JD Sports perplexed by Footasylum deal knockback

JD Sports has said it is "perplexed and disappointed" by concerns over its proposed takeover of rival Footasylum.

The Competition and Markets Authority (CMA) says it is still worried that a merger will mean shoppers could face higher prices or less choice.

But JD Sports' boss hit back, saying the deal would boost a "High Street decimated by a number of high-profile closures".

The competition watchdog first blocked the £90m takeover last year.

However, it was forced to reconsider its decision after an appeal by the sportswear retailer.

The competition watchdog has now said that, having gathered extra evidence on the impact of the pandemic and the sports fashion sector, it still has concerns over the proposed takeover.

"This deal would see Footasylum bought by its closest competitor and, as a result, shoppers could face higher prices, less choice and a worse shopping experience overall," said Kip Meek, chair of the group conducting the CMA inquiry.

"While many stores were closed during lockdown, online sales in this market have been stronger than ever, and revenue from in-store sales is rebounding as people return to the High Street."

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The CMA also said that while big sportswear brands are starting to sell more products directly to customers, potentially cutting out the likes of JD Sports, "these developments are still not enough to replace the very significant degree of competition between JD Sports and Footasylum".

The CMA said that forcing JD Sports to sell Footasylum to new owners may be "the only way of addressing" its competition concerns as a result.

In its response to the provisional findings, JD Sports accused the CMA of failing to take into account the "structural shift in favour of online shopping" seen during the pandemic, which it says has benefitted big brands such as Nike and Adidas who are now selling more goods direct to consumers.

According to the Office for National Statistics, the proportion of retail sales online increased to 27.9% in July - substantially higher than the pre-pandemic levels of 19.8% seen last February.

JD Sports boss Peter Cowgill urged the CMA to reconsider its position

"I am not sure what further evidence the CMA needs to appreciate the extent of this dynamic change which has been substantially accelerated by Covid-19," said JD Sports executive chairman Peter Cowgill.

"If the CMA's mission is indeed to 'make markets work well in the interests of consumers, businesses and the economy' then I urge the CMA to reconsider its position before making its final determination."

Neil Wilson, chief market analyst for Markets.com, said: "While a tie-up would give [JD Sports and Footasylum] a pretty dominant position in supplying these two brands on the High Street, this matters a lot less now you have Nike and Adidas significantly ramping up their direct-to-consumer offering.

"Retail changes all of the time and the pandemic has accelerated trends that mean blocking JD Sports from acquiring Footasylum increasingly makes less sense," he added.

Both JD Sports and Footasylum now have the opportunity to give their views on the new findings by 16 September before the competition watchdog makes its final decision.

The CMA's said that it believed both companies would continue to be profitable should the merger not go ahead.

In its 2021 annual report, JD Sports reported an increase in sales to £6.2bn, up from £6.1bn in 2020, although profits were dented by store closures during lockdowns.