01:35 PM EDT, 06/25/2025 (MT Newswires) -- Dick's Sporting Goods' (DKS) earnings growth is likely to "enhance meaningfully" following its pending acquisition of footwear retailer Foot Locker ( FL ) despite a downbeat investor sentiment around the deal's prospects, Oppenheimer said Wednesday.

The athletic goods retailer agreed to buy Foot Locker ( FL ) for an equity value of roughly $2.4 billion last month in a deal that's expected to close in the second half of the year.

"We believe that the merger of (Dick's Sporting) and (Foot Locker ( FL )) will create a larger, more scaled player within the fragmented global sporting goods retail marketplace and yield substantial incremental sales and (earnings per share) growth potential for the combined chain, over the next few years," Oppenheimer analysts Brian Nagel and Andrew Chasanoff said in a Wednesday note to clients.

Since the day prior to the deal's announcement, Dick's Sporting shares are down 16% versus a 3% gain in the S&P 500, according to the brokerage.

"The purchase of (Foot Locker ( FL )) and forthcoming strategic repositioning of the beleaguered chain, including improved inventory and cost disciplines and select store rationalization, should, over time, enhance significantly underlying earnings expansion of (Dick's Sporting), with intermediate-term EPS for the company likely to track 35% higher than for (Dick's Sporting) alone," the analysts said.

Foot Locker's ( FL ) operating margins are expected to rebound amid a re-strengthening partnership with athletic footwear and apparel maker Nike ( NKE ) , making for an incremental EPS growth driver for the merged entity. Nike ( NKE ) currently accounts for about 25% of sales at Dick's Sporting and represents 59% of sales at Foot Locker ( FL ), according to the note.

"While we believe that repositioning at Nike ( NKE ) represents a key catalyst for the (Dick's Sporting-Foot Locker) transaction, in our view, the combined entity will also prove a more compelling wholesale partner for other brands, including larger names as well as up and comers," the analysts said.

The deal is unlikely to face any regulatory hurdles given the size and the fragmentation of both the domestic and global sporting goods markets, according to the note.

Oppenheimer reiterated its outperform rating on the Dick's Sporting stock, with a $270 price target. "Dick's Sporting Goods continues to represent our preferred way to play sporting goods retail and athleisure," the analysts wrote.

Dick's Sporting shares were up 3.6% in Wednesday late-afternoon trade, while Foot Locker ( FL ) rose 0.4%.

Price: 184.36, Change: +6.08, Percent Change: +3.41