Dick’s Sporting Goods announced on November 25 that it will close a number of under‑performing Foot Locker stores as part of a broader restructuring of the recently acquired Foot Locker business. The closures are intended to trim excess inventory, eliminate low‑traffic locations, and realign the Foot Locker portfolio with the company’s long‑term growth strategy.
The announcement follows the September 8, 2025 acquisition of Foot Locker for $2.4 billion. Management has projected pre‑tax restructuring charges of $500 million to $750 million to support the “clean‑out the garage” plan, a cost that will be reflected in the next quarter’s earnings. The charges are aimed at removing unproductive assets and positioning Foot Locker for profitability in 2026.
In its Q3 2025 earnings, Dick’s reported revenue of $4.17 billion, missing the consensus estimate of $4.43 billion by $260 million. The company’s adjusted earnings per share for the DICK’S business beat expectations, posting $2.78 versus the $2.71 consensus, a $0.07 or 2.6% beat. Consolidated EPS, however, fell to $2.07, below the $2.20 estimate, largely due to the Foot Locker integration costs and the one‑time restructuring charges. The revenue miss reflects weaker demand in the Foot Locker segment and a decline in pro‑forma comparable sales of 4.7% YoY, while the DICK’S business saw a 5.7% rise in comparable sales driven by higher average ticket and transaction volumes.
Segment analysis shows that the DICK’S business grew 5.7% in Q3 2025, up from 4.3% in Q3 2024, and its gross margin expanded by 27 basis points to 33.13% of net sales. In contrast, Foot Locker’s pro‑forma comparable sales declined 4.7% YoY, and its lower gross margin contributed to a 264‑basis‑point drop in consolidated gross margin. These dynamics explain the mixed earnings picture: strong core performance offset by a lagging acquisition that is still incurring integration costs.
Executive Chairman Ed Stack emphasized that the “clean‑out the garage” effort is necessary to return Foot Locker to a profitable trajectory. He noted that Foot Locker’s inventory had become misaligned with consumer demand, leading to excess stock and lower sales, and that the company’s focus on inventory management and store optimization will lay the groundwork for 2026 profitability.
Market reaction to the announcement was initially muted, with analysts noting the revenue miss and the sizable restructuring charges as short‑term headwinds. However, the company’s raised full‑year guidance for the DICK’S business—an EPS range of $14.25 to $14.55 and comparable sales growth of 3.5% to 4.0%—provided a positive signal that helped stabilize sentiment later in the day.
The restructuring is expected to generate significant cost savings and improve Foot Locker’s gross margin over the next two years. While the immediate impact includes a $500 million to $750 million pre‑tax charge, management believes the long‑term benefits of a leaner Foot Locker portfolio and stronger inventory control will support sustainable growth and return the subsidiary to profitability in 2026.
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