JD Sports buys Shoe Palace for $325 million to expand U.S. footprint

FILE PHOTO: People pass a JD Sports store in London

(Reuters) -Britain’s biggest sportswear retailer JD Sports said on Tuesday it had bought retailer Shoe Palace for $325 million in a move that would expand its footprint in the U.S. West Coast, sending the company’s shares 5% higher.

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

Shoe Palace is operated by four brothers from the Mersho family who will be issued equity in JD’s U.S. unit, the British company said, adding the brothers would own 20% of the enlarged group in the United States.

The value of the issued equity is about $356 million, JD said.

The owner of Footpatrol and Cloggs said the brothers would continue to manage Shoe Palace, but from next year the JD Finish Line and Shoe Palace teams would “begin to share ideas and best practices”.

Founded in 1993, California-based Shoe Palace has 167 stores in the United States, and generated a pretax profit of $52 million last year on revenue of $435 million.

“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.

JD said the deal was being funded through its existing cash reserves and bank facilities.

(Reporting by Aniruddha Ghosh in Bengaluru; Editing by Aditya Soni)