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Brand buyouts force indies to weigh up alternatives

Young fashion indies reviewing offer after sportswear giants strike deals to snap up popular brands.

Consolidation in the young fashion market is prompting indies to re-evaluate which brands to stock as they attempt to differentiate themselves from Sports Direct and JD Sports Fashion.

The two young fashion players have been on an acquisition spree in the past two years. The latest has been World Design & Trade (WDT), owner of the Fullcircle and Firetrap brands, which Sports Direct snapped up this month.

JD Sports has bought men’s young fashion brands Peter Werth and Fly53, streetwear brand Fenchurch, Spanish sports chain Sprinter, sports chain Champion in the Republic of Ireland and outdoor retailer Blacks Leisure. It has also made a foray into the premium market, acquiring menswear retailer Cecil Gee and inking a deal with Fourmarketing, owner of directional etailer Oki-ni.

Sports Direct founder Mike Ashley, too, has set his sights on premium retail, adding designer mini-chain Cruise to his portfolio, as well as branded young fashion business USC, after signing a £7m deal for a majority stake in both last year. Ashley’s business has also acquired labels including streetwear brand No Fear, premium sportswear brand USA Pro and women’s young fashion brand Golddigga.

Such activity has prompted discussion as to how new ownership will impact distribution. Expectation across the market is that both retailers will turn some brands into in-house labels. So far, JD Sports has brought men’s young fashion brands Sonneti and The Duffer of St George in-house, while Sports Direct has done so with Golddigga and No Fear.

The acquisition of brands gives both JD Sports and Sports Direct an exclusive edge, according to Carly Syme, senior retail analyst at Verdict Research. She says: “JD keeps buying more and more brands and that’s its thing, to have exclusive product in stores. It provides something other retailers can’t offer.”

Jonny Hewlett, UK managing director of denim brand Diesel, points to concerns about JD Sports and Sports Direct’s moves into the premium market, saying while both have extensive experience in high volume and discounting, neither have a track record with higher-end brands.

“If you look at the law of commerce, ultimately if two giants start slugging it out, particularly two that don’t have a track record in premium brands, then it can only be worrying,” he says.

Despite this concern, communication has become more transparent for brands like Diesel since Mike Ashley’s team came on board, with USC’s operations, strategy, planning and collaborations improving, according to Hewlett. “Since Sports Direct’s acquisition of USC we’ve never had a stronger relationship,” he says. 

Others have voiced concern that the more widespread a brand’s distribution, the more it could devalue that brand.

Speaking about Firetrap, Graeme Nichol, sales director of footwear brand Feud, says: “If you look at the history of what Sports Direct has done with brands in the past, they will just shove the excess stock into their stores and it will become a Sports Direct house brand.”

Dave Conaghan, co-owner of young fashion indie Chocolate in Derry, Northern Ireland, which stocks Firetrap and Fullcircle, says if a multiple put a brand into the corner of its sportswear stores it would diminish the brand.

He says: “I would [revaluate the brands I stock] if it was a high end or premium brand, as it would diminish the brand.

It could ruin a brand’s distribution, particularly if it was over-distributed. Brands want to be here, there and everywhere to make a quick buck but they need to think of the long term.”

Brands being bought by multiples could force indies to axe them, says Salim Kidiya, owner of young fashion indie Club JJ in Plaistow, east London.

He says: “If all of a sudden there is a whole lot of Firetrap product in Sports Direct stores, even if it’s last season’s stock, it devalues the brand and we wouldn’t want to be associated with it.”

One former young fashion boss, however, says that despite JD Sports and Sports Direct swooping in on brands, the strength of indies still lies in building brands: “You always need indies because brands need to build and they build through independents.”

While JD Sports and Sports Direct have been consolidating young fashion, the 12 to 24-year-old market has been growing on a sales basis, according to data from Kantar Worldpanel.

Sales over the 24 weeks to January 22 were up 4% to £4.3bn from £4.1bn for the same period last year. The total volume of units sold remained flat. However, this was counteracted by a 4% rise in average price from £10.76 to £11.20.

Syme says: “JD and Sports Direct are doing well. Their results are still strong and they have benefited because JJB [Sports] has been closing a lot of stores.”

Verdict expects the economy to improve next year, which will in turn lead to the consolidation tailing off as the market becomes more stable and brands and retailers are not as vulnerable without investment.

Story in numbers

57.5% of JD Sports Fashion is owned by Pentland

11,231 employees at JD Sports Fashion

462 JD Sports Fashion group stores in UK

71.2% of Sports Direct is owned by Mike Ashley

10,319 employees at Sports Direct

393 Sports Direct group stores in UK

   

JD Sports

JD Sports

      

Sports Direct

Sports Direct

Readers' comments (2)

  • And the UK boss of Diesel has a track record of working with "premium" brands for how long??

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  • @Anonymous after working with Diesel, they are in an ideal position to make such remarks. I have worked for a company mentioned within this report before and I will think you will find Diesel is the most commercially successful denim brand within this country, in a premium environment. Distribution for Diesel is quite hard to achieve for certain area's and he is quite right to question the direction of his brand within the watering down of the sports driven premium market.

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