JD Sports founders John Wardle and David Makin are going for gold a second time by running back to the stock market with Footasylum.
The heavyweight pair, who launched the high street’s athleisure sweetheart JD Sports in 1981, will list their newer venture Footasylum on London’s junior market this week.
The 59-store sports footwear specialist, which began life as a single shop in Cheshire in 2005, is predicted to be valued at around £150m before any new money is raised, and has been tipped to turn investor’s heads.
Following in the footsteps of JD Sports
When it floats, Footasylum’s founders will hope to replicate the success they enjoyed with JD Sports.
Having ably fended off competition from rivals Sports Direct and JJB, JD Sports currently wears the sportswear crown with a market value of over £3.5bn.
Footasylum will use the funds raised at IPO to firm up its own footing and almost triple its UK store estate to “at least” 150 branches.
But, as Retail Week Prospect head of research Phil Wiggenraad points out, reaching this long-term target will make Footasylum a sizeable competitor to JD Sports.
“This will be particularly the case if Footasylum manages to maintain its multichannel approach. The online channel currently accounts for around 30% of overall sales, which is more than twice the level that JD Sports achieves,” observes Wiggenraad.
“The 59-store sports footwear specialist, which began life as a single shop in Cheshire in 2005, is predicted to be valued at around £150m before any new money is raised”
However, the retailer will not proceed at breakneck pace to reach its target – planning instead to open around eight to 10 stores a year – and further physical expansion could put some downward pressure on its online growth.
Adding further spice to the rivalry, Footasylum has snapped up former JD Sports boss Barry Bown to replace Wardle as executive chairman after the IPO, at which point its chief executive, Makin’s daughter Clare Nesbitt, will become the youngest boss of a listed company.
Turning investors’ heads
Despite operating in a tough market, Footasylum is fighting fit.
The on-trend retailer, which employs around 2,200 people and has partnerships with 300 external brands, made £11.2m in pre-tax profits in its last full year on sales of £110m.
It is also investing heavily in its digital platforms to reach a target of 50% online revenue.
Fashion industry monitor Styleintelligence, in a pre-IPO diagnostic report, surmises that the float will tempt investors.
“Despite our natural inclination to look for negatives, Footasylum appears to be one of the few companies with overall positive indicators,” it says.
Styleintelligence points out that the retailer’s average annual growth rate of 37.5% between 2009 and 2016, is more akin to that of pureplay retailers, such as Asos and Boohoo, rather than its high street peers.
It does point out, however, its gross margin is relatively low, which it puts down to both discounting and its own brands either being “under-priced or not very popular”.
Has it fired the starting gun prematurely?
It’s also worth noting that Footasylum’s flotation comes at an intriguing time, as the high street faces an escalating cost base, including higher business rates and the apprenticeship levy.
What’s more, Brexit has increased the level of uncertainty among consumers.
“Despite operating in a tough market, Footasylum is fighting fit”
However, as Wiggenraad points out, global markets are still forging ahead and the FTSE 100 recently reached a record high.
“So this would seem to be a good time to get a flotation off the ground,” he says.
“Footasylum probably feels that it is less likely to be impacted by the UK consumer slowdown and in a good position to continue to thrive because of its focus on 16- to 24-year-olds. This is a demographic that is very image-conscious and tends to prioritise discretionary spending on fashion,” he says.
Similarly, fast fashion retailer Quiz – which has a similar target market – made a strong entrance to the AIM market earlier this year.
As the athleisure trend continues to influence the fashion sector, Footasylum looks as if it is in good shape to prosper.
It is perhaps unsurprising that Wardle and Makin plan to retain a significant stake after the IPO, as the footwear specialist follows JD Sports’ well trodden path towards success.