ITEM 1A. RISK FACTORS
Risks Related to Our Industry and Macroeconomic Conditions
Macroeconomic conditions may adversely affect consumer discretionary spending and our business, operations, liquidity, and financial results.
Our business depends on consumer discretionary spending, and are sensitive to changes in global macroeconomic conditions outside of our control, including inflation, prolonged inflationary pressures and measures taken to curb inflation; elevated interest rates and recessionary pressures; changes in consumer disposable income consumer confidence and debt burdens; perceptions of global economic stability (including in response to shifts in government policies); and wage and unemployment levels. These conditions can cause consumers to reduce or postpone discretionary purchases, resulting in lower traffic, reduced comparable sales, and decreased average value per transaction across our business.
Geopolitical developments may also adversely affect our business and financial results. Ongoing conflicts and tensions —such as those in the Middle East (particularly the recent U.S. military operations in Iran), Ukraine and Venezuela—and the threat or outbreak of additional conflicts, war, terrorism, or public unrest may create economic instability, disrupt supply chains, increase fuel and transportation costs, or elevate cybersecurity risks. Such developments continue to introduce uncertainty regarding long‑term trade and economic conditions in the European Union and other markets, which may particularly affect our Foot Locker Business given its international footprint.
In response to reduced demand, we may need to increase promotional activity or adjust pricing strategies, which could negatively impact our planned sales levels and gross margins. A sustained reduction in consumer spending or an extended period of economic instability could adversely affect our business, operations, liquidity, financial condition, and results of operations.
Intense competition in the sporting goods and retail industries could limit our growth and reduce our profitability.
We operate in a highly fragmented, intensely competitive and rapidly evolving global marketplace. We operate a number of different store formats and compete with an expanding set of retailers and other potential competitors across multiple formats and channels—including large-format, specialty and traditional retailers; mass merchants; department stores; and online and direct‑to‑consumer sellers, including vendors. Many of our competitors have significant international, national, regional, or local market presence, and their name recognition, and financial, marketing, technological, and other resources allow them to meaningfully compete with our business across various channels. Our ability to effectively and successfully respond to competitive pressures may adversely affect our results of operations, profitability or reputation.
Consumers can compare prices and product offerings in real time, increasing pressure on us to maintain competitive pricing, differentiated assortments and compelling marketing programs. If our varied marketing and advertising strategies, particularly across digital and social media channels, are unsuccessful, we could lose customers and experience declining sales. In addition, the retail industry is undergoing continued technological innovation and disruption—including increased use of artificial intelligence (“AI”) and machine learning. If we cannot innovate, enhance our platforms or adopt new technologies at a pace consistent with consumer expectations and industry developments, our business could be harmed.
Fluctuations in product costs and availability could adversely affect our business, financial condition, and results of operations.
Our product costs depend in part on the cost and availability of raw materials and component inputs. Significant increases in those costs—whether due to trade tensions, shifting tariff policies in key sourcing countries like China, Mexico, and Canada (including recently enacted tariffs and potential additional shifts in tariff policies in the future), currency fluctuations, material shortages, supply chain disruptions, or other factors—could increase manufacturing and other costs for both our own private brand merchandise and the products we purchase from our vendors. These factors could also compel us to seek alternative suppliers, take pricing actions, modify operations, or take other actions that may not fully mitigate the associated cost increases, and our sales, margins, and profitability could be adversely affected.
Our business also depends heavily on third‑party transportation providers to move products (including those manufactured overseas). Transportation availability and other sourcing costs are influenced by fuel price volatility, extreme weather conditions, geopolitical conflicts and tensions as discussed above, acts of war or terrorism, port congestion, government shutdowns, labor disputes, regulatory changes, inspections, and other disruptions to global trade routes, shortages of qualified transportation personnel, and limited availability of aircraft, ships, trucks, and rail equipment. In particular, the military conflict recently launched in Iran has had, and may continue to have, adverse impacts on global trade with respect to goods passing through the Strait of Hormuz and material supply chain disruptions resulting in significant increases in oil and fuel prices
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globally. Increased demand for transportation services and spikes in fuel prices have resulted in higher transportation costs for us and our vendors, and continued volatility could further pressure our operating results. Any inability by us or our vendors to secure adequate and timely transportation resources at competitive rates or to otherwise obtain sufficient quantities of merchandise at acceptable cost on a timely basis could delay product flow, result in shipment delays, disrupt inventory levels, and negatively impact our ability to serve customers, any of which may adversely affect our sales, profitability, and customer experience.
Our reliance on products manufactured outside the United States and our significant international operations expose us to numerous global economic, political, regulatory, and supply‑chain risks that could materially and adversely affect our sales, profitability, results of operations, and financial condition.
A substantial portion of our merchandise, including most of our vertical brand merchandise, is manufactured abroad. As a result, our business is subject to a broad range of risks inherent in international sourcing and global retail operations, including changes in import duties, quotas, tariffs, and other trade restrictions; the potential introduction or expansion of taxes on imported goods; the loss of favorable trade status; trade remedy actions; geopolitical tensions; and other trade restraints affecting the countries where our vendors and manufacturers operate. Heightened political and economic uncertainty may further disrupt global trade flows, limit access to vital trade routes, or affect the availability and cost of imported goods.
In addition, imported products are often subject to excise duties, sales taxes, and value‑added taxes, and our international retail operations are subject to various taxes in foreign jurisdictions. Changes in duty structures, tax rates, or tax legislation—including indirect‑tax reforms, digital services taxes, or customs‑valuation rules—could increase the cost of goods sold or operating expenses. Foreign manufacturers’ pricing may also be affected by local currency movements relative to the U.S. dollar, as well as changes in the cost of raw materials, which could further increase our product costs and negatively impact our margins.
Risks Related to Our Operations and Reputation
If we are unable to anticipate or respond effectively to changes in consumer demand, preferences, fashion trends or shopping patterns, our sales and profitability may be adversely affected.
