Dick’s Sporting Goods’ $2.4bn swoop on its struggling rival Foot Locker could not have come at a better time, enthused Edward Stack, the retailer’s executive chair, upon announcing the unexpected deal this month.
Nike’s multiyear efforts to reduce its dependence on retailers had helped send Foot Locker into a downward spiral by depriving the chain of some of its most in demand trainers. But with the world’s biggest sportswear brand now “leaning back into wholesale” to revive growth, Foot Locker was set to be a beneficiary, Stack told analysts.
While the deal carried a whiff of opportunism — Foot Locker shares had declined by more than 80 per cent since 2021 — it was nevertheless consistent with a long-running trend.
Sports shoe chains have been consolidating in a fast-growing industry: sales of sportswear have risen from $272bn in 2017 to $407bn in 2024, according to McKinsey.
Suppliers to retailers are often wary of mergers that pool the buying power of their customers. But Nike, the industry’s key supplier and power broker, which has recently lost its way, welcomed the Dick’s Foot Locker deal as an opportunity to drive sales growth.
Nike chief executive Elliott Hill said they were “two of the most storied and respected brands in our industry and have been our valued partners for decades”.
“Each has their own loyal consumer following . . . I am confident that together they will help elevate sport and continue to accelerate the growth of our industry,” Hill said in a statement.
The consolidation of US trainer retailers has been led by UK chain JD Sports. However, Dick’s bid for Foot Locker, which is subject to regulatory approval, is the industry’s biggest deal yet. If Dick’s can turn Foot Locker around, they could soon have substantial clout — from the outset the combined business will operate from 3,266 stores and make $21bn of annual revenue.
“It is a game that is all about momentum and scale, so the combined power of Dick’s and Foot Locker is pretty formidable”, said one industry executive. “Dick’s are already powerful in the Nike camp,” he said.
In 2017, Nike sent shockwaves through the world of trainer retailing when it began a cull of its wholesale customers. With hit franchises such as Air Jordans and Air Force 1’s riding the crest of a wave, Nike set out to funnel more sales through its own higher-margin retail channels.
Spurned retailers responded by filling their shelves with trainers from upstarts, such as On Running, Hoka or VEJA, giving Nike’s fledgling rivals additional exposure and an opportunity to take market share.
Nike was forced to abandon its direct to consumer strategy after consumers returned to shopping in stores in greater numbers than anticipated following the pandemic, and its own trainers fell out of fashion.
Hill, a veteran at ‘the Swoosh’, pledged last year to rebuild Nike’s wholesale business as part of his turnaround efforts, acknowledging that retailers felt Nike had “turned its back” on them. The Oregon-based company confirmed last week it planned to recommence direct selling on Amazon for the first time since 2019.
Nike is not the only brand in the midst of a U-turn. Under chief executive Bjørn Gulden, Adidas has also retreated from a previous ambition to make half of its revenue through its own retail channels by 2025.
Last year, the German sportswear brand increased wholesale revenues by 14 per cent, compared with an increase of 11 per cent through its own channels, as retailers increased shelf space for popular retro models such as the Samba and Gazelle.
The strategic reversals collectively amount to a seismic development in the world of trainer retail, adding to the codependence between brand and retailer.
Co-operation could prove to be increasingly important. Nike and Adidas will both be raising prices on trainers sold in the US because of President Donald Trump’s tariffs, which threaten to take a heavy toll on Vietnam, a global production hub.
The industry executive said that retailers sought Nike’s approval before any major acquisition in the sector. Barclays analyst Adrienne Yih said half of Dick’s and Foot Locker’s combined revenues will be made on Nike products.
The enlarged group could drive some much-needed volume growth for Nike — particularly if it agrees to sell it products on more favourable terms, according to Jefferies analyst Randal Konik.
“Foot Locker is 1748234429 run by a bigger, better company”, Konik said. “[So] the [benefits of higher] volumes would more than offset a [slightly] better margin given to that bigger entity.”
Consolidation in the trainer retail market, allied to growing popularity of performance-focused brands such as On and Hoka, is subtly shifting the balance of power back towards the retailers.
“Nike is not a fading force, but it’s not as powerful as it once was,” said Neil Saunders, a managing director at GlobalData. “That means that the balance between retailers and Nike has been reset somewhat. It needs to now work more closely with a lot of these retailers and not just be dismissive of them.”
Another senior industry executive said the relationship between brands and retailers is now centred around mutual dependence rather than dominance.
“We can’t do anything without the brands, they can’t do anything without us,” they said. “[Selling] direct to consumers was an attempt to say ‘why not get rid of those guys [retailers]’ [but] they discovered that to be able to reach the customer, to be able to get feedback on products, [they need us].”
However, not everybody in the world of sports retailing believes they are suddenly on a level playing field.
“Retailers like Foot Locker and Dick’s are curators”, said one former industry executive. “But the brands are the creators — they are the ones that really hold the power.”
