The sportswear chain is buying up an American retailer – Finish Line – in which Sports Direct had built up a stake.
The main reason for JD Sports splashing out $558m (£400m) to buy Finish Line, a US sports retailer and exclusive supplier to the iconic Macy’s department store chain, is the toehold it gives the group in the world’s biggest sportswear market.
I imagine the fact that it also rubs beleaguered rival Sports Direct’s nose in it – Mike Ashley’s outfit is a sizeable investor in Finish Line – will simply serve as some nice icing atop this particular cake.
While they occupy different niches in the sportswear business – JD being toward the premium end – the latter has shown its rival how it should be done on multiple fronts.
JD has been firing on all cylinders, declaring that it would beat expectations with its January update, in stark contrast to SD which just looked daft when Mr Ashely trumpeted that his “high street elevation strategy is currently delivering spectacular trading performance within our flagship stores” when the group revealed a slump in profits and falling sales in its trading update in December.
A potentially damaging report into working practices at JD courtesy of Channel Four was responded to swiftly, and, after a review found in favour of the company, it has all gone quiet. The way that was handled couldn’t have been more different to the way Sports Direct dealt with the rather more serious allegations about working practices at its warehouse, which dogged the company for months.
JD’s proposed US acquisition could be seen as its answer to the curious habit that the self proclaimed “Selfridge’s of Sport” has had of building minority stakes in other businesses.
Both clearly saw value in Finish Line, but whereas SD tiptoed in, JD has gone for the jugular with a deal to buy the whole kit and caboodle.
If it wasn’t already clear who’s wearing the fancy running shoes, it should be after this.
That’s not to underestimate the challenges executive chairman Peter Cowgill faces. They are formidable.
He has successfully internationalised JD’s business, but there are plenty of UK retailers that have done that and still fallen flat on their faces when trying to tackle the American market. Just look at what happened to Tesco in California.
The market JD is entering is highly competitive, and Amazon is far from alone in disrupting it. Mr Cowgill has proven himself to be no fool, but the addition of some dollar earnings to his portfolio is perhaps the biggest challenge he’s taken on. At least he’s starting with the right idea. Go big or go home is what the Americans say. Mr Cowgill has done that, sending his rival home in the process.