Our success depends on our ability to anticipate and respond in a timely manner to changing consumer demand, preferences and fashion, and cultural trends, as well as evolving shopping patterns across digital and in‑store channels of our business and international markets. We operate a fully omni‑channel business model and must meet customers’ expectations for appealing and consistent online experiences; localized and differentiated assortments; premium products; elevated customer service; fast, accurate and reliable delivery and pickup options; and convenient returns. Consumer expectations and shopping behaviors continue to evolve rapidly and vary across geographic and demographic groups, and these factors could be particularly pronounced within the global multi-cultural nature of our customer base with respect to the Foot Locker Business. If we do not provide an omni‑channel experience that aligns with customer expectations, our results of operations could be adversely affected. Our need to make advanced merchandise purchase commitments can limit our ability to adjust quickly to changes in demand or fashion trends. If we misjudge consumer preferences or the market for our merchandise, we may experience significant markdowns, lower margins, missed sales opportunities and inventory write‑downs.
The athletic footwear and apparel industry, particularly at the premium end of the market, is driven by fashion and cultural trends, changing consumer preferences and product innovation. We rely on our suppliers to maintain product innovation and to anticipate shifts in consumer tastes across the various geographic regions of our operations. We cannot guarantee that our merchandise selection will accurately reflect consumer preferences when offered for sale or that we will be able to identify and respond quickly to changes in fashion trends, especially given the long lead times required to source much of our product. Failure by us—or by our suppliers—to anticipate, identify or react appropriately to changes in fashion trends or consumer preferences could materially adversely affect our business, financial condition and results of operations.
Our vertical brand offerings and specialty concept stores expose us to potential increased costs, risks related to innovation and prediction of consumer trends and demand, customer experiences, third party liability and proprietary rights, competition and certain additional risks.
We develop and offer our customers exclusive vertical brand products, particularly within our DICK’S Business, which generally carry higher margins than equivalent third-party products. Our vertical brand products represent approximately 13% of our overall sales within the DICK’S Business. We expend considerable resources to develop new brands and continually seek to improve and expand our vertical brand offerings. Unexpected or increased costs or delays in development of a brand, excessive demands on management resources, legal or regulatory constraints, and changes in consumer demands and shopping patterns could cause us to curtail or abandon any of our vertical brand products, which could result in asset impairments and inventory write-downs. Additional risks relating to our vertical brand offerings include increased potential product liability and
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product recalls for which we do not have third-party indemnification or other contractual rights or remedies (including product safety concerns); increased reputational risks related to responsible domestic and international sourcing; increased costs for labor or raw materials used to manufacture products; our ability to successfully protect our proprietary rights (e.g., defending against counterfeit or unauthorized goods); our ability to successfully navigate and avoid claims related to the proprietary rights of third parties; our ability to anticipate consumer trends and styles; and our ability to utilize talent and other generational advertising techniques to reach the relevant market specific to each vertical brand.
We have also developed and introduced new store concepts and formats, including with respect to our DICK’S House of Sport stores, DICK’S Field House stores and Golf Galaxy Performance Centers within our DICK’S Business, as well as expanding or making improvements within our existing stores, including the pilot of a more focused product assortment within our Foot Locker Business which we’re referring to as our Fast Break initiative, which require considerable resources, and there is no assurance that these initiatives will be successful. We have also included a variety of experiential opportunities in our current store concept offerings for our DICK’S Business, such as climbing walls, batting cages, fields, ice rinks, group fitness activities and other in-person activations. Issues that may pose potential risks for our new store concepts, formats and enhanced experiential opportunities include: increased potential liability for bodily injury to customers or employees; increased liability for property damage; increased costs for implementing, installing, building, repairing, and maintaining our experiential concepts or creating new concepts; our ability to attract and retain employees with specific skill sets as it relates to experiential concepts; our ability to anticipate consumer trends or engaging activities across segments and international markets; increased reputational risks related to community involvement, giving, and other activations at a localized level; increased risk related to competitors attempting to create similar concepts to market share; and our ability to administer and comply with obligations under license agreements that we have with third-party licensors of certain brands.
Harm to our reputation could adversely impact our ability to attract and retain customers and employees.
Negative publicity or perceptions involving us, our brands, products, or individuals or entities associated with us, or failure to detect, prevent, mitigate or address issues giving rise to reputational risk, could adversely impact our reputation, business, results of operations, and financial condition, and may adversely impact our ability to attract and retain customers and employees. Issues that might pose a reputational risk include any of the risks enumerated in these risk factors. Furthermore, the prevalence of social media and potential misinformation may accelerate and in the short-term increase the potential scope of any negative publicity we or others might receive and could increase the negative impact of these issues on our reputation, business, results of operations, and financial condition.
Our strategic plans and initiatives may initially result in a negative impact on our financial results, and such plans and initiatives may not achieve the desired results within the anticipated time frame or at all.
Our ability to successfully implement and execute our strategic plans and initiatives, including the ongoing integration of the Foot Locker Business, depends on many factors, some of which are out of our control. For additional risks related to the integration of the Foot Locker Business, see the risk factor captioned “We may not realize the anticipated benefits of the Foot Locker transaction or other strategic alliances, acquisitions or investments, and integration challenges or other risks associated with such transactions could adversely affect our business” below.
Our focus on long-term strategic investments, including investments in our technology and other digital capabilities (such as AI and machine learning), our eCommerce and GameChanger platforms, DICK’s Media Network, improvements to the customer experience in our stores and online, our supply chain, enhancements to our ScoreCard loyalty program, the continued development of our vertical brands and specialty store concepts, expansion and re-positioning of our real estate portfolio (including grand openings, store remodels, experiential concepts and relocations), continued enhancements to our product assortment across our business, including the Fast Break initiative in the Foot Locker Business, and improving employee productivity through strategic talent investments, organizational re-alignment and otherwise may require higher short-term expenditures, changes to our existing cost structure and/or significant capital investment and management attention at the expense of other business initiatives and may take longer than anticipated to achieve the desired return or fail to achieve the desired return at all. Additionally, any new initiative is subject to certain risks, including customer and employee acceptance, competition, product differentiation, our ability to implement technological initiatives, and the ability to attract and retain qualified personnel to support the initiative.
