It’s all about the swoosh

Why’s JD raid on North America strengthens its hand with Nike

What better way to celebrate St George’s Day than with a English lionheart of a company delivering the very best of English culture’s gifts to the world - sportswear as fashion - acquiring an American company.

JD Sports is still headquartered in Bury, Greater Manchester, but these days the CEO isn’t a bluff northern Englishman called John, Dave, or Pete, but a Frenchman, Régis Schultz, who lives in the United Arab Emirates.

He also has his strategic focus on sites and markets way beyond their new planned superstore in Stockport, or even a new global flagship store on the Champs-Élysées in Paris in readiness for the Olympic Games this summer.

The deal revealed to the stock market this morning is Schultz’s attempt to slay the dragon of negativity that has surrounded the business since a profit warning earlier this year signalled that the company would miss Schulz’s own ambitious £1bn profit target.

A quick recap.

As reported on TheBusinessDesk.com this morning JD Sports has agreed a billion-dollar deal to buy major American retailer Hibbett that will add more than 1,000 stores to the group.

Like JD, Hibbett is a sports fashion-inspired retailer and has 1,169 stores spread across 36 states.

It’s a cash deal for $1.08bn (£878m) and will be financed through the JD’s existing US cash resources of $300m and a $1bn extension to its existing bank facilities.

Last year Hibbett generated a pre-tax profit of $131.6m (£107m) on sales of $1.73bn (£1.40bn).

The combined group will have annual sales in North America of £4.7bn and account for around 40% of JD’s total, at a stroke, or a swoosh, making it a little bit more American than it was yesterday.

Régis Schultz said the footprint of the two are “highly complementary”, adding that the deal will give JD a stronger presence in the deep south, but also tellingly: “It will also provide a stronger platform for the rollout of the JD fascia in the US.”

Let’s not forget that in 2018 JD, under previous executive chairman Peter Cowgill, bought another US retailer Finish Line, which had 660 stores in 47 states.

Schultz reckons the combination of the two businesses can also save them $25m (£20m) per year over the medium term.

Let’s not forget too that early in his tenure as CEO Schultz offloaded a whole bag of brands to Mike Ashley’s Sports Direct to play around with, including Scotts, Tessutti and Pretty Green, while he was determined to build JD globally.

As he told the World Retail Congress last week: “When I joined, we were developing a lot by acquisition,” he said. “Let’s focus on one thing, let’s stop doing multiple things, and let’s really focus on JD as our first priority. That was the message – and it was more internal than external.”

But here’s what it’s really about:

“It will also strengthen further our key brand partner relationships in the largest sportswear market in the world,” Schultz said.

The sports fashion retail business lives or dies by its relationship with the big global brands - Nike and Adidas. But in the US, the partnership with Nike is the key one.

In Hibbett’s annual report from 2022 the business notes: “Because of our strong -17- dependence on Nike, any adverse development in Nike’s distribution strategy, financial condition, or results of operations, or the inability of Nike to develop and manufacture products that appeal to our target customers, could also have an adverse effect on our business, financial condition, and results of operations.”

The obligatory risk factors in an American annual report are also eye opening, as they truly lay bear everything that keeps a US board awake at night.