JD Sports has confirmed it is exploring additional funding options with a view to increasing its flexibility to invest in future strategic opportunities

JD Sports has confirmed it is exploring additional funding options with a view to increasing its flexibility to invest in future strategic opportunities

UK sports retailer JD Sports has confirmed it is exploring additional funding options to allow it to invest in future strategic opportunities, as reports surfaced it is in talks for a GBP400m (US$547.9m) share sale as it eyes further expansion opportunities.

The group is considering launching an equity placing as soon as this week, according to a report published by Sky News yesterday (25 January), which cites an insider as saying it would be in the region of GBP400m.

In a stock exchange announcement, JD Sports said: "The board of JD Sports Fashion notes the recent press speculation concerning the possibility of the group undertaking an equity capital raise.

"The board confirms that it is exploring additional funding options with a view to increasing its flexibility to invest in future strategic opportunities and that this may involve a non pre-emptive equity placing. A further announcement will be made as and when appropriate."

News of the potential move comes just weeks after the retailer made its second acquisition in less than a month with the purchase of UK menswear independent retailer Wellgosh.

JD Sports snapped up US footwear retailer Shoe Palace Corporation in a US$325m deal in early December in a move that significantly increases its presence on the West Coast of the United States.

It backed out of a deal for Debenhams the same month.

Commenting on the news, Shore Capital analyst Greg Lawless said he is "not that surprised" by the board's consideration of an equity raise "given its global ambitions and the potential M&A opportunities that might arise from the fallout of Covid in the retail sector both in the UK and internationally."

He added: "In our view, JD Sports remains a best in class retailer with excellent cash generation (reflected in its strong balance sheet) and tight cost and stock controls. To bolster its balance sheet with a potential fund raising will enable the company to widen its already extensive corporate development net, as it looks for further bolt-on opportunities.

"One theme we are seeing in retail land is that the bigger retailers are starting to scale up (Boohoo acquiring the Debenhams brand online and Asos in exclusive talks with TopShop and a number of other Arcadia brands following its fall from grace). JD Sports with an ambitious management team with global aspirations wants a seat at the M&A table and a stronger balance sheet to leverage the multitude of opportunities that might come across its desk. We believe that this is a management team worth backing."

The retailer said in January it is confident group headline profit before tax for the full year will be significantly ahead of current market expectations and total at least GBP400m (U$539.6m).