An inability to execute our real estate strategy could adversely affect our financial results.
Our financial performance depends, in part, on our ability to execute our real estate strategies across our business, which are varying and multi-faceted. For our DICK’S Business, this includes growing and optimizing larger-format specialty store concepts and to repositioning and optimizing our existing store portfolio over time, and for our Foot Locker Business, includes maintaining and acquiring locations in highly productive urban retail corridors, high streets, and enclosed regional and
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neighborhood malls. There can be no assurance that we will be able to locate and obtain control of adequate desirable real estate that meets the criteria of our business or that such locations will continue to be available on favorable terms.
Our ability to negotiate favorable lease, purchase, or operating terms depends on conditions in the real estate, capital, and construction markets and other factors outside of our control, including competition for desirable properties; our relationships with current and prospective landlords, property owners, and shopping center or mall operators; construction costs; the availability of labor and materials; access to sufficient capital and/or financing vehicles, such as sale-leasebacks; local regulations; private restrictions; third-party or political opposition; and broader market conditions. Additionally, several large landlords control many prime properties, and further consolidation or deterioration in their financial condition could reduce our ability to obtain and retain desirable locations on favorable terms. If we are unable to secure suitable sites or negotiate appropriate terms, we may incur excessive costs, and our operating margins and/or return on investment may fall below acceptable levels.
Because a meaningful portion of our stores, particularly within our Foot Locker Business, are located in shopping centers or malls, our performance is influenced by the volume of mall traffic and the sustained success and relevance of those locations. Mall traffic may be adversely affected by economic downturns; the closing or decline of anchor tenants and specialty retailers; vacancies or closures; shifts in consumer shopping habits, including increased online shopping; singular material events, such as a public health emergency, or decline in the popularity of mall shopping among our target customers. Our DICK’S Business may also be affected by changes in traffic patterns in the regional shopping areas and off-mall retail nodes where many of our stores are located. Declines in traffic or conversion rates may require us to increase markdowns, promotions, or marketing spend, which could adversely impact our financial results. Additionally, the growth of our business is dependent on our ability to open and operate our various store concepts synergistically in geographic regions where multiple store concepts may exist in close proximity to one another.
If particular stores become unprofitable, we may be required to record impairment charges and may not be able to terminate related leases or sell associated real estate. Store closures may result in short-term economic consequences, such as ongoing rent or other lease-related obligations for the remainder of the lease term, termination charges, default risks, or, if a property is owned, costs, expenses, and losses associated with a sale or other disposition. We may also remain liable for certain post‑assignment or sublease obligations if an assignee, sublessee, or tenant fails to perform. Any of these factors could adversely affect our business, financial condition, and results of operations. These risks may be more prevalent within our Foot Locker segment as we continue our review of the global Foot Locker business store fleet and evaluate closure of certain underperforming stores.
Our business relies on our global distribution and fulfillment network, and disruptions in or failures to optimize this network, could cause us to lose merchandise, be unable to effectively and efficiently deliver merchandise to our stores and customers, and could adversely affect our financial condition and results of operations.
The ability to optimize our global distribution and fulfillment network, which includes multiple distribution centers worldwide, our eCommerce fulfillment centers, and our stores that serve as forward distribution points, to avoid disruptions and maximize efficiencies, depends on a variety of factors including severe weather conditions, natural disasters, public health emergencies or other catastrophic events, problems with our information technology systems or our warehouse management systems, labor or employee disagreements, supply chain disruptions or other shipping problems, and general geopolitical, economic and real estate conditions. An inability to optimize our distribution and fulfillment network might impair our ability to adequately stock our stores, process returns and fulfill eCommerce orders at the speed expected by customers, increase costs associated with shipping and delivery, a material portion of our inventory, and otherwise affect our operations, sales, , and reputation.
In addition, we rely on independent third-party transportation providers for substantially all of our merchandise shipments. If we change shipping companies, we could face logistical difficulties that could adversely impact deliveries, and we would incur costs and expend resources in connection with such change. Moreover, we may not be able to obtain terms as favorable as those received from the independent third-party transportation providers we currently use, which could have a material adverse impact on our business.
Unauthorized access to, or disclosure of, sensitive or confidential information could result in substantial costs, operational disruption, legal exposure, and reputational harm, and evolving privacy and cybersecurity regulations may increase our compliance obligations and related risks.
The protection of customer, employee, vendor, and Company data is critical to our business. In the normal course of operations, we collect, receive, store, manage, transmit, and delete confidential and sensitive information, including payment card data, personally identifiable information, employee and vendor information, and other proprietary or confidential Company data, and rely on numerous third‑party vendors and service providers in this regard. Although we have established cybersecurity
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governance processes, implemented security measures, and conduct regular training and system updates, cyber threats continue to evolve rapidly accelerated by emerging technologies such as advanced artificial intelligence and machine learning. We may be unable to anticipate, prevent, or fully mitigate new or sophisticated cyberattacks or insider threats, whether intentional or inadvertent.
While we and our third-party providers have experienced non‑material data security issues from time-to-time, and in the future may continue to experience cyberattacks or threats of varying degrees in the conduct of our business, we are not aware of any material data breach to date. Nevertheless, any actual or perceived compromise of data security could interrupt our operations; result in loss, theft, or misuse of sensitive information; harm our reputation; undermine customer trust; discourage participation in our loyalty program; and require significant remediation costs, including investments in additional technology, system upgrades, or personnel. A material compromise could also expose us to substantial legal, regulatory, and financial consequences beyond the scope or limits of our insurance coverage.
In addition, the data privacy and cybersecurity regulatory environment is becoming increasingly complex, with new, more rigorous, and often inconsistent requirements emerging at the federal, state, and global levels. We are subject to numerous laws and regulations, including the EU General Data Protection Regulation (GDPR), the United Kingdom GDPR, the California Consumer Privacy Act (CCPA), and other U.S. state and international privacy laws. We are also subject to payment card industry compliance and other regulatory requirements. These laws impose strict requirements regarding the collection, use, storage, transfer, deletion, and protection of personal data, and grant enhanced rights to individuals. Regulatory scrutiny from international regulatory authorities, U.S. federal agencies, U.S. state attorneys general, and newly created U.S. state privacy regulators continues to increase, and we have received inquiries from government authorities from time-to-time regarding our data practices.
