Footasylum PLC (LON:FOOT) shares sprinted into action on Monday after rival tracksuits and trainers retailer JD Sports PLC (LON:JD.) bought an 8.3% stake and said it was prepared to add to that holding.
JD has taken advantage of the dive in Footasylum’s value over the past year and has paid around £2.5mln for its stake, which it has told the market is “for investment purposes”.
READ: Footasylum gets another kicking after latest profit warning
The FTSE 250 company added that it is prepared to take its stake up to 29.9%, although it ruled out a takeover bid.
News of JD’s interest put some energy back into the Footasylum share price, which jumped 76% to 51p on Monday morning. JD shares were up too, climbing 2.4% to 460.2p.
JD founders set up Footasylum
Should JD make good on its aim to build a sizeable stake in Footasylum, it would represent a homecoming-of-sorts for the two athleisure retailers.
JD was founded by former Manchester City chairman John Wardle and his business partner David Makin back in the eighties.
They pocketed £45mln after selling out of the retailer – which still bears their first initials – back in 2005, and Makin used his chunk of the money to set up Footasylum. Three years later he was joined by Wardle.
Their latest venture is chaired by ex-JD boss Barry Brown and headed up by Makin’s daughter, Clare Nesbitt. His son, Tom, is the marketing and e-commerce director.
Along with their sister, Amy, the Makin children own 57% of Footasylum shares, having trousered just shy of £25mln from the troubled retailer’s initial public offering in November 2017.
Back then, Nesbitt and her team were predicting furious growth driven by dozens of new store openings, but things haven’t gone to plan since then.
Teething problems
Analysts think its stores are too small, while they have also criticised the buying team, who they reckon have made the “odd mis-selection” with some of their recent product lines.
That left stores filled with unwanted goods, even over the key Christmas period, forcing bosses to slash prices which in turn crucified margins.
As a result, the company has issued a string of profit warnings, sending its shares plunging from their 164p IPO price to below 30p, although they have picked up somewhat today.
JD, by contrast, has enjoyed solid growth during what has been less-than-optimal conditions for UK retailers.