JD Sports buys Shoe Palace to expand footprint on U.S. West Coast

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(Reuters) - Britain’s biggest sportswear retailer JD Sports has bought Shoe Palace for $325 million in cash to expand its business on the U.S. West Coast, sending the company’s shares higher.

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

Shares JD, which also owns Footpatrol and Cloggs, were up 3.3% at 816.6 pence by 1253 GMT.

“SP is a very well-regarded retailer (this is not a distressed asset: quite the opposite...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,” Peel Hunt analysts said.

As part of the deal, the four brothers from the Mersho family who own Shoe Palace will be issued equity in JD’s U.S. business. The brothers will own 20% of the enlarged group with an equity value of about $356 million and will continue to manage Shoe Palace.

Shoe Palace, which owns 167 stores, made a pretax profit of $52 million on revenue of $435 million last year.

The acquisition comes as retailers are still struggling to recover from the COVID-19 pandemic. In September, JD had reported a 68% fall in its first-half profit but also highlighted a recovery in demand.

JD had said that the pandemic had not changed its ambitions of expanding in the United States and that it would continue to make selective deals and investments.

The company said the Shoe Palace deal was being funded through its existing cash reserves and bank facilities.

Reporting by Aniruddha Ghosh and Tanishaa Nadkar in Bengaluru; Editing by Aditya Soni and Jane Merriman