JD Sports Fashion executive chairman Peter Cowgill reveals how he built a multi-billion pound sportswear behemoth.
”It’s a great team with good consumer understanding across all aspects of the business and great delivery of communication. Behind the scenes, it is very strongly managed.”
This is the concise explanation sportswear retail group JD Sports Fashion’s executive chairman, Peter Cowgill, gives for its growth.
Drapers visits Cowgill in a boardroom above the JD Sports Oxford Street flagship in London, just days after he was named Fashion Leader of the Year at the Drapers Awards 2019 – a fitting accolade given the Lancastrian has led it to unprecedented success during the most difficult retail trading climate in living memory.
In a market obsessed with athleisure, JD Sports has blown the competition out of the water. An international multichannel powerhouse of sports, fashion and outdoor brands, including Nike, Adidas, Puma and The North Face, it has grown from one shop in Bury, Greater Manchester in 1981, to more than 2,400 stores in 18 countries.
In the six months to 3 August 2019, revenues at JD Sports jumped 47% to £2.7bn and EBITDA grew 37% to £235m. The group reported an operating profit of £200m, a 61% increase on the previous year. International expansion continued apace with a net increase of 23 JD Sports stores across Europe, seven in the Asia-Pacific region and six in the US.
Andy Rubin, non-executive director at JD Sports and director at Pentland Group, which owns 55% of JD Sports Fashion, credits Cowgill for its performance: “His leadership, commitment and work ethic have been the driving force behind the development of the group and the spectacular success since then.”
Cowgill, a chartered accountant, got into the fashion industry by accident: “After university I was going to join one of the ‘Big Four’ [accountancy firms]. On the first day, I was told I was going to spend four months doing one audit. It wasn’t what I expected,” he laughs. “I had a friend setting up a boutique in Bolton [called Playmate], so I worked there for a year and learned a lot about clothing.”
In 1981, aged 28, Cowgill set up his own practice in Bolton, Cowgill Holloway, where he remains a senior partner. Three years later, he began advising JD Sports’ founders, John Wardle and David Makin, on its growth, before joining in 1996 as finance director. He left in 2001 after “a difference of opinion”, but was parachuted back in as executive chairman in 2004 to lead a turnaround when profits hit the buffers. It has not looked back since, and in June last year it made its FTSE 100 debut.
It is a very populated market, and you just have to be as relevant as you can be
Central to JD Sports’ growth has been its relationships with brands, particularly Nike and Adidas, which have granted it exclusives and premium products, enabling it to stand out in a crowded market.
“We have a strong relationship with all brands, not just Adidas and Nike, because we wish to develop and protect brand equity,” explains Cowgill. “The most important things for these companies are innovation and their brand equity, and we play very fairly with them [to protect that].”
He is quick to dismiss speculation that the retailer has an advantage over its competitors in terms of product availability: “Some of that gets over-egged. We have a strong relationship with brands, but so do several of our competitors. Foot Locker is also worldwide and it has a great relationship with brands. Sports Direct, Schuh, Office, Asos, Very – everyone is in the game now because of the developing culture of athleisure. It is a very populated market, and you just have to be as relevant as you can be.”
Pippa Stephens, retail analyst at GlobalData, says this relevance to its shoppers and strong brand equity has fuelled its success: “JD Sports’ strong growth has been driven by its superior branded proposition, effective marketing and shopper engagement. It has also built strong relationships with premium sports brands, such as Nike and Adidas, enabling it access to exclusive top tier products, in contrast to Sports Direct, which has fallen out of favour with these brands. However, JD Sports should still seek out up-and-coming brands to widen its range of unique products and minimise its dependency on such brands.”
Cowgill has made a habit of acquiring smaller rivals to strengthen the group proposition over the last 20 years, among them outdoor chains Blacks, Millets and Go Outdoors; designer chain Tessuti; Pretty Green; Choice; Scotts; Mainline; Footpatrol; Spanish retailer Sprinter; French retailer Chausport; Finish Line in the US; Netherlands-based Perry Sports and Aktiesport; and Australian retailer Glue.
Retail analyst Nick Bubb says: “Peter is an acquisition junkie, but his record, although not perfect, is far better than [Frasers Group, formerly Sports Direct International, CEO] Mike Ashley.
“He has stuck to areas he knows and he cuts things that don’t work. Remember Bank five years ago? [JD Sports sold the young fashion chain to restructuring firm Hilco Capital in November 2014 for £1, and it went into administration six weeks later.] The main blot on his record is the disappointing performance of [loss-making] Go Outdoors, but that hasn’t been a major blow. Europe has been very successful, and the US is shaping up very well.”
In March last year, JD Sports announced that it was buying struggling retailer Footasylum for £90.1m.
Cowgill says this is part of plans to continue growing the group in the UK through further acquisitions and expanding its smaller fascias: “We see development with add-ons as we extend our brand reach. Footasylum is part of that. It attracts a different consumer, and we see that as an extension in the UK.”
However, the Competition and Markets Authority (CMA) raised some concerns. The prospective takeover rang alarm bells for the regulator, which argued it could lead to higher prices, worse choice and poorer service for shoppers. It referred the deal for further investigation in September 2019.
