Fashion

JD Sports in talks to remove brands as it focuses on its core business


According to sources close to the company, the retail group is in talks to get rid of a number of stakes it holds in the fashion and beauty sectors.

“They unload any brand that doesn’t fit their core sport and outdoor model. Brands that do not fit this strategy are resold to their former owners or offered on the market. This [acquisition strategy] was peter [Cowgill’s] vision and he’s gone,” a source said.

Another added: “In recent years [JD] blotted distressed marks. If you look at his portfolio, it’s extensive. But if they don’t generate results, they will be considered a headache.”

Industry experts believe this could be a good move for the retailer. An insider told Drapers, “Fashion and beauty businesses have never been core competencies for them, and they haven’t developed an effective strategy for them. It was usually about buying a struggling business opportunistically and then thinking they could run it with the trainer brand playbook,” she added.

Global Data apparel analyst Pippa Stephens said with the sportswear market still booming post-pandemic and other parts of the retail market currently struggling due to soaring rates inflation and declining consumer confidence, it makes sense for JD Sports to focus on developing key aspects of its proposition to ensure they continue to thrive.

“These businesses currently represent a very small proportion of its overall sales, so offloading them will have little impact on its future performance,” she added.

JD Sports declined to comment on the story.

The news comes as the UK’s biggest sportswear retailer revealed that pre-tax profits fell 18% year-on-year to £298.3m for the six months to July 30, despite sales up 13.7% to £4.4 billion for the same period.

And in his interim results, JD Sports non-executive chairman Andrew Higginson said the outlook remained “cautious” for the second half.

With the key trade period ahead, he cited “widespread macro-economic uncertainty, inflationary pressures and the potential for further supply chain disruptions with industrial action” as lingering risks in many markets.

UK trade, mostly online, initially softened in August and early September, he said, as customers were slower to switch to heavier autumn produce as the weather remained relatively warm and dry. However, performance has improved further over the past few weeks.

Higginson joined the company in July, following the sudden departure of former JD Sports boss Peter Cowgill in May.

An industry insider said of the departure: “The board didn’t like the bottleneck that Peter created. Everything has changed at the bottom, except at the top. It becomes very difficult, especially if you want to evolve. You can’t do it all through one individual.

In August, the company announced that former B&Q executive Regis Schultz would assume the role of chief executive, effective September. He succeeded interim CEO Kath Smith.

International expansion is an important part of future strategy and a key reason for Schultz’s appointment. At the time, Higginson said his “retail expertise in Asia and the Middle East, combined with his ability to drive transformational change through digitalization,” will help the company through the next phase of his journey.

But in another twist this week, JD Sports revealed Cowgill was set to return as a consultant to the company. With the board agreeing to pay £3.5m to impose restrictions on him, such as preventing him from working for competitors or soliciting JD employees. These will be in place for two years.

Cowgill will also receive £2million over three years in consultancy fees, which the group says would allow the new management team to benefit from his support and “unparalleled knowledge” of the business.

“I am pleased that we were able to achieve this friendly and constructive path with Peter spanning the next three years,” Higginson said in a statement.

Stephens said having led the business for 18 years, Cowgill will be an invaluable source of advice and information.

A source close to the business said: ‘For any newcomer there has to be a transfer and it makes sense to keep Peter as a consultant. He has a vast knowledge of the retail space and has seen so many obstacles. He has the answer to everything. »

However, others wondered how former boss Cowgill would fit into this new structure as a consultant. And whether that’s good for continuity or whether it will actually prevent the new CEO from putting his stamp on the company.

A former High Street CEO told Drapers: ‘I wonder if Schultz knew about this deal with Cowgill when he took the role? My bet is that it wasn’t, because it wasn’t on the table at the time.

“I don’t envy Schultz. With Cowgill there, many staff will simply refer to him and look to his point of view. Cowgill is crafty obviously, but also an inspiration to many people. I imagine it will also be difficult for him to be on the sidelines while having solid opinions and experience. But if the combination works, JD’s future looks good,” he added.

In its latest interim reports, JD Sports said progress in its global markets was reflected in the Group’s organic retail business total sales being 5% higher than a year earlier. .

He said that this performance is very encouraging, as “notwithstanding the non-comparability of trading conditions in the United States, the Group also faced many other challenges during the period, including the much publicized shortage of supply of a number of international brands and the difficult global macro-economic situation”.

Adidas and Nike have both been hit by supply shortages, due to Covid-19 lockdowns in its eastern markets, where products are both made and sold, with sportswear brands giving the priority to their own direct-to-consumer (D2C) sales over their wholesale. retailers.

An overreliance on the two major sportswear brands is one of the retailer’s biggest weaknesses, an industry source said, especially as those brands themselves shift more towards a DTC strategy. And a key challenge for JD Sport going forward will be to look at the impact this will have on revenue share and how it can replace it with other brands.

While retailers in the UK, ROI and Europe have struggled to trade as soaring inflation forces consumers to rethink their spending, JD Sports still saw impressive growth at double digits in each region for the first half of the year.

But with a potential recession looming and any price increases largely driven by partner brands, its new management team will have to “stick to what it does best and focus on making it better,” the analyst said. retailer Richard Hyman. ride the choppy waters successfully.

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