Will JD Sports Be Impacted By the Dick’s Sporting Goods, Foot Locker Deal?

The Dick’s Sporting Goods acquisition of Foot Locker could be a headwind for JD Sports (LON: JD.), according to analysts at Bernstein, who labelled the development a “net negative” for the UK-based retailer.

In a recent note to clients, Bernstein identified a number of key concerns, stating that JD was a strong third player in the US and had been gaining share, but will now be a weak second player. 

Analysts also warned that the increased investment and expertise going into competitors could increase competition in lifestyle, a core focus for the brand.

Access to top brands may also be threatened. The firm told investors in its note that JD Sports may get less access to the brands, as a larger merged entity could command greater influence with suppliers.

Further pressure may come from overseas. Bernstein said the deal “could drive a wave of international expansion pressuring on JD’s business in Europe,” an area where JD has historically performed well.

The firm also highlighted that JD Sports has missed out on mega consolidation and was not the target, stating that a question should be asked, given the current valuation levels.

Still, Bernstein did point to potential positives, including bid speculation on JD Sports, suggesting a private equity buyout could be on the table. In addition, store disposals could be attractive for JD to expand at a faster pace in the US.