 8, 2016.
Over the last three fiscal years, Foot Locker's revenue growth was lackluster, with earnings falling from $7.77 in fiscal January 2022 to $1.37 by the end of January this year. Foot Locker's market share is also shrinking. And these challenges unnerved Dick's Sporting Goods investors, causing a 14.6% drop in DKS share price on Thursday.
While Dick's Sporting Goods has increased market share, improved profitability, and thrived in a tariff environment, acquiring a struggling retailer has dampened investor enthusiasm. Understandably, Dick's plans to expand its footwear business, which made up 28% of total sales in fiscal 2024. But acquiring a stressed company at a high price has fueled doubts about Dick's Sporting Goods' future. It may decrease the return on capital and heighten balance sheet risk for the company.
Investors are feeling uneasy about Dick's Sporting Goods' beaten-down Foot Locker acquisition amid uncertain macroeconomic conditions and elevated selling, general, and administrative expenses. Therefore, new entrants should avoid betting on Dick's Sporting Goods stock for now. However, existing stakeholders may consider holding onto it as there are potential growth opportunities if management gets the synergy right.
Dick's Sporting Goods, anyhow, is seeing strong top-line growth, increase in comparable store sales, and transaction growth. For now, Dick's Sporting Goods has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Foot Locker, Inc. (FL) : Free Stock Analysis Report
DICK'S Sporting Goods, Inc. (DKS) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Forbes
3 minutes ago
- Forbes
Why We're Dodging These 3 Gold CEFs (Even With Gold Soaring)
A lump of gold on a stone floor getty Here's a surprise from a die-hard closed-end fund (CEF) fan like me: Sometimes CEFs aren't your best bet. I'll admit, that's tough for me to say—especially when the average CEF yields a historically high 9.1%. (CEF yields are usually around 8.5%). That high yield partly reflects the fact that many CEFs are trading at steep discounts to their net asset value (NAV). Translation: The fund is trading for less than what its underlying portfolio is worth. That, in turn, has resulted in lower prices among some CEFs, along with higher yields (as yields and prices move in opposite directions). All of this simply means that CEFs are generally out of favor right now, which is an opportunity for us. But not every CEF is ripe for buying. We especially want to avoid the three top performers among CEFs with market caps over $200 million: ASA Gold and Precious Metals (ASA), the Sprott Physical Gold Trust (PHYS) and the Sprott Physical Gold and Silver Trust (CEF). The fact that these funds have booked strong runs this year shouldn't come as a surprise: They're all gold funds, and gold has taken off due to rising economic uncertainty (the usual fuel for the yellow metal). Even so, as you can see, there are some clear differences in performance here, and those are worth unpacking. Gold Funds Ycharts Above we see that the Sprott Physical Gold and Silver Trust—with the somewhat confusing 'CEF' ticker, not to be confused with CEFs in general (in purple)—and PHYS (in blue) have similar returns to the benchmark SPDR Gold Shares (GLD) ETF (in green), at around 25%. Then there's ASA (in orange), which has more than doubled even the best of these three other funds. There is some logic at work here. For starters, PHYS and GLD really should track each other, since they both devote almost 100% of their portfolios to physical gold (both own gold bars that are locked up in vaults), and both have similar expense ratios (0.4% for GLD, 0.41% for PHYS). The lower performance of 'CEF' is also not surprising, given that the fund also holds silver, and the 'poor man's gold' hasn't done as well as its yellow counterpart this year. ASA, however, is the clear outperformer. That's thanks in part to its ownership of several gold-mining stocks. Its largest position, G Mining Ventures Inc., a Canadian firm that explores for precious metals, has nearly doubled year to date. ASA's fast short-term gain is, of course, great, but it's unlikely to last. Here's why. Note that, if we go back to 2010, the year the last of these funds, PHYS, launched, we see that GLD (again in green) outran all three of the CEFs. This shows that CEFs were poor options in the case of gold. Moreover, ASA (again in orange) was actually the worst performer, returning just 53% over 15 years, and being in the red for most of that time. ASA Underperforms Ycharts In terms of key takeaways, there are a few here. First, if you want to hold gold, this is a rare case where an ETF, not a CEF, is the better choice. Second, gold is not a great play for income, given that the highest yielder among these funds is ASA, with a puny 0.2%. Third, gold itself is a poor play for the long term, no matter how you invest in it. To see why, all we need to do is splice the S&P 500's performance (in pink below) into that last chart. Gold Underperforms Ycharts It doesn't get much clearer than that! This, however, is where the good news ends for ETF investors. Because when it comes to investing in stocks (or pretty well any other asset class, for that matter), you're far better off with CEFs. Let's take a look at the Adams Diversified Equity Fund (ADX), a CEF we've held in my CEF Insider service since its earliest days: We bought ADX in July 2017, just a few months after CEF Insider's launch. Here's how the fund—current yield: 9% (and in orange below)—has done since, as compared to the S&P 500 index fund SPDR S&P 500 ETF Trust (SPY), in purple, with dividends reinvested: ADX Outperforms Ycharts This chart says it all: CEFs like ADX can crush the S&P 500 and pay us generously while doing so. Plus they give us access to top-notch management and upside-generating discounts to NAV, too. Those are strengths no index fund can match. Michael Foster is the Lead Research Analyst for Contrarian Outlook. For more great income ideas, click here for our latest report 'Indestructible Income: 5 Bargain Funds with Steady 10% Dividends.' Disclosure: none
