JD Sports: Will $1bn Hibbett acquisition help realise its American dream?

JD Sports chief executive Régis Schultz called the deal “a very important transaction for our strategic and financial development” as it strengthens the brand’s presence in North America and also provides a stronger platform for the rollout of the JD fascia in the US. 

Jonathan Pritchard, an analyst at Peel Hunt, said the acquisition fits in “immaculately” with JD’s wider strategy. He said it was a “good strategic, geographic and cultural fit” for the retailer as it further enhances its reputation as a global sportswear brand.

Retail Week takes a look at JD Sports’ latest acquisition and what impact it will have on achieving its American dream.

What is Hibbett?

Headquartered in Birmingham, Alabama, sportswear retailer Hibbett began trading more than 75 years ago and has two main fascias in the US – Hibbett and City Gear, which it acquired in 2019. 

As of February 2024, Hibbett trades out of 1,169 stores across 36 states in the US. JD said 80% of these store locations are neighbourhood “street” stores and 20% are in malls. 

In the 53 weeks to February 3, 2024, Hibbett had net sales of $1.7bn (£1.38bn), EBITDA of $186m (£150.7m), profit before tax of $131.6m (£106.2m) and gross assets of $909.2m (£736.8m). 

Hibbett’s sales mix is in line with JD in the US with apparel accounting for just under 20% of sales, which is higher than for the average US sports retailer.

The business also has strong partnerships with brands including Adidas and Nike, with the latter making up more than half of its total sales. This is in line with the average sales contribution of Nike for a US sportswear retailer.

Alongside its relationship with brands, Pritchard says Hibbett will give JD Sports a “strong grasp over logistics and supply chain in the region and can grow faster as a combined entity rather than on its own in the long term”.

Hibbett has a large distribution centre in Alabama and a strong foothold in the southeastern US, with its largest presence in Georgia, Texas and Alabama, where currently JD’s presence is small – a fact that Schultz highlighted.

“Hibbett’s footprint is highly complementary, adding a stronger presence in communities across the southeastern US, where we currently have a limited presence,” Schultz said. 

JD expects the acquisition to be accretive in the first full year of ownership and expects annual cost synergies of at least $25m (£20.07m) over the medium term. 

On a pro forma basis, JD Sports and Hibbett’s combined revenues in North America would be approximately £4.7bn, which would increase JD’s group sales from 32% to 40% in the world’s largest sportswear market.

The US market 

JD Sports said the acquisition marks an “important strategic milestone” as it gears up towards expanding into what Schultz calls the “biggest and most attractive sportswear market” in the world. 

Investec analyst Kate Calvert said the deal enhances JD’s position as one of the leading sportswear retailers in the US. 

“The acquisition gives JD more scale in the US. They’re already one of the leading players but this will give them increasing scale and fits in with their complementary brand strategy. [Hibbett] is more the neighbourhood format, rather than JD, which has a larger presence in malls. Geographically, there’s very little overlap for the business in the US,” she said.

“The US is the largest athleisure market in the world and JD’s growth strategy is effectively being driven by increasing market share in the States, and also within Europe. The UK is a mature market for JD Sports, so as a retailer selling third-party brands, it is a logical move to expand in the largest market if you want to be a global player.” 

The US sportswear market is forecast to grow 2.6% in 2024 to reach $160.1bn, according to research by GlobalData. 

In 2023, JD Sports held a 3.1% share of the US sportswear market, which is forecast to grow following the Hibbett acquisition, with combined revenues in North America of £4.7bn.  

This will bring JD Sports on par with US sportswear giant Footlocker, which racked up sales of $5.86bn (£4.73bn) in North America in the full year ending March 2024.

As JD sets out to achieve its target of global domination through value-creating acquisitions and leveraging strong brand partnerships, it must navigate short-term headwinds amid a weak consumer backdrop in the US and UK before it can reap the long-term benefits.