The move from major sportswear brands towards building out their direct-to-consumer (DTC) channels should be viewed as an opportunity for the likes of JD Sports Fashion PLC (LON:JD.), says Berenberg.
Nike, Adidas and co have traditionally sold most of their products through third-party stores and websites, but they are increasingly devoting more time and effort towards leveraging their own channels.
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“Their DTC ambitions are clearly a threat – but not for everyone,” wrote Berenberg analysts in a note to clients on Monday.
They point out that JD is seen as a ‘key strategic retailer’ by brands, meaning it should actually command a greater share of the best product allocations going forward.
Instead, it will be the likes of Sports Direct International PLC (LON:SPD) and other “lower-quality wholesale partners” that will suffer as companies look to position their goods with more premium retailers.
Threat from Amazon
That isn’t the only issue for Sports Direct: Berenberg adds that Mike Ashley’s firm has the “weakest online proposition”, leaving it most at risk to the threat posed by Amazon.com Inc (NASDAQ:AMZN).
“The online giant is already the second-most visited UK sports retailer and has forged encouraging partnerships with Nike and Adidas in the US. Amazon is already better than Sports Direct on product range, price and convenience.”
Ashley and his team have been more interested in reviving in-store sales and the billionaire has often described his plans to turn Sports Direct into the ‘Selfridges of Sport’.
The analysts claim this ambition “lacks credibility”, while they also argue that even more money needs to be spent on the store estate for it to catch up with its peers.
JD a ‘buy’, Sports Direct a ‘sell’
In short: “JD is a best-in-class sports retailer and key global strategic partner to brands, capturing a compelling international growth opportunity.
“Sports Direct, however, is beset by structural headwinds, while growing competitive threats will weigh on its positioning. It also faces corporate governance risks and, in our view, its strategy lacks clarity and credibility.”
Berenberg has kicked off its coverage of JD with a ‘buy’ recommendation and 530p price target, whereas the bank has stuck a ‘sell’ rating on Sports Direct, along with a 270p price target.
JD shares were broadly flat at 431p on Monday morning, while Sports Direct slumped almost 7% to 302.6p.