LONDON — JD Sports has helped itself to another slice of American streetwear, buying the San Jose, Calif.-based Shoe Palace, which sells brands including Nike, Champion and Fila.
JD Sports said it’s paying $325 million for the U.S. retailer, of which $100 million has been deferred and will be paid on various dates over the next 12 months. In addition, it is giving the founding Mersho family equity equivalent to 20 percent of JD’s U.S. operations, worth $356 million.
Shoe Palace was established in 1993 by the Mersho family and currently has 167 stores, more than half of which are located in California, although it also an e-commerce platform and an established retail presence in Texas, Nevada, Arizona, Florida, Colorado, New Mexico and Hawaii.
It is operated by four Mersho brothers, who head up the various operating functions. In the year to Dec. 31, 2019, Shoe Palace generated revenues of $435 million.
In the U.S., JD Sports already owns sports retailers Finish Line and JD, and has recently opened a flagship for the latter in New York City’s Times Square. It broke into the U.S. market two years ago with the purchase of Finish Line for $558 million.
JD said the acquisition will “significantly increase” its presence on the West Coast “and strengthen its connection with Hispanic and Latino consumers, who represent a significant proportion of Shoe Palace’s customer base.”
The Mersho Brothers will continue to manage the Shoe Palace business, although the intention is that, from 2021, the JD Finish Line and Shoe Palace teams “will begin to share ideas and best practices as we look to create an unrivaled proposition which connects with all relevant consumers,” JD said.
In the year ended Dec. 31, 2019, Shoe Palace posted profit before tax of $52 million. Gross assets in the Shoe Palace audited balance sheet were $197 million, according to JD.
Peter Cowgill, executive chairman of JD Sports Fashion, described the Shoe Palace team as “ambitious, with great energy. They pride themselves on their consumer connection and we welcome them to the group. We are confident that our combined fascias will provide us with the flexibility and expertise to fulfill our mutual ambition of becoming a prime customer destination for sneakers and lifestyle apparel in the U.S.”
George Mersho, chief executive officer of Shoe Palace, said the sale would help build on the legacy of the family business. “Through this combination with JD and Finish Line in the U.S., we have gained a strong global partner. We look forward to being part of the JD family and continuing to serve our customers and communities for many years to come.”
JD Sports has had a challenging year in the U.K. from an acquisitions perspective. The sporting goods and streetwear giant was set to buy fellow British retailer Footasylum when, in an unexpected move, the U.K. Competition and Markets Authority blocked the deal, saying it would lessen competition and be bad for the end consumer.
JD Sports remains locked in a battle with the U.K. competition regulator, and appeals to overturn the CMA’s decision are ongoing.
In 2019, JD Sports acquired the British label Pretty Green out of administration. Pretty Green was founded by the Oasis frontman Liam Gallagher 11 years ago and had stood as a symbol of Cool Britannia, after it fell into administrators’ hands.
One of JD’s rivals, Mike Ashley’s Frasers Group, is also on a major acquisitions spree, and has expressed interest in companies including Debenhams and Arcadia. As reported Frasers has until Dec. 17 to make a full bid for Mulberry, or walk away. It has a 29.7 percent stake in the company, which is majority owned by Christina Ong.