The British ‘King of Trainers’ Takes On the Land of Sneakers
Retailer JD Sports thinks it can conquer a depressed U.S. market with its sportswear-as-fashion concept
Americans’ waning demand for sneakers and sportswear has major players like Nike, Adidas and Foot Locker in a rut. British newcomer JD Sports JD 2.05%increase; green up pointing triangle Fashion sees the U.S. market’s weakness as the moment to pounce.
With a fashion-first approach that the company says sets it apart from its rivals, JD Sports is doubling down on American sports retail, opening hundreds of U.S. stores even as incumbents contend with disengaged consumers.
“The U.S. customer wanted something new. I think they’d gotten tired,” Chief Executive Régis Schultz said in an interview. “They have plenty of sneaker stores, which all look the same.”
JD Sports has bought a trio of U.S. retailers in recent years and is targeting more than 1,300 U.S. stores by 2028, up from about 900 today.
The retailer has established itself as Gen-Z’s go-to sportswear store in Britain thanks to its youthful vibe and exclusive drops of the latest sneakers. By Schultz’s admission, it sells much the same sneakers and branded clothing as other sports stores but has differentiated itself by marketing its products as youth fashion rather than performance sportswear.
JD Sports’ stores have a more contemporary, streetwise feel that is more akin to a fashion label than a typical sports shop. The music tends to be loud, the staff young, and the in-store imagery shows sneakers and apparel in a street context rather than being used to run or play sports.
It positions Nike and Adidas products alongside labels such as Juicy Couture, Hugo Boss and Polo Ralph Lauren, as well as its own brands that include Hoodrich and Supply & Demand.
The formula has resonated with younger consumers and big sports brands. Through an arrangement with Nike, for example, JD Sports secures exclusives or early releases of new sneakers and other products, which in turn generate buzz and drive sales.
“The music’s cooler, the staff are cooler,” said Jonathan Pritchard, an analyst at investment bank Peel Hunt, adding that JD Sports’ focus on casual wear over serious sports products has proved fruitful. “For every guy that runs past the pub, there are 10 that go into the pub,” he said.
Annual sales at the self-styled “Undisputed King of Trainers”—the British term for sneakers—more than tripled over five years to reach £10.1 billion, equivalent to $12.8 billion, in 2022. The company said sales for the financial year ended Feb. 3 likely grew about 8% over the year before.
That contrasts with its chief U.S. competitors. Foot Locker’s sales fell 10% in the first nine months of 2023 compared with the same period in 2022, having declined 2.3% the year before. At Dick’s Sporting Goods sales increased 3.8% in the first nine months of 2023, having fallen slightly in 2022.
Major athletic brands are also slowing. Nike recently downgraded its outlook to 1% sales growth for the financial year ending in May, citing cautious consumer spending. Adidas said it expects its 2023 revenue to have declined slightly, and Under Armour forecast a similar decline for its financial year ending in March.
While the sporting-goods market is weak globally, high inventory levels in the U.S. will make it especially tough for brands and retailers until at least the second half of 2024, according to analysts at HSBC.
JD Sports lowered its profits forecast in January, saying cautious consumer spending had led to more discounting than it anticipated. A warm end to 2023 also hurt sales of its cold-weather clothing, including its top-selling product, the Nike Tech Fleece.
Analysts said the new profit guidance, which prompted JD Sports’ shares to shed a quarter of their value, shouldn’t affect the company’s long-term ambitions. Its shares are now trading at roughly half the price of their peak in late 2021.
Though the U.S. market has recently been sluggish, retailers with edgier concepts are still doing well and that gives JD Sports scope to expand, said footwear industry analyst Matt Powell.
The British company’s youth-fashion identity is unique in the U.S., Powell said, contrasting with Foot Locker, which is “first and foremost a sneaker store,” and Dick’s Sporting Goods, which targets “younger and older customers—dads and their kids.”
With lifestyle a much bigger business than performance sports, brands have welcomed JD Sports as a means of accessing that side of the market at a time when their revenues are under pressure, Powell said. “Nike in particular has shown JD a lot of love,” he added.
Based in Bury in the north of England, JD Sports was founded in 1981 by John Wardle and David Makin. Its biggest shareholder is Pentland Group, a U.K. investment firm whose portfolio includes swimwear brand Speedo and outdoor label Berghaus, with a 55% stake.
The company operated 3,347 stores globally as of September. Its three big markets, the U.K., mainland Europe and the U.S., each constitute roughly a third of its business.
Last year Schultz, a 55-year-old Frenchman who joined JD Sports in 2022, outlined a five-year expansion plan focused on the U.S. and Europe. The strategy calls for the company to spend roughly $750 million a year opening around 350 stores annually.
JD Sports first entered the U.S. in 2018 when it acquired Indianapolis-based Finish Line for $560 million. Two years later it bought California sneaker chain Shoe Palace for $681 million. It agreed to pay $495 million for Baltimore-based lifestyle retailer DTLR in 2021.
The company said it would open three new JD Sports stores in the U.S. in February, in Toms River, N.J., Tacoma, Wash., and Hayward, Calif., having opened a dozen last month.
When opening new stores, the company looks for sites closer to clothing brands like Zara rather than near other sports stores. To raise awareness, it gives local influencers over $500 in store credit, in return for which they agree to post videos of their shopping sprees on social media.
JD Sports plans to open around 100 stores a year in the U.S. through 2028. Half of these stores will be new sites, with the rest converted from Finish Line locations. The company had initially planned to stick with the Finish Line name but its U.S. management team recommended switching to the British brand, Schultz said.
The company tested the name-change idea by updating some Finish Line stores and rebranding others as JD Sports. Stores operating as JD Sports performed better, reinforcing the company’s belief that the U.S. market was ripe for shake-up.
JD Sports plans to retain and grow the DTLR and Shoe Palace brands.
“The major brands fully support JD’s expansion in the U.S.,” Schultz said of its top athletic lines. A European partnership with Nike that links their loyalty programs is set to extend to the U.S. this year, as is a similar tie-up with Adidas.
Nike said it is increasingly focused on working with a small number of what it calls “top strategic partners,” which include JD Sports and Dick’s Sporting Goods.
One benefit: JD Sports can launch exclusive branded products. It carries more than 100 Nike exclusives. These are typically widely available products but come in colorways unique to the company, such as a newly released edition of the Nike Air Max 95 in black and white with blue trim.
A third-party retailer constantly needs to prove its worth to brands like Nike, Schultz said. “We give life to their products in a fashion way,” he said, “that’s why they value us.”