Sports etailer Wiggle has revealed the extent of its expansion plans with the planned acquisition of rival Chain Reaction Cycles.

Private equity-backed Wiggle will effectively double its annual sales overnight through the tie-up with its family-owned Northern Ireland-based etail competitor. 

It will also bring the combined group’s annual sales up to the same size as Halfords’ revenues from cycling.

The deal is being billed as a merger. But with Wiggle boss Stefan Barden taking the saddle at the combined group, it will be the backing of its private equity owner Bridgepoint that underpins the new, as yet unnamed, business.

Barden believes that he can boost Wiggle’s annual turnover significantly. But how ambitious can you be in what appears a relatively niche market?

Despite so-called MAMILs – middle-aged men in lycra – remaining a growing, generally well-off breed and the ongoing appetite for healthy lifestyles, the opportunity, on the face of it, appears limited. 

Wiggle also talked up Chain Reaction’s strength in mountain biking and BMX, but again these will only ever be specialist pursuits.

Opportunities in other categories

However, the roads of opportunity are many.

Wiggle may be an odd, slightly nondescript word, but it means Barden has the space to do exactly what its name suggests – wiggle into other categories.

“Although Wiggle has dialled down the number of countries it operates in after being burnt by currency movements, the opportunity on the continent remains significant

James Wilmore

It could also consider popular watersports, such as surfing and sailing, which could play well to some of its customers. 

Another option is devoting more attention to European growth. Although Wiggle has dialled down the number of countries it operates in after being burnt by currency movements, the opportunity on the continent remains significant.

The annual European market for tri-sports – cycling, swimming and running – is around £16bn. Both Wiggle and Chain Reaction already secure around half of their revenues from abroad.

Physical presence

But one area Wiggle now has on hold, it seems, is a move towards a bricks-and-mortar presence. “We are focused online,” Barden told Retail Week last year when asked about plans for shops.

And my understanding is that the Chain Reaction deal was the preferred option for investment, instead of taking stores.

Interestingly, Chain Reaction has a 10,000 sq ft store in Belfast, but that is unlikely to convince Wiggle to change its view on having a physical presence.

The only thing that may prove a distraction to Barden is the future ownership of the company.

As he admitted last year: “With private equity they can sell you next week or in 10 years.”

Speculation surfaced in 2014 that Bridgepoint was considering an IPO for Wiggle. It remains an option, clearly.

But the intensely private Barden could be wishing he gets to fulfil his ambition without having to explain himself to investors and the media every three months. 

At the moment he has a clear road ahead and appears to be on the right track. 

Wiggle and Chain Reaction’s financial performance

Wiggle

Headquarters Portsmouth

Full-year underlying profits £7m (12 months to end of February 2015)

Sales £179m, up 11.5%

Chain Reaction Cycles

Headquarters Ballyclare, Northern Ireland

Pre-tax profits £4.8m (2014)

Sales £153.4m, up 5.9%