Industry insiders have said Footasylum has been saved by JD Sports Fashion following the latter’s agreement to buy the struggling retailer for £90.1m.
JD Sports acquired an 18.7% stake in Footasylum last month, but said at the time it was not intending to make an offer for its rival.
Footasylum’s most recent annual report for the year to 24 February 2018 shows revenue was up 33% to £194.8m, while gross profit was up 30% to £87.6m.
However, the company, which operates 65 stores and employs 2,270 staff, issued a profit warning in January as “tough trading conditions” and discounting over Christmas hit its bottom line.
One supplier expressed relief that Footasylum has been saved from its financial problems: “The benefit as a supplier is there’s less financial risk. There hasn’t been any credit insurance on Footasylum for the past four or five months.
“It will be very interesting to see how this turns out for suppliers and employees. They might merge their buying teams like they did with Bank [which JD Sports bought in 2007].”
Retail analyst Richard Hyman agreed the deal would place Footasylum on firmer footing: “Footasylum is a relatively new retail business and it’s grown quickly. It has probably over-rented, and has got leases that seemed like a good idea at the time but aren’t now. It’s probably in a good position to negotiate those leases now that it has JD behind it.”
He added that the brand’s image remains strong enough to continue operating under its own name.
“I think they’ll bring Footasylum under the JD umbrella operationally, but they’ll keep the brand. JD is a big business that needs parallel brands to bring opportunities to grow.”
Patrick O’Brien, UK retail research director at analyst GlobalData, said the move may have been made to fend off other buyers: “For JD Sports, this looks like a defensive move against Mike Ashley’s Sports Direct. With Footasylum’s share price so low, it looked like only a matter of time before the hoover of the high street would strike, before JD Sports began building its stake last month.”
However, he believes Footasylum could be a strong asset for the company: “The deal seems a positive one for JD Sports, which has the clout to restart Footasylum’s expansion and use its sourcing scale to make it more efficient, and we expect it to develop what is still a very marketable fascia.”
JD Sports said: “JD believes that Footasylum is a well-established business with a strong reputation for lifestyle fashion and, with its offering targeted at a slightly older consumer to JD’s existing offering, it is complementary to JD. JD also believes that there will be significant operational and strategic benefits from a combination of the two businesses.”
Footasylum was launched by JD Sports co-founder David Makin in 2005. John Wardle, the other cofounder of JD Sports, was appointed CEO in 2008 and moved to the role of executive chairman in 2015. He was succeeded as CEO by Clare Nesbitt, Makin’s daughter, who joined the company in 2009 and was deputy CEO from 2012 to 2015.