Entrepreneur
14 minutes ago
- Entrepreneur
8 Smart Ways to Save on Your Summer Business Travel (and Have Fun, Too!)
Discover savvy strategies for an efficient, enjoyable summer travel experience, whether for business or pleasure. Opinions expressed by Entrepreneur contributors are their own. Business travel during summer doesn't have to mean stretching your budget to the breaking point. Over the years, I've learned that with a bit of strategy, you can cut costs and add a touch of enjoyment to those work-related getaways. Whether you're sealing deals or prepping presentations, these tips will help you save smart while enjoying a little extra along the way. Here are eight practical ways to make the most of your summer business travel. 1. Score big on hotels with members-only platforms Hotel costs tend to eat up a large part of any travel budget, especially during summer. That's why I created Tonia in Vegas. You can save hundreds on top hotel bookings without compromising on comfort or location. From luxury stays in Las Vegas (and anywhere else in the world) to budget-friendly accommodations near business hubs, members-only discount clubs offer the best of both worlds. Plus, they throw in perks like discounts on dining, entertainment and even experiences to make your business trips more enjoyable. Related: 8 Easy Ways to Save Money on Your Next Business Trip 2. Book flights early (and stay flexible) Flight prices often soar in summer, so early booking is a must. Aim to secure tickets at least 6-8 weeks in advance for the best prices. Being flexible with your travel dates can also save you big bucks. Did you know that Tuesdays and Wednesdays are usually the cheapest days to fly? Midweek flights are often less crowded, too. If you're not picky about departure times, consider red-eye or early morning flights, which tend to be cheaper. And even if you're tempted by business class, economy seating can save you a pretty penny. 3. Make the most of credit card rewards Your business expenses should be earning you something in return. Travel-focused credit cards come with perks like free travel insurance, airport lounge access and points on your purchases. Rack up these points while you book your flights, hotel stays or meals and you might find yourself redeeming a free flight or hotel sooner than you think. If your company is footing the bill, make sure you're still using your rewards card for those bookings. Just remember to review your usage policy or reimbursement procedures to stay compliant. 4. Pack light to avoid fees Nothing stings like a surprise baggage fee at the airport check-in counter. Avoid extra costs by sticking to just a carry-on for your trip. Choose versatile clothing that works for both professional and casual settings, like a light blazer that can transition from client meetings to dinner outings. If you're headed somewhere sunny, pack lighter fabrics and neutral basics you can mix and match. Don't forget to check the airline's baggage policy beforehand to avoid unexpected fees. Pro tip: Rolling your clothes instead of folding saves space in your suitcase. Packing organizers can also help keep everything compact and accessible. Related: Ease Your Summer Business Travel in 5 Steps 5. Combine work and play Traveling for work doesn't mean it has to feel monotonous. Blend work with leisure to make your trips more enjoyable. For instance, if you're heading to Las Vegas, use discount platforms to snag discounts on theme parks, live shows and fine dining. Scheduling a personal day at the end of your business trip can help you relax, recharge, and experience the destination more fully. Example: Traveling to a city with cultural sites? Visit museums, local attractions or nature parks during your downtime to get the most out of your trip. Not only will these experiences make your trip feel more balanced, but they'll also boost your energy when it's time to get back to work. 6. Skip pricey restaurants Dining out is often one of the sneakiest ways to drain your travel budget. Avoid high-end restaurants for every meal by finding affordable local gems instead. Try to uncover hidden spots offering great food at reasonable prices. If your hotel includes a kitchenette or even just a mini-fridge, consider grabbing groceries or pre-made meals to save even more. Breakfast, in particular, can be simplified with store-bought yogurt, granola bars, or fresh fruit. Budget bonus: Some hotels offer free breakfast, coffee or evening snacks. Take full advantage of these perks! 