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Foot Locker (FL) Closes WSS Buyout, Expansion Plan on Track

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Foot Locker, Inc. (FL - Free Report) steadily focuses on improving its performance through operational and financial initiatives. Talking of its operational strategy, this New York-based athletic retailer is continuously making prudent investments and undertaking strategic buyouts to attain sustainable growth. In early August, Foot Locker had entered into agreements to acquire Eurostar, Inc. (WSS) for $750 million and Text Trading Company, K.K. (atmos) for $360 million.

On Sep 20, it concluded the buyout of WSS. This U.S.-based athletic footwear and apparel retailer mainly operates on the West Coast.

In relation to the buyout, Foot Locker announced the appointment of Anthony Aversa as the chief operating officer of WSS, which is effective immediately. He will supervise the brand's market planning, real estate and customer experience activities, and report directly to Rick Mina, the senior vice president & general manager of WSS.

More on the WSS Buyout

WSS is a complementary addition to Foot Locker’s portfolio and boasts an impressive customer base rooted in the Hispanic community. 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. Hence, this brand enhances the company’s product mix and looks forward to reinforce the buyer’s foothold with a complete off-mall store fleet across major markets. This buyout will help the company expand into new markets and customer segments apart from enhancing its relationships with vendor partners.

Foot Locker is likely to gain from WSS' assortment of classic styles, a unique market position, robust customer base and a real-estate portfolio. In fiscal 2020, WSS delivered revenues of about $425 million, reflecting a three-year CAGR of 15%.

WSS will maintain its own name post acquisition, thus operating as a new brand across the company's portfolio. Management had earlier stated that both the WSS and atmos transactions will drive the company’s earnings per share in fiscal 2021. It had also projected these deals to be accretive to earnings, which on an annualized basis, are estimated to be 44-48 cents in fiscal 2022. Foot Locker anticipates WSS delivering annual sales growth in low-double digits and EBITDA margins in low-double-to-mid-teen digits in the coming five years.

Wrapping Up

Foot Locker is consistently gaining from healthy demand from customers as outdoor activities are picking up the pace amid relaxation of the pandemic norms. The company continues to invest in digital platforms, improve supply-chain efficiencies and effectively manage inventory. In addition, management’s commitment to develop power stores is encouraging. Foot Locker’s strategic deals including partnership with NIKE (NKE - Free Report) to enhance its assortment and drive growth will keep yielding positive results. The company is progressing well with its FLX membership program as well.

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So far in the year, shares of this currently Zacks Rank #1 (Strong Buy) stock have increased 23.6%, outperforming the industry’s 3.8% growth. You can see the complete list of today’s Zacks #1 Rank stocks here.

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