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Foot Locker (FL) Boosts Expansion Strategy, To Buy WSS & atmos

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Foot Locker, Inc. (FL - Free Report) remains committed toward making prudent investments to attain sustainable growth. In a latest development, the company agreed to acquire the U.S.-based footwear and apparel retailer Eurostar, Inc. (WSS) for $750 million and Text Trading Company, K.K. (atmos) for $360 million. Headquartered in Japan, Text Trading Company, K.K. owns and licenses the atmos brand.

Post acquisition, both WSS and atmos will maintain their names, operating as new banners in the company's portfolio. Both transactions will be funded with cash and drive the buyer’s earnings per share in fiscal 2021. These deals are likely to be concluded late in the third quarter of fiscal 2021.

Detailing Pending Acquisitions

Since its inception 37 years back, WSS has successfully developed a high-growth business by pioneering the neighborhood-based store model and focusing on a full-family offering. In fiscal 2020, WSS delivered revenues of about $425 million, seeing a three-year CAGR of 15%. 80% of sales are being generated from the members in its loyalty program.

Foot Locker is likely to gain from WSS's assortment of classic styles, a unique market position, robust customer base and a real-estate portfolio. This buyout will reinforce the acquirer’s position in North America by enhancing its product mix and offering an access to a wider customer base and store footprint. Going forward, management sees major opportunities to expand this business by exploring WSS's store base into new geographies in North America.

Coming to the atmos transaction, the to-be-acquired entity is an exclusive in-house streetwear brand with premium sneakers and apparel, possessing a robust omni-channel platform. Founded in 2000, atmos has a global store base of 49 outlets including 39 in Japan that are operating under the atmos banner and atmos pink, its women's brand. In fiscal 2020, atmos generated revenues worth around $175 million, more than 60% of which came from the digital channels.

Through this buyout, Foot Locker looks to capitalize on the fast-growing Asia-Pacific market and establish a critical entry point in Japan. Hence, the acquisition of atmos is expected to bolster the company's global reach with a significant foothold in the East Asian nation alongside expanding its premium and top-tier offerings.

What’s More?

So far this year, shares of this well-known athletic shoes and apparel retailer have surged 38.1%, outperforming its industry’s 26.1% rally. Sturdy growth in its digital realm, a robust brand portfolio and efficient inventory management are consistently aiding the stock. Foot Locker has been investing significantly in solidifying its digital presence and augmenting its direct-to-consumer operations.

Foot Locker is focused on improving its performance through operational and financial initiatives. This presently Zacks Rank #2 (Buy) company is getting a favorable response from its customers for its merchandise offerings, which is constantly aiding growth across the company’s stores as well as the digital channel. Management remains optimistic about its product categories as well as its ability to drive long-term growth.

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