Dick's Sporting Goods' $2.4 billion acquisition of Foot Locker has backfired as shares tumbled over 25% after the retailer warned of lower profits. The company cited weak consumer footwear demand and heavy discounts pressuring profits. Executive chairman Ed Stack defended the deal, attributing challenges to a promotional environment spilling from brand websites into the broader marketplace.

The sector-wide issues particularly impacted Foot Locker, which relies heavily on legacy and new footwear launches that underperformed. Dick's namesake business avoided the decline. Stack noted fewer launches and below-expectation performance during the second quarter.

The challenges were exacerbated by U.S. tariffs on Asian imports and excess inventory that Foot Locker faced before the acquisition. Despite current headwinds, Stack maintains confidence in the long-term potential, citing investments in new stores, marketing, and product assortment. He stands by the acquisition, believing it positions Dick's for growth when the market rebounds, though consumers remain cautious due to geopolitical volatility and high fuel costs, especially in European and Middle Eastern markets.