JD Sports finds stronger footing in US sneakers market with latest acquisition
It comes nearly two months after it snapped up West Coast trainers store chain Shoe Palace for US$681mln, though the FTSE 100 retailer had made its US debut in 2018 after merging with Finish Line.
The athleisure seller is tapping into a market expected to generate revenues of US$15.3bn this year alone, according to Statista.
“While the UK remains JD Sports Fashion’s dominant market, accounting for around 40% of sales, the US adds a further 25% and is clearly being seen as a strategic priority,” Richard Hunter, Head of Markets at Interactive Investor, told Proactive.
“The mature and extremely large market is one which JD Sports believes can also benefit from its mix of physical stores and online offering, as the fashion space continues to thrive. The company has indeed ramped up its online presence recently, giving some reassurance that it is battling the pandemic from a position of strength.”
Although the US retail sector is also seeing a migration to e-commerce as we have witnessed on this side of the Atlantic, JD Sports opened its New York flagship store last October – nowhere less than Times Square.
Analysts at house broker Peel Hunt hailed this move as a “major step forward” because it can raise awareness to the brand, and in fact it did spark excitement with customers queuing outside despite the bad weather.
Moreover, they reckon JD Sports can stand out among its US competitors because it devotes much more space to apparel, as proven by the new store.
“The US was looked upon by many within, and outside of JD, as the key test of its global credentials and the results so far, following the acquisition of Finish Line, have been impressive,” the broker said in October.
“We expect more flagships, more JD badge flips but still hundreds of Finish Lines, the latter being a different proposition to that of three years ago, and therein lies the key. The JD brand travels, so does its culture with data at its core, and the empire is building.”
With the addition of DTLR, JD Sports has even more customer data under its belt while its US expansion is underpinned by well-established store chains rather than being a solo job, noted Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
“Any acquisition comes with execution risk, but the company’s track record for expansion and acquisition is strong, propelling significant growth over the last ten years, during which time the shares have risen almost 1800%,” Hunter concluded.
“The further acquisition has been well received by investors, who will be hoping that further selective acquisitions – particularly in such times of economic stress – will be of real benefit in the longer term.”
Shares were trading 7% higher at 799.2p on Monday before close, just 4% below pre-pandemic levels.