Foot Locker (FL) has embarked on an acquisition drive as it seeks to strengthen its growth prospects across the Asia-Pacific and North America. The company has entered into an agreement to acquire Eurostar (WSS) for $750 million, as it looks to diversify its store footprint and product mix in the U.S.
The U.S.-based Eurostar has made a name for itself as an athletic-inspired retailer targeting the rapidly growing Hispanic consumer market. It currently operates 93 stores in key markets on the West Coast. The acquisition will allow Foot Locker to benefit from the company’s differentiated market position and diverse customer base.
In fiscal 2020, Eurostar generated $425 million in revenues on the back of a compound annual growth rate of 15%. (See Foot Locker stock charts on TipRanks)
“Looking ahead, we see significant opportunities to expand this business, including by accelerating WSS’s store growth into new geographies in North America,” said CEO Richard A. Johnson.
Additionally, Foot Locker has moved to enhance its Asia Pacific expansion with the acquisition of Text Trading Company, K.K. (“atmos”). The New York-based athletic retailer is to pay $360 million for the company which owns and licenses the atmos brand.
The atmos acquisition should enhance Foot Locker’s global reach in Japan while also enhancing its premium and top-tier offerings. The atmos brand will join, having generated $175 million in revenues in 2020, with more than 60% coming from digital channels.
Last month, Goldman Sachs analyst Kate McShane initiated coverage on the stock with a Buy rating and a $70 price target, implying 25.31% upside potential to current levels. The analyst remains confident about the company’s omnichannel presence and robust pipeline, which are expected to generate long-term value.
Consensus among analysts is a Moderate Buy based on 10 Buys and 5 Holds. The average Foot Locker price target of $71.67 implies 28.30% upside potential to current levels.
FL scores a 7 out of 10 on TipRanks’ Smart Score rating system, suggesting that the stock is likely to perform in line with market averages.
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