Acquisition

12 Months Ended

Jan. 28, 2023

Business Combinations [Abstract]

Acquisition

2. Acquisitions

WSS

In 2021, the Company, through its wholly-owned subsidiary Foot Locker Retail, Inc., acquired 100% of the shares of Eurostar, Inc., a Delaware corporation operating as WSS (“WSS”). WSS is a U.S.-based off-mall athletic footwear and apparel retailer, focused on the Hispanic consumer, which operated 93 stores at the acquisition, primarily on the West Coast.

We believe that this acquisition enhances our growth opportunities in North America and creates further diversification and differentiation in terms of both customers and products.

The results of WSS are included in our consolidated financial statements since the acquisition date. The proforma effects of the acquisition have not been presented, as their effects were not significant to the consolidated results of operations.

The aggregate purchase price for the acquisition was $809 million ($2 million paid in 2022 and $737 million paid in 2021, net of cash acquired) and was funded with available cash. During 2022, we recorded insignificant changes to the value of net assets acquired related to income tax balances.

The following table represents the final allocation of the purchase price for WSS. We determined that the WSS tradename will have an indefinite life and will not be amortized. The excess purchase price over the fair value of assets was allocated to goodwill.

($ in millions)
Assets acquired:
Cash and cash equivalents	$	70
Merchandise inventories		82
Other current assets		10
Property and equipment, net		133
Operating lease right-of-use assets		143
Tradenames		296
Customer relationships		13
Other assets		4
Liabilities assumed:
Accounts payable and accrued liabilities	$	(59)
Current portion of obligations under finance leases		(3)
Current portion of lease obligations		(19)
Long-term portion of obligations under finance leases		(50)
Long-term lease obligations		(127)
Deferred taxes		(87)
Other liabilities		(4)
Goodwill		407
Total purchase price	$	809

atmos

Effective November 1, 2021, the Company, acquired certain entities collectively operated as atmos, headquartered in Japan. atmos is a digitally led, culturally-connected global brand featuring premium sneakers and apparel, an exclusive in-house label, collaborative relationships with leading vendors in the sneaker ecosystem, experiential stores, and a robust omni-channel platform.

The aggregate purchase price for the acquisition was $372 million ($12 million paid in 2022 and $319 million paid in 2021, net of cash acquired) subject to adjustment for the finalization of the purchase price. At closing, we placed $20 million related to certain indemnifications and this indemnification escrow will be released in May 2023, unless there is a pending claim. The acquisition was funded with available cash.

2. Acquisitions (continued)

The purchase price includes contingent consideration which can reach up to $111 million based on achieving certain revenue growth and EBITDA performance targets. The contingent consideration was initially valued at $35 million in 2021 and during 2022 that amount was reduced to $4 million, through impairment and other in our Consolidated Statements of Operations.

The results of atmos are included in our consolidated financial statements since the acquisition date. The proforma effects of the acquisition have not been presented, as their effects were not significant to the consolidated results of operations.

The table below summarizes the final allocation of the purchase price to the fair value of assets acquired for atmos using the exchange rate in effect as of the date of the acquisition. The excess purchase price over the fair value of assets was allocated to goodwill. Changes to amounts reported in the prior year resulted in a change to goodwill of $7 million and primarily was related to intangibles. These adjustments did not have a significant effect on the consolidated results of operations. We determined that the atmos tradenames will have an indefinite life and will not be amortized. Goodwill of $30 million is deductible for tax purposes over 15 years.

($ in millions)
Assets acquired:
Cash and cash equivalents	$	6
Merchandise inventories		20
Other current assets		12
Property and equipment, net		7
Operating lease right-of-use assets		44
Tradenames		130
Customer relationships		9
Other assets		6
Liabilities assumed:
Accounts payable	$	(10)
Current portion of lease obligations		(10)
Other current liabilities		(8)
Long-term lease obligations		(35)
Deferred taxes		(40)
Other liabilities		(8)
Goodwill (1)		249
Total purchase price (2)	$	372

(1) Goodwill represented on this table is at the exchange rate in effect as of the date of acquisition.

(2) Total purchase price consists of $337 million in cash and $35 million of contingent consideration.