In a bid for expansion both in the U.S. and abroad, Foot Locker has acquired two companies for a total of $1.1 billion, according to press releases on the acquisitions. Both are expected to close in the third quarter.
Foot Locker will acquire WSS parent Eurostar for $750 million in cash. The athletic footwear and apparel retailer operates mostly on the West Coast and made around $425 million in revenue in fiscal 2020.
Separately, Foot Locker will also acquire Japanese retailer Atmos' parent company Text Trading Company for $360 million in cash. Atmos is described as a "culturally connected brand" selling premium sneakers and apparel that made about $175 million last year.
Foot Locker is looking to expand its reach in key markets with two acquisitions announced Monday.
WSS, which operates in the U.S., focuses on the "rapidly growing Hispanic consumer demographic" via 93 off-mall stores in California, Texas, Arizona and Nevada, an area Foot Locker says it is underpenetrated in. Atmos, on the other hand, gives Foot Locker "a highly strategic foothold in Japan" and a chance to grow its influence in the "rapidly growing Asia-Pacific market" with 49 stores globally (39 of which are in Japan).
"We remain focused on our strategy of profitably driving growth by addressing key white spaces in our industry," Foot Locker CEO Dick Johnson said in a statement. "With our ongoing investments in the business, we are confident in our ability to continue creating value for our shareholders, consumers, vendor partners, and other stakeholders."
Both WSS and Atmos will maintain their names, operating as separate banners under Foot Locker. The retailer highlighted expansion opportunities for both companies, specifically calling out "significant opportunities" to expand the WSS format into new geographies in North America. In a call with analysts Monday morning, executives highlighted that WSS currently operates in just three of the top 10 states by Hispanic population, and they projected that WSS could become a $1 billion brand over time. (The company already has a three-year compound annual growth rate of 15%.)
The two acquisitions also take aim at broadening Foot Locker's product mix. In a presentation on the acquisitions, Foot Locker described its current brands as operating in the "sneaker culture and sport culture" space, while WSS will fill a position as a "classics driven assortment for [the] full family" and Atmos will expand Foot Locker into the "premium boutique streetwear" market.
In addition to promising financials, Foot Locker executives were also interested in more qualitative elements of WSS and Atmos. Around 80% of WSS sales come from loyalty program members, and Johnson highlighted the company's "neighborhood-based store model" and community engagement as selling points. Foot Locker execs said WSS allows the company to expand its off-mall strategy, which it is "very committed to continuing."
Atmos has a store fleet of experiential locations, an exclusive in-house label and high digital penetration, with more than 60% of sales in 2020 from digital channels. Foot Locker executives are also particularly interested in "strengthening our connection to the sneaker community" and youth culture, Johnson said on the call, which Atmos is helping to influence in Japan. The company's founder is "one of the most influential people in streetwear and sneaker culture," Johnson said in a statement.
Importantly, the Asia Pacific region is Foot Locker's "largest growth opportunity," according to a presentation on the acquisition, and Japan is the third-largest economy globally.