Dick's executive chairman Ed Stack told CNBC senior retail reporter Courtney Reagan that it will close an unspecified number of Foot Locker stores as part of a major restructuring to prevent the newly acquired chain from dragging on profitability.

"We need to clean out the garage," Stack told Reagan. "We've taken pretty aggressive markdowns to clean out old merchandise. We're impairing some store assets. We'll close some stores… everything we're doing is there to protect 2026 and just kind of do this one time."

The restructuring will weigh heavily on Foot Locker's results this quarter, with comparable sales expected to fall in the mid- to high-single digits and margins compressing by 10 to 15 percentage points. 

In May, Dick's acquired Foot Locker for $2.4 billion, a deal that was completed in September. This acquisition creates a larger sports retail chain that can expand its global reach and offer a wider range of products and services to a broader customer base.

However, that customer base in the U.S. skews toward lower-income and lower-middle-income consumers, and it is not surprising that the retailer is restructuring, given that these consumers are financially pressured. 

Meanwhile, Dick's core business remains solid: Comparable sales rose 5.7%, far ahead of Wall Street estimates, prompting the company to raise full-year guidance. Dick's now expects comparable sales growth of 3.5% to 4% and EPS of $14.25 to $14.55.

Q3 results beat Wall Street estimates:

In a recent channel check, Goldman analysts led by Kate McShane visited a Foot Locker store in Jersey City, New Jersey, and found light traffic and elevated promotions. 

Here are McShane's findings:

• Traffic was light; in-stocks appeared healthy

• "Just gift" signage in front window with Jordan 1 high and lows and AF1s in window display

• New Balance sneakers in front of store display and Jordan apparel

• Uggs and Timberlands are now on wall near front of store where the Nike Vomeros used to be

• Shifted Nike Vomero on the wall; a few Vomero colorways are now on sale for the first time we have seen

• Shifted basketball shoes on the wall more towards the front middle of the store

• Moved non-Nike running shoes on the wall towards the back of the store (Hoka, On, and Asics)

• Seemed that there were more workers in the store than usual – we counted 10-12

• In men's, we estimate that 34% of Nike footwear was on sale with an average promotion of 32%, compared to 21% of Adidas footwear with an average promotion of 33% and 38% of New Balance footwear with an average promotion of 42%. In women's, we estimate that 30% of Nike footwear was on sale with an average promotion of 34%, compared to 57% of Adidas footwear with an average promotion of 32% and 45% of New Balance footwear with an average promotion of 37%.

Promotions Observed at Foot Locker

More details. 

Foot Locker operates 2,400 stores globally, with 677 located in the U.S. as of August. Stack provided no details on how many stores will be shuttered or on the timing of the closures.