Why JD Sports’ Hibbett Acquisition Could Present Fresh Challenges for Foot Locker

Overall, analysts believe that Hibbett and JD Sports make a "good match."

JD Sports’ announcement on Tuesday that it plans to acquire Hibbett in a deal valued at $1.1 billion could spark the latest power shift in the American athletic retail landscape.

According to Williams Trading analyst Sam Poser, the deal is a “good fit” as Hibbett’s core urban fashion athletic customer is very similar to the core customers at JD’s DTLR and Shoe Palace banners.

“JD should also benefit from Hibbett’s e-commerce and omnichannel platforms,” Poser told FN. “Hibbett has one of the best, if not the best omnichannel operation, e-commerce platform, and mobile app within our coverage, and in the industry, according to many in the vendor community.”

Matt Powell, advisor at Spurwink River and senior advisor at BCE Consulting, agreed. “This is a combination of two very good operators, although they have different business models,” Powell told FN. “But the combined businesses are much more powerful than they were as separate entities.”

But this new combined athletic retail force could spell bad news for competitors like Foot Locker. “JD will have increased leverage with its vendors after this acquisition, and continue to take share from Foot Locker,” Poser noted.

Powell added that with this new acquisition JD Sports is now a “formidable competitor” to Foot Locker and even Dick’s Sporting Goods in the U.S.

This could be the case following Foot Locker’s March announcement that it will take longer than expected to achieve long-term financial targets it outlined last year. At the time, the retailer updated its timelines for its Lace-Up plan, revealed in 2023. The strategy included a plan to grow Foot Locker’s business to more than $9.5 billion in annual revenue by 2026. Now, Foot Locker expects these results to come to fruition two years later — in 2028.

But at the completion of the transaction, JD Sports presence in the U.S. will only grow – adding Hibbett’s 1,169 stores across 36 states where JD as a group is less well represented.

And these existing Hibbett stores will remain largely unchanged. On a conference call with analysts on Tuesday, JD Sports chief executive officer Régis Schultz noted that there is “no plan” to rebrand the soon-to-be-acquired Hibbett stores.

“We believe strongly that we have in the U.S. two propositions,” the CEO said. “One with JD, which is a global proposition in “A” and “B” malls in key locations, which we continue to develop, and we continue our program to rebadge Finish Line store to JD. On the other side, we recognize that there is a market for small [community] stores, and that is where we have Shoe Palace, DTLR and City Gear. These banners are responding to this very local customer and have a very close relationship with them. We will continue to do that. So, there is no plan to rebadge stores.”

JD Sports chief financial officer Dominic Platt added on Tuesday’s call that this deal brings “seven core benefits” to JD in what he called a “highly complementary acquisition.”

“It’s an attractive acquisition aligned with our strategy,” Platt said. “It expands our reach in the largest athleisure market. It brings a complementary store portfolio. We continue to enhance our branded partnerships. It has a scalable platform underpinning future growth and synergy benefits. It has a strong and experienced management team, and it is earnings enhancing in the first full year before synergies, which we will deliver over the medium term.”

Following the closing of the transaction, Mike Longo will continue to serve as president and chief executive officer and Jared Briskin will take on the role of chief operating officer of Hibbett. The company will maintain its corporate headquarters in Birmingham, Ala.

The transaction is expected to close in the second half of 2024, at which point Hibbett will cease to be a publicly traded company.

“Today’s announcement is a true testament to all that our Hibbett | City Gear teams have built over the years and reinforces the strength of our brands, our close relationships with our vendor partners, and our team of dedicated colleagues across the country,” Longo said in a statement. “JD Sports is a well-respected global leader in athletic footwear and fashion that, like us, is committed to the communities and customers it serves.”