JD Sports acquires retailer Shoe Palace for £244 million

By: Wajeeh Khan
Wajeeh Khan
Wajeeh is an active follower of world affairs, technology, an avid reader, and loves to play table tennis in… read more.
on Dec 15, 2020
  • JD Sports acquires retailer Shoe Palace for £244 million.
  • The retailer is funding the deal with existing cash reserves.
  • Shoe Palace has 167 stores across the United States.

JD Sports (LON: JD) revealed to have bought Shoe Palace for £244 million on Tuesday – an acquisition that the British company expects will help it expand its operations in the United States West Coast. JD Sports bought Finish Line in 2018 to make a debut in the U.S. market.

JD Sports also highlighted on Tuesday that Mersho family, that currently operates Shoe Palace, will receive equity in its U.S. unit. The largest British sportswear retailer valued this equity at £267.48 million that translates to 20% ownership for the Mersho family.

Shoe Palace has 167 stores across the United States

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According to JD Sports, Shoe Palace will remain under the management of four brothers from the Mersho family in the beginning. But from next year, JD Finish Line and Shoe Palace teams will start to take over. In related news from the United Kingdom, collapsed British multinational retailer Debenhams faced uncertainty again as JD Sports pulled out of rescue talks in the first week of December.

Shoe Palace was established in 1993. The California-based retailer currently has 167 stores across the U.S. It reported £326.84 million of revenue last year and £39.07 million of pre-tax profit. Peel Hunt analysts commented on the acquisition on Tuesday and said:

“It’s a great fit for JD: Finish Line has a weakness on the West coast and doesn’t really connect with the shoppers SP is close to.”

JD Sports is funding the deal with existing cash reserves

The British sportswear retailer said on Tuesday that it was funding the agreement with Shoe Palace via bank facilities and existing cash reserves. In a report published in September, JD Sports announced that its profit was 68% lower on a year over year basis in the fiscal first half.

On the daily chart, JD Sports is currently a little under 4% up. At 820 pence per share, the British sportswear retailer is still 1% down year to date in the stock market after recovering sharply from a low of 293 per share in March, when the impact of the COVID-19 crisis was at its peak. The price action should come in handy if you are interested in investing in the stock market.

The Coronavirus pandemic has so far infected more than 1.8 million people in the United Kingdom and caused over 64 thousand deaths. At the time of writing, JD Sports is valued at £7.99 billion and has a price to earnings ratio of 42.13.

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