7. Choose hotels close to attractions Location matters. Staying near conference venues or your other main destinations can help you save on transportation costs like rental cars or rideshares. Look for accommodations within walking distance of key attractions, restaurants or meeting sites. Not only will this help your budget, but it can also reduce overall travel stress. No one enjoys being stuck in traffic trying to make it to a critical client pitch. If you have extra time, don't forget to have some fun and check out some local attractions. Pro tip: Many central hotels offer special business traveler rates or shuttle services to airports or conference centers. 8. Stay connected with Wi-Fi and free tools Roaming and data costs add up quickly when traveling, especially internationally. Avoid costly cellular bills by making use of free Wi-Fi spots in cafes, hotels and co-working spaces. If your business regularly requires calling or video conferencing, use free tools like Zoom, Slack or WhatsApp to stay connected. Pro tip: Invest in a portable Wi-Fi hotspot if you often find yourself needing reliable connectivity on the go. Related: I Sold My House to Work Remotely on a Cruise Ship for 3 Years — and I May Stay Aboard Even Longer. Here's What My Life Will Look Like. Final sip of advice Smart saving during summer business travel is all about planning and flexibility. From accessing exclusive hotel rates to using credit card perks and packing light, small changes to your travel routine can make a big difference to your budget. Buy blending work and play, staying mindful of expenses and keeping an eye on perks, you'll not only save money but also make the most of every trip. Safe summer travels and happy saving!
The Verge
17 minutes ago
- The Verge
Apple's latest AirPods Pro with USB-C just received a $70 discount
This year's WWDC kicks off in less than a week, which means Apple is likely to announce a string of software changes in short order, some of which are designed to improve Apple's latest pair of premium earbuds. Thankfully, if you haven't yet pulled the trigger on the second-gen AirPods Pro, they're once again on sale at Amazon, Walmart, and Best Buy for around $169 ($70 off), matching their best price of the year. If you're an iPhone user, you'd be hard-pressed to find a better pair of noise-canceling earbuds than Apple's latest AirPods Pro with USB-C. The second-gen model ratchets up the noise cancellation and sound quality, providing dynamic, rich sound and ANC that can go toe-to-toe with Sony's XM5 and other like-minded rivals. Unlike the cheaper AirPods 4 with ANC, they also feature convenient swipe-based controls and four sets of silicone tips, whereas Apple's entry-level earbuds still rely on an open-style design that allows more ambient noise in. As for why they're the perfect fit for iPhone users, well, that's easy. The Pro are chock-full of Apple-only features, including head tracking spatial audio, robust Find My support, and automatic device switching. The included speaker-equipped charging case also features a U1 chip for more accurate tracking, and thanks to a software update in the fall, Apple's high-end earbuds can now protect your hearing and serve as clinical-grade hearing aids. That makes them well-suited for those with mild to moderate hearing loss — or your next Turnstile concert. Other ways to save this weekend It's by no means a necessity, but I've been ogling the Vestaboard Note ever since the spendy split-flap display went up for sale last month. The nostalgic 24.5-inch board is currently available for preorder from Vestaboard ahead of its December launch starting at $899 ($400 off), and while it only features 45 split-flap mechanisms (as opposed to 132 on the original), it still looks like a delightful way to showcase any message, pattern, or image you create using the accompanying web interface or mobile app. Ugreen's FineTrack Smart Finder is available for just $9.99 (about $7 off) from Amazon and Ugreen right now, which is the best price we've seen on the inexpensive location tracker. Sure, it's not quite as capable as an AirTag, but it still comes with a two-year replaceable battery, a built-in ringer, and the ability to tap into Apple's extensive Find My network as necessary. Hell, it even comes with a lanyard hole, which isn't something we can say about Apple's tracker. Meta's entry-level VR headset, the Meta Quest 3S, is on sale once again at Amazon, Walmart, and Best Buy, where you can pick it up with a copy of Batman: Arkham Shadow and a three-month trial of Meta Horizon Plus for an all-time low of around $269 ($30 off). It's sort of the middle child in terms of Meta's headset lineup, as it features the same chipset as the Quest 3 but remains reliant on the same lenses and field of view as the Quest 2. Still, it can play most of the same standalone games as the former, as well as PC-based virtual reality titles if you own a gaming PC. Read our review.