Maintaining compliance with these obligations may require significant resources, ongoing enhancements to our privacy and cybersecurity programs, and changes to our business practices. Evolving regulations may limit our ability to collect and use data to enhance and personalize our customer experience, support marketing and advertising activities, or execute strategic initiatives. Failure to comply with applicable laws or regulations, or to respond appropriately to a data‑security incident, could result in severe penalties, sanctions, governmental investigations, consumer litigation, and reputational harm.
Problems with our information systems could disrupt our operations and negatively impact our financial results and materially adversely affect our business operations.
We utilize and depend on information systems for core system needs of our business, including our use of an independent service provider for electronic payment processing. We rely on these systems to make operational decisions, manage inventory, operate our websites, track, record and analyze the merchandise we sell, process and deliver shipments of goods, and maintain normal business activities. Additionally, we have adopted a hybrid remote work environment which relies on the efficiency and functionality of our information systems. If any of these systems (including our back-up systems, third party systems or systems upon which any of these systems rely) are damaged, breached, or fail to function properly, whether from natural, accidental or malicious events, it could disrupt our operations, we may suffer loss of critical data, and we may have to undertake significant investments to repair or replace these systems, which could negatively impact our financial results and materially affect our business operations. If independent service providers become or to provide such services to us or if the cost of using these providers increases, our business could be .
In addition, the development, adoption, and use of generative AI technologies and machine learning are progressing rapidly; ineffective or inadequate AI and machine learning development or deployment practices by us or by third parties, including vendors, could result in unintended consequences. For example, AI or machine learning algorithms that we use may be flawed or based on datasets that are biased, incomplete or insufficient. In addition, any latency, disruption, or failure in our AI or machine learning systems or infrastructure could result in operational delays or errors. Developing, testing, and deploying resource-intensive AI and machine learning systems may require additional investment and increase our costs.
We may be unable to attract, train, engage and retain key employees and to adequately respond to employee organizing efforts.
Our long-term success and ability to implement our strategic goals and initiatives depends on our ability to attract, retain, train and develop key and qualified employees in all areas of the organization. Our ability to meet our labor needs while controlling labor costs is subject to numerous external factors, including market pressures with respect to prevailing wage rates, equity compensation, unemployment levels and labor availability, particularly in key geographic regions, and employee benefit costs; adoption of new work models and policies regarding on-site and remote work; immigration compliance, and international wage and labor standards and other global regulatory factors; changing demographics; and our reputation within the labor market. If we are unable to attract and retain a global workforce that meets our needs, our operations, service levels, support functions, and competitiveness could suffer, and our results could be adversely affected.
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We also cannot predict whether any unionization or other organizing efforts could occur with our employees within one or more of our domestic or international markets. Any such efforts could increase our costs and negatively impact our operational flexibility. Our response to any such efforts could be perceived negatively and harm our business and reputation.
The loss of one or more of our key executives or the inability to successfully attract and retain executive officers or implement effective succession planning strategies could have a material adverse effect on our business.
Our long-term success and ability to implement our strategic and business planning processes depends in large part on our ability to continue to attract and retain executive management, including recent hiring and appointments of key executives within our Foot Locker Business. All employees, including members of our executive management and key personnel, are at-will employees, and we generally do not maintain key-person life insurance policies on our employees. The loss of any one of the members of our executive management team, including our President & Chief Executive Officer, Lauren Hobart, and our Executive Chairman Edward W. Stack, who began operating the Company in 1984, continues to oversee our merchandising group and key strategic growth initiatives, including the Foot Locker Business, could seriously harm our business. Effective succession planning for executive management and key personnel, including Ms. Hobart and Mr. Stack, is vital to our long-term continued success. Failure to ensure effective transfer of knowledge, maintenance of our culture, setting of strategic direction, and smooth transitions involving executive management and key personnel could our long-term strategies and .
The seasonality of certain categories of our operations, along with the current geographic concentrations of our stores, exposes us to certain seasonal influences and weather-related risks.
Our business is subject to seasonal influences and certain holidays and sports seasons during the year. Many of our stores are in geographic areas that experience seasonally cold weather, and we sell a significant amount of cold weather sporting goods and apparel. Within the DICK’S Business, our highest sales and operating income results have historically occurred during our second and fourth fiscal quarters, which is due in part to golf and team sports sales and the back-to-school season during the second quarter, and in part to the winter holiday season, and our historically strong sales of cold weather sporting goods and apparel in the fourth quarter. Results for any quarter are not necessarily indicative of the results that may be achieved for the fiscal year. However, poor performance during a quarter because of slow holiday or back-to-school seasons or unseasonable weather conditions, including unusually warm weather in the winter months or abnormally wet or cold weather in the spring or summer months, could have a material adverse effect on our business, financial condition, and operating results for the entire fiscal year.
Furthermore, extreme weather conditions and natural disasters caused by changing climate conditions or otherwise and other catastrophic events in the areas in which our stores, distribution centers and/or eCommerce fulfillment centers are located could negatively impact consumer shopping patterns, consumer confidence and disposable income, create interruptions to our business, damage or destroy key facilities, or otherwise could have a negative effect on our financial performance.
We cannot provide any guaranty of future dividend payments or that we will continue to repurchase our common stock pursuant to our stock repurchase program.
Any determination to pay cash dividends or change the amount of our cash dividend on our common stock in the future will be based upon our financial condition, results of operations, business requirements, and the continuing determination from our Board of Directors that the declaration of dividends is in the best interests of our stockholders and complies with all laws and agreements applicable to the dividend. Furthermore, although our Board of Directors has authorized share repurchase programs, we are not obligated to make any purchases under these programs, and the Board may discontinue these programs at any time.
If we do not successfully manage our inventory levels and protect against inventory shrink, our business, financial condition, and results of operations could be materially and adversely affected.
