What a difference a month makes. In February, after securing an 8.3% stake in Footasylum, sports fashion titan JD Sports insisted it was “not intending to make an offer” for its athleisure rival.

But just 28 days later, JD has tabled a £90m cash bid for Footasylum – a swoop that values the footwear specialist at a little over half of the £170m market cap it boasted when it floated in November 2017.

It’s a move that has gone down well with the City.

Footasylum’s previously languishing share price has surged 75% to 81.4p since the deal was unveiled on Monday morning. Analysts at Shore Capital say the move “looks like a sensible bolt-on acquisition in the UK to the JD Sports group, which crystallises the strategic stake that the company acquired back in February”.

“It’s a bloody brilliant time to buy the business because it is so cheap”

Industry source 

Considering JD’s existing stake in Footasylum, and the fact that the latter’s current board is peppered with JD’s co-founders, their relatives and former executives, this acquisition is not exactly a bolt from the blue.

But what gave the sportswear goliath’s boss Peter Cowgill the appetite to snap up struggling Footasylum at this time?

One source says Footasylum’s share price – down from last January’s 258p peak following a series of profit warnings – has allowed JD to pick it up for a song. The value in the deal will no doubt have been a factor in the decision to pounce.

“It’s a bloody brilliant time to buy the business because it is so cheap,” the insider says.

“Although the business has grown sales it has not grown profitability quickly enough, but it will in the medium term. Cowgill has timed this very well.”

Stopping Sports Direct

Indeed, although Footasylum has issued three profit warnings since it floated, its sales have consistently increased during that time, and were up 16% in the year-to-date to £200.8m according to the retailer’s most recent profit warning in January.

The same source suggests the possibility of the highly acquisitive Sports Direct tycoon Mike Ashley adding Footasylum to its eclectic collection would have also been a factor.

“In the back of [Cowgill’s] mind will have been the knowledge that he would be very cross if Footasylum fell into Sports Direct’s pocket,” he says.

centremk Footasylum 1

Footasylum says it views JD ‘as one of the few businesses which can fully understand its markets, aims and culture’

Although JD’s move to snap up a stake in Footasylum last month smacked of a defensive play to ward off a potential swoop by Ashley, the retailer said today that the acquisition has been motivated by prospective synergies between the two high street players.

JD Sports says Footasylum represents a “complementary” business, due to the fact that its proposition is “targeted at a slightly older consumer to JD’s existing offering”.

The City source agrees.

“Footasylum has a much deeper penetration of the 18-24 market, particularly for male shoppers,” he says.

“Whereas JD Sports is a much broader sports and fashion brand, Footasylum is more urban. I doubt a single pair of shoes bought in a Footasylum has ever been near a gym.”

Getting a stronger foothold in this “urban” sector of the market will give JD the chance to own young, fashion-conscious shoppers’ spend – from 12-year-olds with pocket money to splurge, through to university students with loans burning holes in their pockets.

This acquisition also gives JD Sports the opportunity to reignite Footasylum’s expansion plans, which have stalled since its float.

Brands in step

Whether Footasylum will follow through on its initial plan to expand its store estate from 60 at the time of floating to 150 is not clear, but GlobalData UK retail research director Patrick O’Brien believes there is plenty of gas left in the tank of the troubled footwear specialist.

“The deal seems a positive one for JD Sports, which has the clout to restart Footasylum’s expansion and use its sourcing scale to make it more efficient and we expect it to develop what is still a very marketable fascia,” he says.

One source says JD’s standing will also give Footasylum better sway with powerful brands like Nike, which will be a win-win for both retailers in terms of sales and customer engagement.

Footasylum says it views JD “as one of the few businesses which can fully understand Footasylum’s markets, aims and culture and which can, therefore, provide appropriate support and development opportunities to the Footasylum platform to assist Footasylum’s growth”.

The fact that Footasylum was borne from the same minds that conceived of JD Sports in the first place arguably means the two businesses are particularly well placed to keep in step with each other now that they are playing for the same team.