JD Sports Buys Shoe Palace For $681M; Shares Jump 5%

JD Sports Fashion Plc has announced that its wholly owned holding company in the US, Genesis Holdings Inc., has acquired a 100% stake in Shoe Palace for $681 million. Shares were up over 5% on the day at the time of writing.

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JD Sports (UK:JD) is looking to reinforce its position in the US market, and this most recent acquisition follows the 2018 procurement of Finish Line for over $400 million, the Financial Times reports.

Shoe Palace, established in 1993 by the Mersho family, has 167 stores across the US and is supported by a developing e-commerce platform. The company is operated by four brothers from the Mersho family, who each run a specific aspect of the business.

The acquisition will comprise of a cash component of $325 million and an equity component of $356 million, which grants the Mersho Brothers a 20% ownership stake in Genesis. Several put and call options which commence in 2025 have also been agreed upon to help facilitate future exit opportunities for the brothers.

JD Sports believes the acquisition of Shoe Palace will significantly increase its presence across the West Coast of the US, specifically with Hispanic and Latino consumers, who make up a large portion of Shoe Palace’s customer base.

“We are delighted to have completed the acquisition of Shoe Palace,” said Peter Cowgill, Executive Chairman of JD Sports. “We are confident that our combined fascias will provide us with the flexibility and expertise to fulfil our mutual ambition of becoming a prime customer destination for sneakers and lifestyle apparel in the United States.” (See UK:JD stock analysis on TipRanks)

RBC Capital analyst Richard Chamberlain recently reiterated his Hold rating on the stock with a price target of 825.00p (1% downside potential).

Consensus among analysts is a Moderate Buy based on 3 Buys and 2 Holds. The average price target of 881.25p implies a potential upside of around 6% over the next 12 months.