The news: Dick’s Sporting Goods is acquiring Foot Locker for approximately $2.4 billion to boost its market share and bargaining power.

The appeal for Dick’s: Dick’s, which reported 4.5% YoY growth in Q1 comparable sales, sees several strategic upsides.

• Massive footprint expansion: Foot Locker’s 2,400-plus stores—primarily in malls and urban areas—complement Dick’s 856 locations and dramatically extend its reach.
• TAM growth: The acquisition gives Dick’s an international presence, expanding its total addressable market from $140 billion to $300 billion.
• Stronger leverage: Combining two of Nike’s top three retail partners enhances Dick’s bargaining position, enabling better deals and access to exclusives.
• Loyalty program growth: Merging Foot Locker’s FLX members with Dick’s more than 25 million ScoreCard users could unlock new data insights and boost its retail media network.
• Significant cost savings: Shared merchandising, marketing, supply chain, and back-office synergies could drive meaningful efficiencies and margin gains.

The risks: A deal of this scale comes with real challenges—especially since Foot Locker is still in the midst of a turnaround, with Q1 comps down 2.6% YoY and North American comps off 0.5%.

• Regulatory hurdles: The merger could face scrutiny over competition concerns, even with a merger-friendly Trump administration.
• Tariff pressure: The timing is tricky—steep tariffs on footwear and related goods could raise costs and dampen consumer demand.
• Brand alignment issues: Dick’s plans to keep Foot Locker as a standalone brand, but it’s unclear whether its premium merchandising can translate to Foot Locker’s smaller-format stores.

Our take: Retail history is full of growth-by-acquisition bets that looked strong on paper but stumbled in execution. Whether Dick’s can infuse Foot Locker with its winning formula—or ends up being diluted by its new scale—remains to be seen.