JD Sports Fashion Plc Update on CMA review of Footasylum acquisition (6006C)
February 11 2020 - 2:05AM
UK Regulatory
TIDMJD.
RNS Number : 6006C
JD Sports Fashion Plc
11 February 2020
11 February 2020
JD Sports Fashion Plc
Update on CMA review of Footasylum acquisition
JD Sports Fashion Plc (the "Group") today provides an update
following the Competition and Markets Authority's ("CMA")
announcement that it has competition concerns regarding the Group's
acquisition of Footasylum Limited ("Footasylum").
The CMA's provisional findings do not reflect the intensive and
dynamic competitive reality of the UK sports retail market today,
where a large number of retailers selling third-party brands
compete not only with each other, but also with major online
pure-players and, most importantly, the increasingly powerful
direct to consumer ("DTC") operations of the international brands
themselves. The CMA has failed to recognise and accept clear
evidence of the rapidly changing nature of this market, which has
materially altered even during the period of the CMA's review.
The CMA concludes, correctly, that (i) online and stores compete
in "the same market"; (ii) customers use "these channels
interchangeably"; (iii) online is "growing fast and a key driver of
overall growth"; and (iv) the DTC offer of Nike and adidas will
"continue to grow strongly in the UK, predominantly online". Given
these findings, we cannot comprehend how the CMA concludes that
Nike and adidas, will not be significantly stronger competitors in
the marketplace over the next few years. Experienced analysts in
this sector simply would not recognise this conclusion.
Further, the suggestion that "there could be fewer discounts and
less choice in stores and online" is entirely at odds with our
continuing drive to provide a market-leading, best in class
consumer focussed experience with consistent standards across our
global territories.
We feel that, in its findings, the CMA has lost sight of its
objective to protect consumer interests. We still firmly believe
that bringing Footasylum into the Group will deliver significant
benefits for both consumers and the UK high street, and we will
continue to make our case strongly to the CMA in the coming
weeks.
The CMA itself recognises that Footasylum has a less than 5%
market share. Therefore, it is clear that this transaction is
small, both in the context of our increasingly international
focussed Group and the extremely crowded marketplace in which we
operate.
We anticipate that Footasylum will contribute less than 2% of
the Group's earnings in the year to January 2020 which, after a
robust post-Christmas sales period in our key overseas markets, are
now expected to be at least equal to the top end of current market
expectations, which after adjusting for IFRS 16, range from GBP403
million to GBP434 million.
Peter Cowgill, Executive Chairman of JD Sports Fashion Plc,
commented:
"The CMA's provisional decision is fundamentally flawed and
demonstrates a complete misunderstanding of our market to an
alarming extent, given its six-month review.
"The competitive landscape described by the CMA is one which
neither I, nor any experienced sector analyst, would recognise.
Just take a walk down any major UK high street or search for Nike
or adidas trainers on Google and you can see for yourself how
competitive this marketplace really is.
"The CMA's provisional findings do not reflect the objective
evidence, with excessive weight being placed on surveys asking
hypothetical questions of a small sample of selected customers
equivalent to less than 25% of the footfall of one JD store in
Manchester for one week, rather than assessing the reality of how
consumers actually shop on a national scale.
"When the Group made its offer in March 2019, it was our
intention to support Footasylum and its employees to grow the
business and increase the quality, range and choice of products
available to customers.
"We remain convinced that a combination of the two businesses
would provide significant long-term benefits to customers,
colleagues and brand partners, while maintaining Footasylum's
presence on the high street as the music-inspired casual retailer
which it is today."
Enquiries:
JD Sports Fashion Plc Tel: 0161 767 1000
Peter Cowgill, Executive Chairman
Neil Greenhalgh, Chief Financial Officer
MHP Communications Tel: 0203 128 8788
Andrew Jaques
Giles Robinson
Charles Hirst
Catherine Chapman
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