Photo by Samuel Regan-Asante on Unsplash
How Will JD Sports Do After Acquiring Hibbett?
JD Sports Fashion aims to acquire American athletic apparel retailer Hibbett Inc. for $1.08 billion, enhancing the U.K. company’s presence in the southeastern U.S. despite challenges in the athletic clothing market. The deal values each Hibbett share at $87.50, representing a 20% premium to the company’s closing price on April 22, the night before the announcement.
If completed, the combined companies would generate $5.8 billion (4.7 billion pounds) in North American revenues, according to The Wall Street Journal. JD Sports anticipates earnings growth within the first year and plans to finance the deal with $300 million in U.S. cash reserves and a $1 billion bank facility extension.
In January, JD Sports also faced a setback with its profit forecast, leading to a sharp drop in its stock market value of nearly 23%. The downgrade was attributed to various factors, including higher costs and subdued demand from cautious shoppers. Additionally, “milder weather” conditions affected sales in the latter half of September, according to JD Sports. This decline in the retailer’s performance also impacted other sportswear companies like Frasers Group, Adidas, and Puma, as well as U.S. brands like Nike and Foot Locker.
Despite the challenges, JD Sports reported a 1.8% growth in like-for-like organic revenue for the 22 weeks ending in December, slightly below expectations. Full-year organic revenue growth is projected to be around 8%, compared to 12% the previous year.
Analysts suggest that external factors, coupled with the lack of exciting product launches, contributed to JD Sports’ subdued performance. However, the company remains optimistic about its strategy and continues to invest in its supply chain, systems, and stores.
Furthermore, analysts predict a potential shift in the American athletic retail scene, citing similarities between Hibbett’s customer base and JD’s existing banners like DTLR and Shoe Palace. Hibbett’s strong e-commerce and omnichannel platforms are seen as valuable assets in the deal.
The acquisition is expected to strengthen JD Sports’ position in the U.S. market, posing a significant challenge to competitors like Foot Locker. Experts predict increased leverage with vendors and continued market share gains for JD Sports post-acquisition.
Foot Locker’s recent announcement of delays in achieving long-term financial targets further underscores the potential impact of JD Sports’ expansion. With Hibbett’s 1,169 stores across 36 states, JD Sports will significantly increase its presence in the U.S. market.
Despite the acquisition, Hibbett’s stores are set to retain their identity, with no plans for rebranding. JD Sports emphasizes maintaining a diverse retail portfolio catering to both global and local customers.
JD Sports’ CFO Dominic Platt outlined “seven core benefits” of the acquisition, including expanded reach, complementary store portfolio, enhanced branded partnerships, and earnings enhancement.
Following the transaction’s closure, Hibbett’s leadership will remain intact, with Mike Longo continuing as president and CEO. The company will retain its headquarters in Birmingham, Alabama.
The deal is expected to be finalized in the second half of 2024, after which Hibbett will no longer be publicly traded.
Discussion Questions
How does JD Sports’ acquisition of Hibbett strategically position it in the athletic retail sector amidst increasing competition, particularly in the southeastern U.S.?
Amid challenges in profit forecasts and stock market declines, what proactive steps can retail industry leaders take to maintain investor confidence during uncertain periods?
How might JD Sports leverage Hibbett’s e-commerce and omnichannel strengths to adapt to changing consumer preferences and strengthen its competitive position in North America?
Poll
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Jeff Sward
Founding Partner, Merchandising Metrics
Brandon Rael
Strategy & Operations Transformation Leader
The addition of Hibbett provides a big boost to the US business – which already Consists of Finish Line, Shoe Palace and JD fascia – and gives JD Sports a presence in a lot of markets where it is currently underrepresented. Hibbett has carved out a clear point of difference in serving smaller and mid-sized towns — places where competition from other sporting retailers is relatively thin on the ground: only around a quarter of stores within 10 miles of competitors.
JD’s superior buying will help drive up margins at Hibbett. And under JD Sports, there is also more likelihood if investment in Hibbett stores and the proposition. All in all, this gives Hibbett a more defensible future and it gives JD a new growth vector in addition to its organic expansion.
JD Sports is on a fast track and acquiring an existing player like Hibbett is a good way to accelerate growth. Given that Hibbett is especially strong in smaller, southeastern markets, this acquisition will provide JD Sports with market coverage in geographies that would be challenging to grow organically. Additionally, leveraging Hibbett’s e-commerce strengths more broadly is also part of the value in acquiring the chain. Based on these facts, the acquisition makes good sense. However, JD Sports recent results have been below expectations, and just adding more stores alone won’t satisfy shareholders unless same-store sales and profits also improve.
I like JD stores in the UK. I believe the Hibbett acquisition will strengthen both companies and give them leverage in the US and hope it will be a positive for customers.
I love the fact that Hibbett’s stores will not be rebranded and that the management team will stay in place. It’s about synergies and efficiencies. I can’t help but think of the department store saga in the USA where it became all about rebranding and the dissolution of lots of management teams. We’ll have to see how this evolves over the years, but the early moves sound healthy.
With any merger and acquisition strategies, there are always challenges to hit the ground running post-merger. However, JD Sports’ acquisition of Hibbett will enable the U.K.’s biggest sportswear retailer to gain a competitive foothold in the congested and competitive sneaker and sportswear US market. As JD Sports looks to grow its presence across the south-eastern US, the combined company will now have significantly greater negotiating and buying power and authority to enable the company to achieve higher margins.
Hibbett’s superior omnichannel and digital commerce capabilities will provide a more substantial platform and ecosystem for the rollout of the JD Fascia in the US market. JD Sports said that the enlarged group would have combined revenues of about 4.7 billion pounds in North America, adding that the region’s contribution to total sales would increase to about 40% from the current 32%.
Strategically, this acquisition is brilliant, as Hibbett, a company with more than 75 years of history, has 1,169 stores in 36 states across the U.S. This will enable JD Sports to accelerate its growth plans and compete in new markets.
JD Sports’ acquisition of Hibbett marks a significant step in enhancing its presence in the southeastern U.S., a region where its reach was previously limited. This move not only expands JD Sports’ store network but also strengthens its competitive position against rivals like Foot Locker. With Hibbett’s unique market positioning and strong e-commerce platform, JD Sports gains leverage and synergy, poised to challenge competitors more effectively.
In times of uncertainty, maintaining investor trust is paramount for retail leaders. Transparent communication, emphasizing long-term growth, and consistent delivery on commitments are crucial. By capitalizing on Hibbett’s robust e-commerce and omnichannel capabilities, JD Sports can cater to evolving consumer preferences and enhance the shopping experience. Integrating these strengths will enable JD Sports to reach a broader audience and stay ahead in the competitive North American market.
Big win for JD. Hibbett is a world class operation, with best in class ecommerce in the industry. Along with Shoe Palace and DTLR, JD is covering a lot of ground.
JD’s approach in Europe is to make strategic acquisitions and then let them operate as unique entities. I expect the same here.
That said, Hibbett and JD US can learn from each other and the combined company has much greater buying power.
We’ll see Hibbett go nationwide as quickly as they can.
Who’s the loser here?
Footlocker now faces two more formidable opponents.
And Nike just lost even more leverage…