Our ability to maintain appropriate inventory levels is a key component of our operating performance. We must carry sufficient inventory to meet customer demand while avoiding excess or slow‑moving merchandise. If we fail to accurately forecast demand, consumer buying patterns, or shifts in product trends, we may be required to take markdowns or run promotional activity to clear excess inventory, negatively affecting our gross margins and overall financial performance. We have and are continuing to implement key strategic initiatives designed to optimize inventory levels, enhance supply‑chain efficiency, and improve product‑to‑market processes, including expansion of our capabilities in data science, demand forecasting, and customer‑behavior analytics to better localize assortments and increase store‑level allocation accuracy, as well as deploying technology intended to improve in‑season responsiveness. We’ve also taken and are continuing to take strategic actions with respect to historically unproductive inventory in our Foot Locker Business to optimize our assortment. Because these initiatives require significant changes to our inventory management systems, processes, and organizational capabilities, any to
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implement, integrate, or fully utilize these initiatives could prevent us from realizing the expected benefits and could adversely affect our operating results.
In addition, our business is exposed to risks related to inventory shrinkage—losses from damage, theft (including organized retail crime), and other causes. Although some level of inventory shrink is inherent in the retail business and our inventory shrink generally stabilized in 2025, we have experienced elevated levels of inventory shrink in the past, which could return or worsen. We must also maintain a safe store environment for our employees and customers. Elevated levels of shrink or an unsafe store environment can negatively affect profitability, result in asset impairments at affected stores, and may require strategic changes in operational procedures or security measures that could increase our costs and adversely impact our reputation and the employee or customer in-store experience.
Our future growth may depend on the Foot Locker Business’s ability to expand its market share in international markets, including through licensed or franchise arrangements, and failure to do so could adversely affect our business, financial condition, and results of operations.
Future growth within our Foot Locker Business will depend, in part, on our ability to expand our presence and market share in international regions where we currently operate as well as in new markets where we may have limited operating experience. In certain countries, we rely—and may increasingly rely—on third‑party partners through licensing or franchise arrangements to operate stores or digital platforms under our banners. Our ability to grow internationally therefore depends not only on our own execution but also on the capabilities, financial stability, operational discipline, and brand stewardship of these foreign business partners.
Our Foot Locker Business has retail operations in 20 countries across North America, Europe, Asia, and Australia, plus a licensed store presence in Europe, the Middle East, and Asia. These international operations expose us to retail‑market and regulatory risks unique to non‑U.S. jurisdictions, including distinct consumer behaviors and preferences and shifts related thereto; political or social instability; changes in local economic conditions; fluctuations in real estate and occupancy costs and variations in real estate conditions generally; foreign tax structures; and labor, employment, data‑protection and other regulatory and compliance requirements that differ significantly from those in the United States. Because these businesses primarily conduct transactions in their local currencies, fluctuations in foreign currency exchange rates—especially the euro, British pound, Canadian dollar, Australian dollar and the Japanese yen—may materially affect our reported results when translated into U.S. dollars. In some markets, local business practices and regulatory frameworks may be unfamiliar or more complex than those in our historical footprint for the DICK’S Business. In addition, expansion into new geographies may require significant capital investment, adjustments to our store formats or digital platforms, enhanced supply‑chain capabilities, and increased management attention.
If we or our licensed or franchised partners are unable to successfully execute expansion strategies, adapt our banners to new market dynamics, comply with local regulatory requirements, or maintain consistent brand standards, our international growth may not materialize as expected. Any failure to expand profitably—or at all—in targeted international markets could adversely affect the Foot Locker Business’s future growth trajectory and could have a material adverse effect on our overall business, financial condition, and results of operations.
Risks Related to Our Common Stock, Class B Common Stock and Other Anti-Takeover Mechanisms
Failure to meet market expectations has caused, and could in the future cause, a decline in our common stock price.
As a publicly-traded company, various securities analysts follow our financial results and issue reports about our historical financial results as well as analysts’ opinions of our future performance, including estimates or projections on future results, which may, in part, be based upon any guidance we have provided. If our operating results differ from the estimates or expectations of public market analysts and investors, our stock price could decline (which has happened in the past and could happen in the future). We are currently subject to securities class action and shareholder derivative lawsuits, books and records demands and Section 220 actions relating to a temporary decline in our stock price and could become involved in additional litigation of this type in the future. Any litigation could result in reputational damage, substantial costs (directly or indirectly, such as potential insurance cost increases) and a diversion of management’s attention and resources needed to successfully run our business. See Item 3. “Legal Proceedings” for more information regarding the pending securities class action, shareholder derivative lawsuits, books and records demands and Section 220 actions.
We are controlled by holders of our Class B common stock, whose interests may differ from other stockholders.
Holders of our Class B common stock, consisting of our Executive Chairman, Mr. Edward W. Stack, his relatives, and various trusts established for the benefit of their families, control a majority of the combined voting power of our common stock and Class B common stock and would control the outcome of a vote on any corporate transaction or other matter submitted to our
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stockholders for approval. The interests of the holders of Class B common stock may differ from the interests of our other stockholders and they may take actions with which our other stockholders disagree. Further, activist investors and other public pressures have recently applied greater scrutiny to listed companies with such dual class share structures. Similar efforts or enhanced scrutiny with respect to our Class B common stock could adversely impact perceptions of our common stock value, divert management attention from our core business operations and strategic initiatives, and/or cause our stock price to decline.
The issuance of Class B common stock and other anti-takeover mechanisms could prevent or delay a change in control of our Company or certain other transactions, even if such a change in control transaction could be beneficial to our stockholders.
Provisions of our Amended and Restated Certificate of Incorporation, as amended, and our Second Amended and Restated Bylaws as well as provisions of Delaware law could discourage, delay, or prevent a merger, acquisition, or other change in control of our Company, even if such change in control would be beneficial to our stockholders. These provisions include: authorizing the issuance of Class B common stock; authorizing the issuance of “blank check” preferred stock that could be issued by our Board of Directors to increase the number of outstanding shares and thwart a takeover attempt; prohibiting the use of cumulative voting for the election of directors; prohibiting stockholder action by partial written consent and requiring all stockholder actions to be taken at a meeting of our stockholders or by unanimous written consent if our Class B common stock is no longer outstanding; and establishing advance notice requirements for nominations for election to the Board of Directors or for proposing matters to be acted upon by stockholders at stockholder meetings.
