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Sportswear shake-up looms as JD eyes JJB

The UK sportswear sector could be set for a significant shake-up amid reports that JD Sports Fashion is considering making a bid for rival JJB Sports.

Industry operators told Drapers that further consolidation in the sportswear market was likely and some questioned the long-term viability of JJB Sports given its current market positioning.

JD Sports Fashion, which owns the JD, Bank and Scotts chains, is reported to be considering making a bid for the 250-store JJB Sports business. JD Sports Fashion chairman Peter Cowgill declined to comment, but confirmed the business, which already has a 10% stake in JJB Sports, would “consider all opportunities”.

Several industry insiders told Drapers such a move made sense. “JD did a similar thing taking First Sport and Allsports out of the market, and it’s within the team’s talents to run other chains - they already have Bank and Scotts,” said one sportswear operator.
JJB Sports has struggled in the downturn. Chief executive Chris Ronnie left the company in March amid controversy over the transfer of his stake in the company. It was forced to renegotiate its debts and earlier this month completed a Company Voluntary Agreement (CVA) to stave off administration.

Some of JJB Sports’ senior staff are thought to have joined DW Fitness, the new business created by JJB Sports founder Dave Whelan after he bought a significant chunk of JJB’s gyms, which had shops attached.

Both JJB Sports and Whelan are now laying claim to the “Serious about Sport” strategy that would see them both create chains of sports clothing and equipment stores.

However, although JJB Sports managed to get agreement from creditors and shareholders for the CVA, some insiders are sceptical about its long-term prospects. One sportswear boss said: “If JJB stays where it is with 250 shops, it will get stuck in the middle. It’s big, but not big enough to have as much power and not small enough to be flexible.”

Insiders said JJB Sports’ significant proportion of out-of-town stores was unlikely to be a major draw for JD Sports - its model is more suited to the high street. There is also speculation that branded sportswear supplier Pentland Group, the majority shareholder in JD Sports Fashion, could be driving a potential bid to protect its distribution. JJB Sports sells the likes of Ellesse and Speedo, which Pentland owns.

If a bid emerges it is likely to spark a tug of war between the big sportswear operators. Sports Direct has a 4.5% stake in JJB Sports, but deputy chief executive Mike Ashley is rumoured to hold about another 15% via contracts for difference and would be unlikely to welcome a bid.

There could also be issues regarding competition, although JD Sports Fashion may be able to circumnavigate competition issues if it can emphasise it operates more in the fashion arena rather than solely in the sportswear market.
JD Sports Fashion and JJB Sports declined to comment.

Sportswear stakes

In JJB Sports:
JD Sports Fashion 9.9%
Sports Direct 5.5%
(potentially up to 20% including shares held via contracts for difference)
In JD Sports Fashion:
Pentland Group 57%
Sports Direct 12%

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