How JD Sports Can Make Finish Line’s Struggling Business Compete Better Against Foot Locker

Now that JD Sports Fashion PLC said it will purchase Finish Line Inc., industry insiders believe the deal will result in a more formidable competitor for Foot Locker Inc. — and it could also give the overall marketplace a much-needed boost.

“Overseas, JD Sports and Foot Locker Europe are different — they look and feel different — and if they can apply those differences here and have that work, it would be good for everybody,” explained Susquehanna Financial Group LLLP analyst Sam Poser.

And Matt Powell, The NPD Group Inc.’s senior industry adviser for sports, explained to FN that sneaker buyers will reap the benefits as well.

“Anytime we raise the level of retail, it raises the level for everybody. It raises the level of competitiveness, and I think that’s important for the consumer,” Powell said.

The expert also believes the deal could help Finish Line rebound. He stated JD Sports’ many retail banners — which includes Size?, Scotts, Getthelabel.com and Chausport — will give Finish Line diverse looks within the marketplace, something it can use to stay on-trend.

“It’s one of the reasons JD has been successful. Having that market intelligence will make Finish Line a better retailer as well,” Powell said.

But Poser is skeptical on how, or if, JD Sports can improve Finish Line in North America.

The analyst publicly stated late last year that he believed U.K.-based Sports Direct International PLC would take over Finish Line, a move that could have helped the Indianapolis-based firm strengthen its position in the athletic marketplace.

“Sports Direct would likely keep the Finish Line banner but create a mall-based DSW of athletic shoes, so to speak, and offer current, but not marquee, product at attractive prices,” Poser wrote in a September 2017 note. “Sports Direct currently does a large amount of business with Nike, Adidas, Puma, UA, Skechers, Fila, K-Swiss and other key brands. Such a concept would likely create a strong niche that would not compete directly with Foot Locker.”

After today’s move, Poser downgraded Finish Line’s stock to neutral, from positive, stating the acquisition was the “right idea” but JD Sports was the “wrong British retailer.”

For his part, Powell said it may be too early to tell how the deal will play out for the market.

“We really have to understand what JD’s plans are — if they’re going to change things [with Finish Line] at all, if they are going to roll out the renovated stores much more quickly,” Powell said. “[And] they’ve indicated that they’re going to open JD-branded stores here [in the U.S.] now, as well. We need to understand what the mix is and what the differences are.”

Finish Line announced its $558 million sale to JD Sports today, with JD Sports acquiring all of the issued and outstanding Finish Line shares at a price of $13.50 apiece in cash.

“Finish Line has long admired JD and their commitment to serve customers with premium brands through a unique and innovative retail experience,” said Sam Sato, CEO of Finish Line. “We are thrilled to partner with them and look forward to realizing the impact we will have on the marketplace together.”

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