Foot Locker (NYSE: FL) announced Monday it plans to pay $1.1 billion in two separate deals for a pair of shoe retailers that march to a different tune than the retail giant's longstanding but perhaps slowly fading reliance on enclosed shopping malls.In one announcement, the New York-based retailer said it plans to pay $360 million for Text Trading Company, which operates 49 stores -- including 39 in Japan and a handful around the United States -- under the atmos brand.
In the other, Foot Locker says it will pay $750 million for Eurostar Inc., which operates 93 stores -- primarily on the West Coast – under the WSS brand, an acquisition that gives it access to a large and growing base of Latino consumers, The Wall Street Journal said today.
Foot Locker -- which said it will buy the companies using available cash -- already has about 3,000 stores in 27 countries under brands that include Foot Locker, Kids Foot Locker, Eastbay, Footaction, and Sidestep. That physical presence, along with mobile and website sales, accounted for about $7.5 billion in sales in 2020.
"Every great city has a sneaker market"
Both companies will continue to operate under their existing names, and more physical locations are likely in the future, Foot Locker chairman and CEO Richard A. Johnson said in a media call.
In the WSS announcement, Johnson cited that company's success in "pioneering the neighborhood-based store model, built on community engagement and a full-family offering." He added, "Looking ahead, we see significant opportunities to expand this business, including by accelerating WSS's store growth into new geographies in North America."
He called atmos "a mostly digitally led business, but we believe every great city has a sneaker market that could be the location of an atmos store in the future."
The Millionacres bottom line
While Foot Locker's newest acquisitions are not in malls -- where the sports shoe and apparel supplier has become a fixture -- the announcements didn't say anything about leaving those typically troubled spaces, either.
However, even before the pandemic, Foot Locker was working on plans to move stores out of malls, which in 2018 housed 80% of its outlets, with a focus on larger locations called "power stores" and, after the pandemic messed with that idea, "pop-up" locations, too. (All that is outlined in this Modern Retail article.)
While this isn't necessarily good news for malls, the giant sneaker-seller's commitment to brick and mortar could prove to be a boon for smaller shopping centers and neighborhood clusters where, along with retail real estate investment trusts (REITs) and other major commercial real estate players, there are smaller landlords happy to provide this big, deep-pocketed multinational some rentable space.