JD Sports buys US retailer Shoe Palace for $325m

JD Sports Fashion said it has bought US-based Shoe Palace for $325m along with an equity share in the enlarged group for the company’s founders.

Based in San Jose, California, Shoe Palace was established in 1993 by the Mersho family and currently has 167 stores, most of which trade under the Shoe Palace banner. It is operated by four brothers from the family who will receive a 20% stake of the US business worth around $356m.

JD Sports, which entered the US market in 2018 with the acquisition of Finish Line, said the deal would also increase its appeal among Hispanic and Latino consumers, who form a significant proportion of Shoe Palace’s customer base.

The owner of Footpatrol and Cloggs said the brothers would continue to manage Shoe Palace, but from next year the JD Finish Line and Shoe Palace teams would “begin to share ideas and best practices”.

As well as California, the chain operates stores in Texas, Nevada, Arizona, Florida, Colorado, New Mexico and Hawaii.

JD Sports had previously been in talks with ailing UK high street chain Debenhams but last month but pulled the plug earlier this month - leading to the group's collapse.

Chief executive Peter Cowgill said: "We are confident our combined fascias will provide us with the flexibility and expertise to fulfil our mutual ambition of becoming a prime customer destination for sneakers and lifestyle apparel in the US."

JD said the deal would be funded through its existing cash reserves and bank facilities.

Analysts at Shore Capital said the deal "looks another sensible bolt-on acquisition that will be earnings accretive from year one".

"There will no doubt be synergy opportunities from better buying and central overheads, but initially the two US businesses – JD Finish Line and Shoe Palace will be run as separate business units. The proposed deal has already had pre-competition clearance, so there are no new regulatory hurdles ahead."

"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 and we reiterate our 'buy' rating highlighting global opportunities and increasing both its reach and utilising part of the strong balance sheet, where it held £700m of net cash."