Dick's acquiring Foot Locker: What it means for Nike stock?

Investing.com -- Dick’s Sporting Goods (NYSE: DKS), the largest sports retailer in the United States, is reportedly close to finalizing a $2.3 billion acquisition of Foot Locker (NYSE: FL).

According to Jefferies analysts, the takeover could benefit Nike (NYSE: NKE), which has strong sales ties with both companies.

The acquisition, speculated to be finalized as early as Thursday, is set at a price of $24 per share, a 90% premium over Foot Locker’s current stock price. Foot Locker’s stock price has seen a decline of approximately 40% this year.

Jefferies analysts believe that the potential takeover of Foot Locker by Dick’s Sporting Goods would benefit Nike by improving operational efficiencies and potentially enhancing the retailer’s performance.

“As Nike CEO Elliott Hill strengthens an already robust relationship with DKS, this consolidation could enhance NKE’s retail presence and brand consistency,” analysts led by Randal J. Konik said in a note.

“NKE leads footwear sales at DKS, a key growth category that accounts for 28% of DKS’s business, and represents over half of FL’s sales, underscoring the strategic importance of both channels to NKE’s wholesale strategy,” they added.

Jefferies’ team believes that a better-managed Foot Locker under Dick’s leadership could lead to a positive outcome for Nike, as the brand works on cleaning up the marketplace and pushing innovations that have been well-received by consumers.

With several earnings per share revisions behind it, the sportswear giant is viewed as being in a position for a self-help recovery, with potential for significant margin expansion as it becomes less promotional in its sales strategies.

The reports of Dick’s Sporting Goods’ takeover of Footlocker comes on the heels of the recent acquisition of Skechers by 3G Capital last week

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