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Does Sports Direct's JJB deal spell choppy waters ahead?

Sports Direct’s acquisition of 20 JJB stores has not triggered a response from the Competition Commission. But that doesn’t mean it will be plain sailing for its rivals, writes Ruth Faulkner.

Every time a brand or chain is rumoured to be up for sale, two names are always in the frame to acquire that business.

Although both JD Sports Fashion and Sports Direct have made their fair share of acquisitions over the last 18 months it is the latter whose recent acquisition activity has been ruffling feathers.

Mike Ashley’s group has saved around 550 jobs with its acquisition of 20 JJB stores, the brand and the website. This lifeline - and the saving of any jobs - is something that should always be applauded, especially given the country’s wider economic difficulties, but there will be some who will question at what cost that has come.

It follows a rapid period of change for Sports Direct, one which has seen it grow to become a behemoth in the retail industry.

So far this year it has acquired a stake in premium indie mini-chain Flannels, and bought out World Design & Trade (WDT), owner of Fullcircle and Firetrap young fashion brands.

Last year saw the business hoover up streetwear brand No Fear, as well as taking control of young fashion business USC, luxury retailer Cruise Clothing and indie-mini chain Van Mildert.

The crossover of these various businesses has been sufficiently minimal not to trigger an investigation from the Competition Commission – indeed this is thought to be one of the main reasons that only 20, rather than the expected 60, JJB stores were saved.

There are, however, valid questions about how much this step has actually reduced the amount Sports Direct will dominate by. At this stage it seems the JJB brand will continue, as will its online presence. The value of both the brand reputation and the future business likely to come through its ecommerce channel will outweigh the value of several bricks and mortar stores - although at this stage, it may not be possible to know how many.

In a tough retailing climate, some businesses will sink and some will swim. Sports Direct has undoubtedly found a strategy that works for itself – and for the people it employs – but those caught in the wake could find the water gets choppier yet.

Ruth Faulkner, reporter, Drapers
ruth.faulkner@emap.com