Riding the wave of athleisure
In the UK, JD Sports has managed to thrive by focusing on full-priced premium ‘sports fashion’ rather than just sportswear. Its approach contrasts notably to the ‘pile ‘em high, sell ‘em cheap’ strategy of Sports Direct, the UK market leader that is notorious for selling cut-price trainers and tracksuits in dishevelled stores.
But JD has stayed true to its roots in its international operations too. The many overseas retailers that it has bought over the years are all complementary businesses to its core JD Sports fascia. And it is this international expansion that has proven to be remarkably well-timed as it has coincided with the explosion of the athleisure trend over the last decade.
Strong relationships with brands
Although JD Sports is a listed business, the majority of its shares are held by Pentland Group, the owner of brands such as Speedo and Berghaus. It is therefore no coincidence then that the retailer has always been lauded for its strong relationships with sports brands.
Whereas rival Sports Direct has frequently come into conflict with major sports brands over the years, JD Sports is clearly marked as a preferred supplier. Brands such as Nike and Adidas appreciate the retailer’s stores, which are modern and full of technology to appeal to its core Gen Z target market, and often give the retailer exclusive access to sneaker drops. This clearly gives JD an edge in what is a very competitive market.
Organic growth and acquisitions
JD Sports’ international expansion has been driven by a mix of acquisitions and organic growth by introducing the JD Sports fascia into overseas markets. Major acquisitions over the years have included Sprinter in Spain, Chausport in France and Aktiesport and Perry Sport in the Netherlands – strong brands that were already focused on the right customers and markets.
JD generally always retains the retail brands that it buys, but will usually convert a few branches to JD Sports to test the market. If successful, it will then start opening its own JD stores. That is not to say that it doesn’t jump straight into a new market with the JD fascia. This is how it entered markets such as Italy, the Nordic countries, Malaysia, Thailand and Singapore, where presumably no suitable acquisition target was available.
Not all of JD’s deals have been successful though. In the UK, its bid to buy smaller rival Footasylum in 2019 was initially blocked by the Competitions and Markets Authority. JD challenged this ruling, stating that the ruling did not take into account the growing DTC ambitions of brands such as Adidas and Nike. The case is currently under review again.
In Australia, the retailer bought Glue Store in 2017, but this marriage did not stay the course. JD offloaded the streetwear brand in 2019 as it “no longer provided any strategic benefit”. The deal was clearly used to gain exposure to the Australian market, as JD went on to launch its own JD Sports network, with currently close to 25 stores trading Down Under.
A pandemic winner
JD Sports has not been unaffected by Covid-19, with many temporary store closures having taken place across many of its global territories. Yet the flipside is that demand for leisurewear has also rocketed as consumers remain confined to their homes.
This has been underlined by its recent results, with like-for-like sales ahead by 5 per cent over the 22 weeks to early January 2021 and the retailer forecasting that full-year profits will be “significantly” ahead of market expectations. It has helped that the retailer has already invested considerably in its omnichannel proposition, allowing the online channel to reach customers during lockdowns.
War chest for further international expansion
Any retailers operating in markets where JD has not yet entered should be fearful. In order to fund the acquisition of collapsed department store chain Debenhams, the retailer raised £464 million by placing new shares.
JD Sports can probably thank its lucky stars that it won’t have to deal with the distraction of overhauling a dying brand and business model – that task will fall to Boohoo. It will now be able to deploy its sizable war chest to make further strategic acquisitions and enter new markets around the world.