JD Sports could be told to sell Footasylum over competition concerns | Business
Britain’s competition watchdog has said it could force JD Sports to sell the Footasylum sportswear business it bought last year because consumers could lose out as a result of the deal.
The Competition and Markets Authority said its six-month investigation into last April’s £90m takeover found it “substantially lessens competition nationally”. It said shoppers could get fewer discounts, receive a lower quality of customer service and enjoy less choice in stores and online.
JD Sports, Britain’s biggest sports retailer, hit back at the competition watchdog in a strongly worded statement, claiming the CMA’s findings were “fundamentally flawed”. It said it would fight them.
It said the competition regulator failed to recognise the rapidly changing nature of the UK sports retail market, where a large number of retailers selling third-party brands compete with each other, as well as other online players and the international brands selling directly to customers.
The JD Sports executive chairman, Peter Cowgill, said: “The CMA’s provisional decision is fundamentally flawed and demonstrates a complete misunderstanding of our market to an alarming extent, given its six-month review.
“The competitive landscape described by the CMA is one which neither I, nor any experienced sector analyst, would recognise. Just take a walk down any major UK high street or search for Nike or Adidas trainers on Google and you can see for yourself how competitive this marketplace really is.”
JD Sports has 394 JD-branded stores in the UK and Ireland as well as 120 shops under other brands such as Size? and Footpatrol, while Footasylum has 70 stores. Sports clothing and footwear is a growing market in the UK, worth more than £5bn in 2018.
Kip Meek, the chair of the independent inquiry group leading the CMA investigation, said: “We’re currently concerned that shoppers could lose out after the merger, for example through fewer discounts and less choice in stores and online. This could particularly affect younger customers and students, who shop in JD Sports and Footasylum.”
The CMA is asking for views on its provisional findings by 3 March and possible remedies by 25 February and will assess all evidence provided before making a final decision. It said: “Its current view is that blocking the deal by requiring JD Sports to sell the Footasylum business may be the only way of addressing these competition concerns.”
JD Sports noted that the CMA itself recognised that Footasylum had a market share below 5%, and said this showed the takeover was small in relation to the overall market. It estimates that Footasylum would contribute less than 2% of group profits in the year to January 2020. After enjoying a good Christmas, JD Sports said it expected profits to hit at least the top end of analysts’ forecasts, which range from £403m to £434m. This compares with last year’s pretax profits of £355m.
The company said: “We cannot comprehend how the CMA concludes that Nike and Adidas will not be significantly stronger competitors in the marketplace over the next few years. Experienced analysts in this sector simply would not recognise this conclusion.
“We feel that, in its findings, the CMA has lost sight of its objective to protect consumer interests.”