On May 17, 2021, the Prime Minister of England announced that the country could proceed to Stage Three of the reopening plan. This meant that most shops, including indoor establishments, could reopen. In London, a scene outside a JD Sports shop captured the excitement of the reopening as people adjusted to the new normal.
JD Sports Fashion, the biggest sportswear retailer in Britain, has made a move to expand its reach across the southeastern United States. The company proposed to buy American athletic fashion retailer Hibbett Inc for approximately $1.08 billion. This acquisition is part of JD Sports’ strategy to grow its presence in the U.S. market amid challenging times for athletic clothing retailers globally.
Recent weak outlooks from sports apparel giants like Nike and Puma have put pressure on companies in the industry. Despite this, JD Sports remains optimistic about the future. The company expects events like the Euro soccer championships and the Paris Olympics to boost demand for sports apparel. Additionally, new styles of sneakers and track suits are anticipated to revive the market.
The proposed deal involves JD Sports paying $87.50 per share in cash for Hibbett, a premium of about 20%. Hibbett Inc operates approximately 1,169 stores across 36 U.S. states, providing JD Sports with a significant footprint in the country. The acquisition will complement JD’s existing brands like Shoe Palace and DTLR, expanding its reach from coast to coast.
By acquiring Hibbett, JD Sports aims to increase its revenues in North America. The company expects the region’s contribution to total sales to rise to about 40% from the current 32%. The deal is anticipated to enhance JD Sports’ earnings in the first full year of ownership, with cost savings projected to be at least $25 million.
To finance the acquisition and refinance Hibbett’s existing debt, JD Sports plans to utilize its U.S. cash resources and extend its existing bank facilities. Despite challenges in the retail industry, JD Sports remains confident in its strategic growth plan and the potential of the U.S. market.
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