When the rescue works but the price tag still shows
There's a particular kind of pain that only acquirers know. You buy a struggling company, roll up your sleeves, fix the basics, and just when the patient starts breathing on its own — the market shrugs. Or worse, it punishes you for the cost of the surgery.
That's the moment Dick's Sporting Goods walked into on Wednesday morning. Eight months ago, the Pittsburgh-based retailer wrote a $2.5 billion cheque for Foot Locker, the once-mighty sneaker chain that had spent years watching its mall stores empty out and its biggest supplier, Nike, walk past it to sell directly to customers online. Critics called the deal a vanity project. Executive Chairman Ed Stack called it the bargain of the decade.
Then came the first real report card. Foot Locker, against most predictions, posted positive comparable sales growth — meaning sales at stores open more than a year actually went up rather than down for the first time in over a year. Dick's own stores grew even faster. By any reasonable measure, this was the quarter the doubters were waiting for, and it went the right way.
The stock fell anyway. To understand why, you have to understand what investors are really pricing — and it isn't progress.