Cowgill insists Footasylum appeals to a different customer base from the core JD Sports offering. In submissions published by the CMA in December, JD Sports said competition could not be lessened because the two have quite different “sweet spots” in their brand and own-label representation. It described JD Sports as a mainstream sports heritage brand, while Footasylum’s own-label fashion focus is on “the urban male”. The investigation is still ongoing and should be completed by 16 March.
Further afield, international expansion is another core focus for Cowgill. In its 2019 annual report, group revenue was split as UK 45%, Europe 29%, US 21%, rest of world 5%. In-store sales comprised 78%, online was 19% and wholesale was 3%.
JD Sports opened its first European store in Lille, France, in 2010. Ten years later the group has a presence in 11 countries in mainland Europe. It expects to have opened a net 46 European stores in the current financial year, and will launch a flagship in the centre of Paris on rue de Rivoli later this year.
In Asia-Pacific, the retailer expects to open more than 15 stores in the current financial year, while in the US, following the acquisition of Finish Line in 2018, JD has opened six of a planned 20 stores and work has begun on a flagship in New York’s Times Square, scheduled to open this spring.
“JD has a very strong reputation internationally,” says Cowgill. “It is recognised as being one of the leading international players in the market. Therefore, opportunities to develop in other territories present themselves on a regular basis.”
He adds that further international expansion is on the horizon: “We’d like to take some other fascias at some point in the future into those territories, and that would include Footasylum.”
Juls Dawson, owner of sales agency Just A Group, which sells brands including Fila and Nicce to JD Sports, says the retailer is seen as a premium stockist for many labels globally: “Talking to fellow international fashion agents, they want a brand to be seen in JD in their home markets, as their retail customers see it as an instant stamp of approval. As JD continues to strive to become the biggest global fashion and sportswear retailer, we should be proud it heralds from our shores.”
Despite its dominance, JD Sports is not without its challenges. Cowgill points to “the rapid acceleration and growth of direct to consumer” from big brands such as Nike and Adidas as one of the biggest changes and potential hurdles in the market.
Some independents have been hardest hit by the move as the brands cut off supply in favour of their own stores and websites and “key partners”, of which JD Sports is one, as detailed in Drapers’ investigation in December. However, larger multiples such as JD Sports and Sports Direct have not been unscathed.
We have to continue to be relevant to our consumer, and make the experience as attractive as it can be
Last October, Adidas opened its most digital-focused store yet on London’s Oxford Street, just a few hundred metres from the JD Sports flagship. Meanwhile, Nike is continuing to forge ahead with its “House of Innovation” flagship programme. An opening in Paris is pencilled for later this year following stores in Shanghai and New York in 2018.
Also last October, Sports Direct called for an investigation into the tactics of certain “must-have” brands, such as Adidas, in controlling and withdrawing the supply of products. In its submission to the CMA over the Footasylum deal in December, JD Sports said: “the major brand owners not only constrain horizontally as JD Sports’ fastest-growing direct competitors at the retail level, but also substantially influence the structure of the retail market via their selective distribution models; and individual retailers’ setting of price, quality, range or service within it.”
Analyst Richard Hyman agrees that direct-to-consumer strategies are putting pressure on JD Sports: “A big challenge is the growing desire of brands to go direct. JD is going to have to work harder to maintain what is an outstanding trading performance.”
However, Cowgill is not complacent, and maintains a keen eye on all competitors: “We have to continue to be relevant to our consumer, and communicate with them online and make the experience as attractive as it can be. We have to make it worth the visit. Failures on the high street are non-stop, and there is another [retail collapse] nearly every week. We are aware of that and it keeps us on our toes.”
The other major expense is business rates. I can’t see how you can stimulate bricks-and-mortar [trade] without lowering the cost base
Ramsbottom resident Cowgill is adamant that property costs need to reduce to revive the high street: “As a healthy retailer, it is difficult to accept sitting next door to [businesses that have been through] company voluntary arrangements. If a landlord still has that tenant 12 months later, the true rent of that location is what they are paying, not what I’m paying.
“The other major expense is business rates. I can’t see how you can stimulate bricks-and-mortar [trade] without lowering the cost base. That burden can’t just be borne by the landlords. The rates are unrealistic and relate to a period when online wasn’t as prevalent. The cost base is out of step.”
When asked if he has any advice for budding retail entrepreneurs in such a difficult climate, he quips, “Don’t bother,” before adding: “If you are going to get into a game like this, you have to be committed and ambitious, otherwise you will flounder. It is so competitive. If we walk down this street, I can show you 20 places where you can buy a similar footwear offering to mine. It’s the same on all high streets.
“You have to be open minded to develop the business. I’m lucky I have great people at JD Sports and they love the company – they feel it is part of them, so I’m fortunate in that respect.”
Despite the turbulent market, Cowgill’s goal is long-term sustainable growth and expansion: “In 10 years I’d like to think JD will be prospering in a multichannel world. I’d like to think we’ve been successful enough to develop Tessuti, Blacks and Footasylum into international concepts [that] are all thriving successfully. I’d like to see us occupying most fertile territories of the world.”