Dick’s Sporting Goods faces analyst pressure as newly acquired Foot Locker posts deep Q3 losses

Barely integrated into Dick’s Sporting Goods, already in the spotlight: With the Q3 figures for fiscal year 2025, analysts’ questions have focused primarily on the acquisition of Foot Locker – and on the unfinished business in the turnaround. In the third quarter, the new subsidiary contributed $931 million in revenue but continued to post deep losses: the operating loss was $46 million.

The result was impacted by margin pressure, high inventory levels of $1.8 billion and one-time effects from strategic inventory adjustments. The bottom line was a doubling of the net loss – after minus $26 million in Q2 – with the current Q3 figures reflecting only the period from the acquisition date of Sept. 8 to the end of the quarter.

‘Cleaning out the garage’: International business weak

Foot Locker’s international business was particularly weak, declining 10.2 percent year-on-year in the third quarter – a significant step back from the previous quarter. CFO Navdeep Gupta attributed the double-digit decline to, among other things, the “weak economy in Europe.” Overall, the Foot Locker business unit recorded comparable sales of minus 4.7 percent, with North America proving significantly more stable at minus 2.6 percent. Dick’s CEO Ed Stack referred to this as “cleaning out the garage” – a streamlining of the product range and a realignment.

High one-time costs weigh on earnings – hopes pinned on 2026

The deep red figures are evident not only in sales but also on the cost side: SG&A expenses for the Foot Locker unit amounted to $260 million in the reporting period, accounting for most of the increase in consolidated costs. In addition, there are expected one-time charges of $500 million to $750 million, consisting of store and inventory write-downs and integration expenses. However, these are not included in the adjusted earnings. For the full year 2026, management nevertheless expects a positive contribution to earnings from the Foot Locker business – excluding one-time charges.

Sweeping cuts or smart repositioning?

As of Nov. 1, Foot Locker’s store network comprised 2,339 company-owned stores worldwide, supplemented by 250 licensed stores, according to the quarterly report.

This means that Dick’s management reduced the network by 15 locations from the previous quarter – a first step in the strategic realignment. In the analyst call, management announced that it would be scrutinizing the store portfolio: “We’ve got some stores that we think we’re going to close,” said Stack, echoed by Gupta: “We are absolutely looking into some of the unproductive assets that won’t be part of the core business going forward.” Stack added: “We’re cleaning out old, unproductive inventory. We’re going to be impairing underperforming assets.”

The goal is not only to close unprofitable stores, but also to take stores with potential and make them profitable with better product ranges. However, the company does not intend to provide exact details on the number of closures until the Q4 call – even though some analysts have asked for more specific information.

Motivated teams as trump card in the turnaround

Management is optimistic about 2026 – despite the difficult starting position. However, Stack believes the course has been set: “We’re confident that in 2026, we will put all these building blocks together. We’re confident that Foot Locker will be accretive to our earnings in 2026.” He hopes to gain momentum through new product ranges, stronger brand partnerships and a visually revamped product presentation.

The CEO speaks enthusiastically about the staff taken on in the stores: “These young men and women, they love sneakers, they love Foot Locker, they love to be around this product. We really think they’re our secret weapon as we go forward.” He thus highlights the sales staff – the so-called stripers and blue shirts – as a key success factor in the turnaround.

Analyst pressure and strategy questions: Now Dick’s must deliver

Dick’s is also setting a new course at the management level: Anne Freeman, formerly of Nike, is taking over the North American business as a high-profile executive, while the new European boss, Matthew Barnes, will focus more on the region in the future. The goal is to get the sneaker brand back on track for growth by the 2026 back-to-school season at the latest.

And although analysts such as Simeon Gutman (Morgan Stanley) reported weaker-than-expected performance in the third quarter, the questions raised during the call expressed less skepticism than pressure to deliver: How quickly can the restructuring be completed – and when will the acquisition pay off for shareholders? Dick’s hopes to provide a positive answer to this question by 2026 at the latest, supported by synergy effects of $100 to $125 million, as announced by CFO Gupta, primarily from better purchasing conditions and direct sourcing.