Risks Related to Third Parties and Legal and Regulatory Requirements
We depend on key suppliers, distributors and manufacturers to provide us with sufficient quantities of quality, innovative and competitively priced products, and any disruption in these relationships could adversely affect our business.
Our ability to provide a compelling merchandise assortment depends on maintaining strong relationships with a large but concentrated group of suppliers. We purchased merchandise from approximately 1500 vendors in fiscal 2025, with Nike, our largest vendor, representing approximately 31% of total merchandise purchases. Because of this concentration, any adverse development in a key supplier’s brand power, reputation, financial condition, product innovation, or manufacturing capability—or its decision to change its distribution or allocation strategies—could materially adversely affect our business.
We generally do not have long‑term written contracts with our suppliers that would require them to continue supplying us with merchandise or providing us with customary incentives we’ve historically received in the DICK’S Business such as return privileges, volume purchasing allowances, cooperative advertising and markdown allowances. Key vendors may fail to deliver on their commitments or fail to supply us with sufficient products that comply with our safety and quality standards or fail to continue to develop new products that create consumer demand.
Any inability to obtain merchandise in a timely manner, secure adequate product allocations, or maintain favorable supplier terms could have a material adverse effect on our business, financial condition, results of operations or profit margins.
We are subject to significant costs and risks associated with an extensive and evolving set of global laws and regulations that affect our business, operations, and workforce.
Our business is subject to a broad, increasingly complex and sometimes conflicting array of U.S. federal, state, local, and foreign laws and regulations. As regulatory expectations increase globally, we are required to devote substantial resources to develop and maintain internal compliance programs, monitoring systems, reporting structures, and controls. Failure to comply with applicable laws and regulations, or alleged non‑compliance, could result in governmental investigations, enforcement actions, fines, penalties, injunctions, civil litigation, reputational harm, and operational disruptions.
We are also subject to numerous domestic and foreign labor and employment laws governing wages, minimum hours, overtime, paid leave, scheduling, unemployment insurance, workers’ compensation, and workplace safety. Potential changes to these laws—including increases in minimum wage or overtime obligations, or reforms such as the Protecting the Right to Organize Act—could significantly increase our labor costs. Shifts in regulatory priorities at agencies such as the National Labor Relations Board or analogous international regulators may also affect our employee‑relations practices and expose us to additional administrative or litigation risks.
Complying with new or amended legislation, changes in regulatory interpretations, or reversals of previously implemented rules can be time‑consuming and costly, requiring adjustments to policies, systems, and staffing. Any failure to effectively manage these evolving global compliance obligations could negatively impact our business, financial condition, or results of operations.
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Our sales and operating results could be adversely affected by product safety and labeling concerns.
Failure to meet applicable safety or labeling standards or our customers’ expectations regarding safety or labeling of products, could result in decreased sales, increased costs, and/or expose us to legal and reputational risk. Our vendors must comply with applicable product safety and labeling laws, and we are dependent on them to ensure that the products we buy comply with all safety and labeling standards. Negative customer perceptions regarding the safety, sourcing and labeling of the products we sell, and events that give rise to actual, potential, or perceived product safety or labeling concerns could expose us to government enforcement action and/or private litigation. Furthermore, reputational damage caused by real or perceived product safety or labeling concerns could have a negative impact on our sales and operating results.
We may be subject to various types of litigation and other claims, and our insurance may not be sufficient to cover damages related to those claims.
From time-to-time the Company or its subsidiaries may be involved in lawsuits or other claims arising in the ordinary course of business, including those related to federal, state or multi-jurisdictional wage and hour laws, product liability, consumer protection, advertising, employment, intellectual property, tort, privacy and data protection, disputes with property owners, landlords and vendors, company policies, workplace injuries and other matters. We may incur losses relating to claims filed against us, including costs associated with defending against such claims, and there is risk that any such claims or liabilities will exceed our insurance coverage, or affect our ability to retain adequate or cost-effective liability or workers’ compensation insurance in the future. Even if a claim is unsuccessful or is not fully pursued, the negative publicity surrounding any such could affect our reputation. Due to the inherent uncertainties of and other , we cannot accurately predict the ultimate outcome of any such matters.
Although no longer sold in any of our stores, we remain subject to certain risks relating to the historical sale of firearms and ammunition by the DICK’S Business to the extent it remains in circulation. Due to the highly regulated nature of these products and the increased risk of injury or related lawsuits stemming from their use, any improper or illegal use by our customers of ammunition or firearms previously sold by us could have a negative impact on our reputation and business – including losses due to lawsuits (including class actions) relating to our historic background check processes, compliance obligations, or the improper use of firearms or ammunition, whether brought by private litigants, municipalities, or third-party organizations.
Our inability to protect our intellectual property rights, or claims that we infringe the intellectual property rights of others, could adversely affect our brand, reputation, and operating results.
Our intellectual property, trade secrets, domain names, and exclusive licensing rights are valuable assets that are critical to our brand strength. Effective intellectual property protection may not be available in every country in which we operate or manufacture products. Certain countries may not provide protections comparable to those available in the United States, and operating in these regions increases the risk that our proprietary designs, content, technology, or brand assets may be counterfeited, copied, misused, or otherwise misappropriated. Enforcement measures may be costly and not always successful.
Unauthorized use, reproduction or other misappropriation of our intellectual property can diminish the value of our brands or goodwill and negatively impact our revenues and competitive position. In addition, infringement or other third-party intellectual property claims—regardless of their merit—could be time‑consuming, result in litigation, product delays or modifications monetary damages, or require us to enter into royalty, licensing, or settlement agreements or result in our loss of ownership or use of the intellectual property rights, which could adversely affect our business, financial condition, and results of operations.
