JD Sports enters the US market

JD Sports (rev: $3.4 bn) has announced plans to enter the US market through the acquisition of the struggling ‘sneaker’ chain Finish Line (rev: $1.8bn) for $588 million. The planned transaction will make the combined entity a Top 5 sporting goods retailer. Finish Line is a scaled omni-channel retailer of premium athletic sportswear.

‘Transformational for the business…The acquisition represents an excellent opportunity for JD to establish its market leading multi-brand proposition in the world’s largest athleisure market…It immediately offers a major presence in the US, a clear next step to further increase our global scale…Finish Line has many similarities to JD with a strong bricks and mortar offering complemented by an advanced and well-invested digital platform.’ Peter Cowgill, JD executive chairman.

What will the deal deliver?

– Scale, including a strong foothold in the US, the world’s largest sneaker market: some 550 stores across the US, including a position as the exclusive retailer of sports shoes in the department store Macy’s, which operates 375 branded concessions.

– Significantly improves JD’s leverage with key suppliers (ie. the giant brands). Combined annual sales of more than $5 billion will strengthen its purchasing power.

– The potential to revive Finish Line’s top-line growth by providing better access to product.

–  More balanced product line: 70 % of Finish Line’s sales stem from Nike.

–  Major bolt-on: would be almost impossible for JD to build a major presence in the US organically, given the many store closings in recent years.

– Could mean JD stores in the US down the road.

–  Makes it the 5th largest sporting goods retailer in the world: a genuine global player.

JD Sports has nearly 1,300 stores in the UK and Europe, and its sales, earnings and stock have all performed well over the last five years. Moreover, the company has been pursuing a successful external growth strategy in recent years: it has also acquired Sport Zone (2017) in Spain and Portugal, Go Outdoors (2016), Blacks Leisure (2012), and Millets (2012), and made several other smaller acquisitions across Europe.

Stock market price history – Pre deal announcement

Alexandre Ebin
Alexandre Ebin
Partner
Frankrijk