After its latest deal, could JD Sports be the next FTSE 100 company to move to the US?
A decision by JD Sports to pick up an American listed retailer will increase North America’s share of group sales from approximately 32 per cent to approximately 40 per cent.
A decision by JD Sports to pick up another New York-listed retailer has sparked analyst interest.
The Manchester-based business said it would pay £878m for Hibbett, an Alabama-headquartered ‘fashion inspired’ retailer with stores in 36 states across the States.
When the deal is completed, the firm has estimated the combined revenue of JD and Hibbett in North America would be approximately £4.7bn.
Some 40 per cent of group sales will also come from the North American market, up from 32 per cent today.
Investors in London—where the brand is listed—responded positively to the news, with shares in JD Sports rising close to six per cent when the market opened.
The move was a rare example of a London-listed company poaching from US markets.
Tuesday’s decision is part of the FTSE 100 giant’s aggressive regional expansion plan. It has laid out a plan to open 700 own-brand stores during the next four years.
When the deal is completed, currently set for the second quarter of the year, JD will have added 1,169 more shops selling trendy shoes and sportswear to its portfolio.
The British firm already has over 200 sites in the region and also acquired rival brands in the market such as Finish Line, which has circa 600 stores and concessions.
But could JD consider a move to the US after bulking up its presence in the region?
A shift to the US
Just last week, it was revealed a shareholder in retailer Ocado had asked the company about moving its listing to New York to try and wake up its valuation.
Only 23 companies listed on the LSE last year, while travel giant Tui, gambling group Flutter, and construction materials group CRH bid farewell to the bourse.
Clive Black, director at Shore Black, said he “wouldn’t really criticise” JD Sports if they had the thought about possibly moving stateside.
“There is no suggestion or indication yet that this is what their plans are although from a valuation perspective JD Sports is lowly valued in terms of price earnings ratio on the London Stock Exchange,” he told City A.M.
“Whether it would lead to an automatic rewriting though is the devil in the detail. That’s what any sort of sensible thinking [firm] needs to embody.”
JD becomes a global retail powerhouse
Growing its presence in the USA has always been part of Schlutz’s plan to become a global retail ‘powerhouse’. Its British market is mature and established so the goal was always to turn to new opportunities.
In order to de-list, they would also have to win the approval of the billionaire Rubin family, which has a majority share in the company via its wholesale business, Pentland Group.
Kate Calvert analyst at Investec told City A.M. that the move is unlikely, but you should “never say never”.
“The UK markets are mature, so it’s all about expansion in the US and also in Europe, mainland Europe. They’ve been quite clear and consistent that that’s where their future growth is going to come from,” she said.
JD Sports’ share price has skyrocketed by over 500 per cent in the past decade, but shares have lost around a fifth of their value so far this year.
JD Sports, which has been promoted by rappers such as Central Cee and Stormzy, had a rocky start to the year.
The profit warning wiped £1.8bn of its market value.
Since then, the business has said the year ahead it still expected to be “challenging,” blaming slow innovation at Nike for a sales slump.
Profits for the year will be between £915m to £935m, someway short of the £1bn it had previously hoped for.
However, the business is still held in high regard and has been one of the big winners in retail over the past few years.
City A.M. has approached JD Sports for comment.