Changes to tax laws and regulations, or their interpretation and application, could adversely affect our financial results and condition.
As a U.S.-based multinational company subject to tax in multiple U.S. and foreign jurisdictions, our effective income tax rate and overall tax liability are affected by a variety of factors, including changes in applicable tax laws, regulations, treaties, administrative interpretations and guidance, including the possibility of retroactive effect; changes in transfer pricing rules; shifts in the mix of pretax earnings by jurisdiction; and the valuation of deferred tax assets and liabilities. Significant judgment is required in determining our provision for income taxes and in evaluating our tax positions on a worldwide basis.
We are also subject to routine income tax audits in various jurisdictions, and the final outcomes of these audits may differ from the amounts recorded in our financial statements. Adverse developments, including assessments of additional taxes, interest or penalties, could materially affect our tax expense and profitability.
In addition, many jurisdictions are considering or have adopted new tax regimes, such as digital services taxes and the Organization for Economic Co‑operation and Development’s Pillar Two global minimum tax framework, which countries are in the process of implementing. Future changes in tax laws or related interpretations, including at the federal level in the United
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States, could increase our effective tax rate, impose new taxes or reporting requirements, or otherwise adversely impact our financial results, cash flows and overall financial condition.
Poor performance of professional sports teams within our core regions of operations, as well as league-wide lockouts, strikes or cancellations, retirement of or serious injury to key athletes or scandals involving such athletes could adversely affect our financial results.
We sell a significant amount of professional sports team merchandise across our business segments, the success of which may be subject to fluctuations based on the success or failure of such teams or their key players. Poor performance by the professional sports teams within regions with high customer concentration and demand; league-wide lockouts or strikes; and disruptions to, cancellations of, or negative publicity regarding sports leagues and major sporting events could cause our financial results to fluctuate year-over-year. In addition, to the extent we use individual athletes to market our products and advertise our stores or we sell merchandise branded by one or more athletes, the retirement or injury of such athletes, negative publicity or scandals in which they might be implicated could negatively impact our financial results.
Evolving environmental, social and governance (“ESG”) standards, regulatory requirements, stakeholder expectations and related political and social dynamics may increase our costs, subject us to additional risks and adversely affect our business, reputation and financial performance.
We are subject to rules and regulations related to ESG matters imposed by governmental and self‑regulatory organizations, including the SEC, the New York Stock Exchange, California’s Climate Corporate Data Accountability Act and Climate‑Related Financial Risk Act, and the European Sustainability Reporting Standards. Failure to comply could result in fines, penalties or other regulatory consequences, as well as reputational harm.
In addition, some third‑party organizations, institutional investors, proxy advisory firms and customers evaluate companies on ESG performance using differing, and evolving, criteria. These assessments can influence investor sentiment, capital allocation decisions and consumer preferences. Reduced access to or increased cost of capital may result if we do not meet stakeholder expectations related to ESG matters. Developing, implementing and reporting on ESG initiatives, including environmental sustainability, human rights and labor practices, worker safety, materials traceability, packaging and textile waste reduction, and diversity and inclusion initiatives, is complex, costly and subject to evolving reporting standards, internal controls and methodologies. Our ESG disclosures, goals and progress may rely on assumptions, data and measurement frameworks that continue to develop. We could be criticized for the accuracy, adequacy or completeness of our disclosures, the pace of our progress, the scope or ambition of our goals, or for modifying or abandoning previously announced goals. Any such criticism or perceived shortcomings could result in reputational harm, loss of customer or investor confidence, or business impacts.
At the same time, “anti‑ESG” and “anti‑DEI” sentiment has gained momentum in parts of the U.S., leading to proposed or enacted policies, legislation, litigation, legal opinions, investigations and other actions that challenge certain ESG‑related or DEI‑related practices. These developments may conflict with other regulatory requirements, create uncertainty, increase compliance obligations and expose us to additional scrutiny, enforcement actions, litigation risk or reputational harm. They may also influence investor behavior or reduce demand from certain customers.
If we fail to meet applicable ESG‑related regulatory requirements or standards, or if our ESG initiatives, disclosures or performance fall short of expectations of regulators, investors, customers, employees or other stakeholders, we could experience adverse publicity, loss of investor or customer confidence, reduced access to or increased cost of capital, increased compliance costs, or other negative impacts on our business, results of operations, financial condition and liquidity.
Risks Related to Our Strategic Transactions, Indebtedness and Investments
We may not realize the anticipated benefits of the Foot Locker transaction or other strategic alliances, acquisitions or investments, and integration challenges or other risks associated with such transactions could adversely affect our business.
From time-to-time, we may enter into strategic alliances, make acquisitions, or invest in complementary companies or businesses. In particular, although we expect to achieve $100 million to $125 million in cost synergies over the medium term and other longer term synergies and significant benefits from the acquisition of Foot Locker (the “Transaction”), there can be no assurance that we will realize any such synergies or benefits within the anticipated timeframe, or at all. Our ability to achieve the anticipated benefits of the Transaction—and of any future alliances, acquisitions or investments—depends on our ability to make accurate assumptions regarding valuation, operations, growth potential, integration and other factors, and to operate and integrate the relevant businesses successfully.
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We expect to continue to operate Foot Locker as a standalone business segment within our portfolio, maintain the Foot Locker brands, and grow the business by applying our operational expertise. Achieving the anticipated cost synergies and other benefits will depend, in part, on our ability to operate Foot Locker’s Business successfully and efficiently integrate certain operations, which are complex and time consuming, and include, among others:
• preserving operational and other important relationships of Foot Locker and attracting new business and operational relationships;
• operating multiple banners, a differentiated store concept and successfully addressing the challenges facing Foot Locker’s business;
• integrating financial forecasting and controls, procedures and reporting cycles;
• consolidating and integrating corporate, information technology, finance and administrative infrastructures, including enterprise resource planning systems;
• coordinating sales and marketing efforts to effectively position our and Foot Locker’s capabilities;
• coordinating operations in countries in which we have not previously operated; and
• integrating employees and related HR systems and benefits, maintaining employee morale and retaining and attracting key employees.
