Home Business NewsBusiness JD Sports still nursing Footasylum headache

JD Sports still nursing Footasylum headache

by LLB Editor
2nd Sep 21 12:31 pm

Footasylum must be one of the most cursed names in retail. Having floated on the stock market in 2017, it went on to disappoint investors with a string of profit warnings amid tough high street conditions, growing competition and disruption to its warehouse and distribution operations.

Having then been saved by JD Sports, its new owner has since been subject to endless investigations into whether the takeover could lead to a worse deal for Footasylum customers. The latest twist would suggest that JD Sports may be forced to sell the business.

“From JD Sports’ perspective, it would be annoying but unlikely to be catastrophic to its earnings,” said AJ Bell’s Russ Mould.

“The last reported full year numbers from Footasylum as a standalone business were from the year to 24 February 2018 where it saw revenue jump by a third to £195 million. JD generated £3.16 billion in sales in the comparable period (the year to 2 February 2018), and its most recent full year saw revenue rise to £6.17 billion. So even if Footasylum had continued to grow at a fast rate, it would still only represent a fraction of JD’s overall sales.

“In April this year, JD said there was considerable uncertainty as to whether levels of footfall in Footasylum stores would recover to historic levels which could mean some of its stores may not be viable longer term, so it took an impairment charge on the assets.

“Owning Footasylum has given the group a stronger presence on the high street, however fundamentally the direction of travel for nearly all retail businesses is online. JD’s brand is significantly stronger than Footasylum’s which means it is likely to be front of mind for online shoppers.

“The CMA conducted a survey which found that half of the participants would go to JD Sports if they were unable to shop at Footasylum for clothing. That seems very high, and a surprising result given there is widespread choice for places to buy athleisure. However, the CMA insists that further research shows Footasylum to be a very close competitor to JD.

“What’s certain is that the endless probes by the authorities since the Footasylum acquisition was announced have been a major distraction to JD management. They might even wish the deal had never happened at all.”

 

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