Total cash consideration for the acquisition is $325m, of which $100m has been deferred and will be paid on various dates over the next 12 months

Total cash consideration for the acquisition is $325m, of which $100m has been deferred and will be paid on various dates over the next 12 months

JD Sports Fashion Plc has acquired US footwear retailer Shoe Palace Corporation in a US$325m deal that significantly increases its presence on the West Coast of the United States.

In a statement today (15 December), Britain's largest sportswear retailer said its existing wholly-owned intermediate holding company in the US, Genesis Holdings Inc, has acquired 100% of both the issued shares in the Shoe Palace Corporation and the members' interests in Nice Kicks LLC.

JD Sports noted the acquisition complements its ongoing positive developments from the existing Finish Line and JD fascias in the United States, which includes the recent opening of JD's flagship store in Times Square, New York. It will also strengthen its connection with the Hispanic and Latino consumers, who represent a significant proportion of Shoe Palace's customer base.

Based in San Jose, California, Shoe Palace was established in 1993 by the Mersho family and currently has 167 stores, the vast majority of which trade under the Shoe Palace banner.

The retailer is operated by four brothers from the Mersho family who head up the various operating functions across the business and will be issued with equity in Genesis such that they will own 20% of the enlarged group in the United States.

The initial fair value of the equity consideration is about $356m.

JD Sports said the Mersho brothers will continue to manage the Shoe Palace business although the intention is that, from next year, the JD Finish Line and Shoe Palace teams will "begin to share ideas and best practices." 

In the year ended 31 December 2019, Shoe Palace delivered a profit before tax of $52m. The gross assets in the Shoe Palace audited balance sheet at the same date were $197m.

"We are confident that our combined fascias will provide us with the flexibility and expertise to fulfill our mutual ambition of becoming a prime customer destination for sneakers and lifestyle apparel in the United States," Peter Cowgill, executive chairman of JD Sports Fashion Plc, said.

JD Sports' latest acquisition follows that of US athleticwear chain The Finish Line in 2018 in a deal worth US$558m

Shore Capital analyst Greg Lawless notes the British retailer remains a well-managed company with strong cash generation.

"JD Sports remains a global player and this scales up its ambitions in the US. We have written before that it looked at mid-market UK department store chain – Debenhams but walked away earlier this month. This acquisition looks right up its street in core footwear and is complementary to its existing US business in terms of geography and extends its reach in terms of customers. JD remains one of our top picks in the retail sector."

JD Sports saw both earnings and sales slide in its first half as weak footfall and additional costs associated with a shift in revenues to online channels during temporary store closures weighed on results.