Strategic alliances, acquisitions and investments (including the Transaction) may also result in the diversion of capital and significant management attention from other business issues and opportunities, both before and after completion, which could adversely affect our ongoing operations. We may not be able to successfully integrate acquired operations, including personnel, financial systems, supply chain and other processes, or successfully operate an acquired business, which could negatively affect revenue, increase expenses, and impair operating results.
In addition, acquisitions may result in dilutive issuances of equity securities, the incurrence of debt, contingent liabilities, amortization expenses, or write-offs, including with respect to historically unproductive inventory in the context of the Transaction, any of which could harm our financial condition. If we do not successfully manage the challenges inherent in strategic alliances, acquisitions and investments, we may not achieve the anticipated benefits on the anticipated timeframe or at all, and our revenue, expenses, operating results, financial condition and common stock price could be materially adversely affected.
Our indebtedness and the terms of our debt instruments, together with potential constraints in the capital markets, could adversely affect our business, financial condition and results of operations, and may limit our flexibility to respond to changing business and economic conditions.
We require adequate capital to operate and expand our business and to respond to changing business and economic conditions. Weakness or volatility in the credit and public capital markets, or deterioration in our financial condition due to internal or external factors, could restrict or limit our access to capital and increase the cost of financing. If we are unable to generate sufficient cash flows from operations and if availability under our revolving credit facility (the “Revolving Credit Facility”) is not sufficient to meet our capital needs, we may be required to seek additional financing, which may not be available on favorable terms or at all. Our liquidity and access to capital could also be adversely affected by unforeseen changes in financial markets and the global economy. In the event of insolvency, liquidation, dissolution or reorganization, the lenders under our Revolving Credit Facility and the holders of our senior notes would be entitled to payment in full from our assets before any distributions were made to our stockholders.
We have outstanding 4.00% senior notes due 2029 (the “2029 Notes”), 3.15% senior notes due 2032 (the “2032 Notes”) and 4.10% senior notes due 2052 (the “2052 Notes,” and together with the 2029 Notes and the 2032 Notes, the “Senior Notes”). Our ability to make scheduled payments on, or to refinance, our indebtedness, including the Senior Notes and borrowings under the Revolving Credit Facility, depends on our financial and operating performance. The interest rates applicable to our Revolving Credit Facility may be affected by our credit ratings, and any downgrade—particularly to below investment grade—could increase our interest expense. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital, or restructure or refinance our indebtedness, including the Senior Notes and the Revolving Credit Facility. A failure to generate sufficient operating results and resources could lead to substantial liquidity challenges and might require the disposition of material assets or operations; we may be unable to consummate such dispositions or obtain sufficient proceeds to meet our obligations when due.
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Our current and future indebtedness could have important negative consequences, including, among other things:
• increasing our vulnerability to adverse economic and industry conditions;
• limiting our ability to obtain additional financing on acceptable terms;
• requiring the dedication of a substantial portion of our cash flow from operations to service debt, reducing cash available for other purposes;
• limiting our flexibility to plan for, or react to, changes in our business; and
• placing us at a possible competitive disadvantage relative to competitors that are less leveraged or have better access to capital.
In addition, our debt documents contain restrictive covenants, including among other things, limitations on certain of our subsidiaries’ ability to incur additional indebtedness and our ability to sell all or substantially all of our assets, in each case subject to a number of exceptions and qualifications. Any future indebtedness could include additional or more restrictive covenants that limit our ability to operate our business, raise capital, or make payments under other indebtedness. Failure to comply with these covenants, or to make payments when due, could result in a default under the applicable instrument and, in some circumstances, could lead to the acceleration of amounts outstanding and cross‑defaults under other indebtedness.
Furthermore, certain provisions in the indentures governing the Senior Notes could increase the cost of, delay or prevent a transaction that might otherwise be beneficial to our stockholders. For example, if a takeover results in a change of control triggering event under those indentures, noteholders will have the right to require us to repurchase their Senior Notes for cash at 101% of the aggregate principal amount of such notes. These and other obligations under the indentures could increase the cost of acquiring us or otherwise discourage a third party from pursuing an acquisition or from removing incumbent management, including in a transaction that noteholders or holders of our common stock may view as favorable.
Material changes in the value or liquidity of the securities and other investments we hold may adversely affect our business, financial condition, results of operations, and future capital requirements.
On January 31, 2026, we held $1.4 billion in cash and cash equivalents, the majority of which was invested in short‑term deposits with highly rated banking institutions. We regularly monitor counterparty credit risk and mitigate exposure by limiting the amount invested with any single institution. Although all such investments were in investment‑grade institutions as of that date, the value or liquidity of these investments could decline due to general market conditions, bank‑specific credit issues, or broader financial system stress. Any such decline could adversely affect our liquidity and our ability to fund operations or capital needs.
In addition, our U.S. and Canadian pension plans’ trusts held $408.4 million in assets on January 31, 2026. The fair values of these assets are compared to the plan’s projected benefit obligations to determine the funded status of the plan. We seek to mitigate funding risk through asset diversification and ongoing monitoring of investment risk, including quarterly portfolio reviews and periodic asset‑liability studies. Despite these measures, changes in market conditions, interest rates, credit quality, or other external factors could reduce the value of our pension assets, negatively affect the funded status of the plan, and increase future required contributions.
We currently hold non-controlling minority investments and may make additional minority investments in the future. Because we do not control the operations or strategic decisions of these investees, these investments inherently involve greater financial, operational, governance, and compliance risks. Other investors may have interests that differ from ours or may exercise their rights in ways that impair our ability to realize the anticipated benefits of these investments, including causing delays, disputes, or litigation. If our investees pursue additional financing to fund growth, such transactions may dilute our ownership and could occur at valuations below those at which we initially invested, thereby reducing the fair value of our holdings. Conversely, if our investees are unable to obtain needed financing, they may be forced to reduce spending, alter their business strategies, or face insolvency, each of which could significantly reduce the value of our investments in those entities.
