JD Sports may be forced to sell Footasylum

JD Sports has responded to the media reports on a meeting between its boss Peter Cowgill and Footasylum chief Barry Brown.
JD Sports agreed to buy Footasylum in March 2019 for a sum of £90m
// JD Sports faces pressure to sell Footasylum since buying it in 2019
// The CMA ruled that the merger would result in a worse deal for trainer shoppers
// The CMA said JD Sports and Footasylum would continue to be profitable as separate retailers

JD Sports may have to sell Footasylum after the UK’s competition watchdog has ruled that the takeover would result in a worse deal for Brits despite a shift online amid the pandemic.

JD Sports agreed to buy Footasylum in March 2019 for a sum of £90 million, but the Competition and Markets Authority (CMA) has repeatedly attempted to block the deal.

The CMA’s initial judgment was sent back in November last year by the competition appeal tribunal, which found that the regulator had acted “irrationally”.

READ MORE: JD Sports acquires stake in gym wear brand Gym King

The regulator’s ruling came as it found that the CMA had failed to assess the changes wrought by the pandemic, such as the increasing number of shoppers buying online, directly from manufacturers.

In its latest provisional findings, the CMA did note that the pandemic has shifted shopping habits online, and it acknowledged the growing influence of big brands such as Nike and Adidas selling direct to consumers online.

However, it said that competition on price, quality, range and service levels on footwear and clothing could still be reduced as a result of the deal, and that high street revenues had bounced back since the easing of restrictions.

The CMA said that JD Sports and Footasylum would continue to be profitable as separate retailers.

“JD Sports was – and continues to be – a particularly close competitor to Footasylum,” the CMA said.

JD Sports said it would continue to make its case strongly to the CMA before it publishes its final report in October.

JD Sports executive chairman, Peter Cowgill said the CMA should “reconsider its position before making its final determination”, adding that he believed the merger would improve the quality, range and choice of products for consumers. He did not address the possibility of higher prices.

“We have made compelling submissions on the committed positioning of the global brands towards direct to consumer and the consequent impact on an extremely competitive marketplace,” he said.

“I am perplexed and again disappointed that these have been rejected. I am not sure what further evidence the CMA needs to appreciate the extent of this dynamic change which has been substantially accelerated by Covid-19.”

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