Foot Locker has announced two major acquisitions, one in the U.S. and the other one in Japan, where it is set to acquire Text Trading Company, which owns and licenses the upscale Atmos brand of sneakers and streetwear. It will be paying $360 million and an earnout for the Japanese brand, which generated about $175 million in revenues for 2020, 60 percent of them through digital channels. The company also runs 39 Atmos stores in Japan and two in the U.S. The experiential stores in Japan operate under the Atmos and Atmos Pink (for women) banners. According to its CEO, Richard A. Johnson, Foot Locker is “executing against our expansion initiative in the rapidly growing Asia-Pacific market, establishing a critical entry point in Japan and benefitting from immediate scale.” The company is retaining Atmos’ founder, Hidefumi Hommyo, and the rest of the Atmos team.
Simultaneously, Foot Locker has announced an agreement to acquire Eurostar, the parent company of WSS, which operates 93 off-mall athletic footwear and apparel stores with more classic styles in California, Texas, Arizona and Nevada, targeting mainly the Hispanic community. The business, which started 37 years ago, has been run for the past five years by Rick Mina, a former CEO of Foot Locker who, like Johnson, previously headed up its European operations. It will retain its name. Foot Locker has agreed to pay $750 million for WSS, whose sales have been growing by 15 percent annually in the last three years, reaching about $425 million in 2020. Foot Locker thinks it can double WSS’ turnover in the long term, expanding to other parts of North America.
WSS’ takeover is seen as a reaction by Foot Locker to JD Sports Fashion’s recent acquisition of Shoe Palace, which also targets the Hispanic population in roughly the same territory as WSS. The acquisition is subject to approval by U.S. anti-trust authorities, which have halted the takeover of another American sports chain, Sportsman’s Warehouse, by Bass Pro.
Foot Locker expects both acquisitions to add to its earnings per share in fiscal year 2021. It will easily fund them from its cash pile, which amounted to more than $1.9 billion at the end of the first quarter.
