During boom times top brands often buy up-and-coming companies to expand their product offerings.
Sometimes that's an effort by an established company to become a little more hip or latch onto a business that's different from its core operations.
Walmart, for example, between 2016 and 2018 went on a spending spree, buying a number of direct-to-consumer brands to supplement its web offerings. The purchases included (ModCloth) -), (Bare Necessities) -), (Jet) -), (Shoes.com) -), (Moosejaw,) -) (Bonobos) -), and (Eloquii) -).
DON'T MISS: Another popular retailer shutting dozens of stores
The giant retailer (WMT) -) spent more than $3 billion for Jet but closed it only a few years after the deal and has since sold off the vast majority of its direct-to-consumer holdings.
Another example: In 2000 Lululemon (LULU) -) paid $500 million for Mirror, an at-home exercise product and has stopped selling the product in favor of partnering with Peloton.
It's not quite the same, but Penn National Gaming (PENN) -) tried to capitalize on the dedicated audience of the Barstool Sports brand, spending hundreds of millions to acquire it only to sell it back to Founder Dave Portnoy this year for $1.
Big brands buying small brands often has been a recipe for failure. In some cases, the acquired company merges with the brand that purchased it, but it's pretty common for the large brand to sell off the company it purchased for pennies on the dollar.
Then there's the case of Foot Locker's (FL) -) 2021 purchase of the Atmos brand, which a news release called a digitally led, premium, global retailer headquartered in Japan, for $360 million.
Image source: Shutterstock/The Street.
Foot Locker had high hopes for Atmos
Foot Locker's business depends upon sneaker companies, including Nike (NKE) -) and Adidas (ADDYY) -), being willing to sell its products to the retailer. Diversifying its holdings into a company that not only operates retail stores but makes its own products seemed like a good idea at the time of the purchase in 2021.
The company described Atmos as a "culturally connected 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 omnichannel platform," the company shared in a press release.
Former Foot Locker Chief Executive Richard Johnson saw the brand as a way for the company to further embrace sneaker culture.
“Atmos is uniquely positioned through its innovative retail stores, high digital penetration, and distinctive products that have made it a key influencer of youth and sneaker culture," he said.
Now, the sneaker retailer has decided to shut down the Atmos brand in the U.S.
Foot Locker closes Atmos U.S. stores and website
As recently as March, current CEO Mary Dillon called Atmos a key part of one of Foot Locker's four key growth pillars.
"One pillar was to focus on optimizing its fleet and unique store banners. The retailer said Atmos would serve as a ground for innovation while being rooted in Japanese culture," Footwear News reported.
That strategy has changed and Foot Locker has decided to close all Atmos U.S. stores as well as its website. The brand will continue to exist but will be sold only outside the U.S.
“The Atmos brand has a unique and authentic identity, character, and spirit. Given the strength of Atmos in Japan and Asia, we are focused on further investing in this market," Atmos General Manager Patrick Walsh said in a statement.
"Though in line with this focus and our plans for simplification, we have made the strategic decision to close our three Atmos stores in North America and our Atmos U.S. website,”
Foot Locker posted a $5 million loss for the second quarter. Atmos sales dropped by 10%, which was in line with the company's overall 9.9% drop.
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