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JD Sports shares slip on reports of Debenhams deal talks

Published: 09:35 24 Nov 2020 GMT

JD Sports Fashion PLC -

JD Sports Fashion PLC (LON:JD.) shares fell after reports emerged that is in talks about an acquisition of troubled department store group Debenhams.

The FTSE 100 group, which already owns more than 2,300 stores around the world including the UK chains Size?, Millets, Go Outdoors and Blacks, plus Finish Line in the US, has been in exclusive talks to buy all 124 Debenhams shops, the Times newspaper reported.

READ: Debenhams wind-up plans put acquisitive rivals and landlords on alert

JD’s talks follow department store chain’s reported recent rejection of a bid from Frasers Group PLC (LON:FRAS) that was speculated to be in the region of £150mln.

After twice entering administration in recent years, Debenhams has managed to limp on despite unprecedented difficulties in 2020, with recent months seeing management announce 2,500 job cuts and a plan to reduce the store footprint to 100 stores, with a September update revealing trading was going better than expected, with £95mln of cash in the bank.

There could also be around £500mln of stock in the company ahead of peak season trading, broker Shore Capital suggested.

“It is our understanding that many of the leases have been recently renegotiated, giving the retailer further flexibility against a tough 2020 trading environment,” ShoreCap analysts said in a note on Tuesday.

They said Debenhams, which not that long ago had sales of £2.5bn and delivered profits of £100m per annum, remains the market leader in ‘premium beauty’ in the UK and owns a number of own-label clothing brands including Maine and Mantaray, which are sizeable businesses in their own right, while its online business sits around number-10 in the UK.

“In our view, it is appropriate that JD looks at opportunistic corporate developments in the wider UK retail market. There could be significant synergies over time to be harvested e.g. property costs by relocating standalone JD Sports inside the large Debenhams store footprint in prime city centres.”

Shares in JD, which recently recovered back to parity for the year after its success in overturning a competition ruling, were down 3% to 786.2p in early trading, having .

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