JD Sports Fashion Plc has re-acquired the Go Outdoors business in a GBP56.5m (US$70.7m) pre-pack deal after placing the specialist camping division into administration.
In a statement after the close of business yesterday (23 June), JD Sports said, as a consequence of the challenges caused by the spread of Covid-19, it is restructuring the Go Outdoors business and has appointed Michael Magnay and Daniel Butters of Deloitte as joint administrators.
“Following the onset of Covid-19, the future viability of the business has become materially uncertain with the enforced closure of Go’s stores on 23 March bringing into sharper focus the operating costs of the business,” the company said.
Specifically, it stated the terms of the property leases in Go were “extremely inflexible” with the stores having an average remaining period to lease expiry of approximately ten years with upwards only rent reviews, many of which it said are fixed at rates above inflation regardless of the market rent in the location.
“Such factors have resulted in the board deciding that it is not in the best interests of the wider group, and its shareholders, to provide continued financial support to Go in its existing form.”
JD Sports added it considered a number of strategic options for Go prior to the decision, including a potential sale, but ultimately determined that if Go was “fundamentally restructured” it has a future in the group.
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By GlobalData“Consequently, the group, via its newly incorporated subsidiary JD Newco 1 Limited, has subsequently re-acquired the business and substantially all of the assets of Go from its administrators for consideration of GBP56.5m, which returns to the group as partial repayment against its historic indebtedness,” it said.
At the point of administration, Go operated 67 standalone stores and a trading website. JD Sports has taken an initial 12-month licence such that it will continue to occupy all of the Go stores and intends to retain the majority of the business’ retail estate.
In addition, all pre-existing Go employees will transfer across to the new business with their previous terms and conditions of employment preserved.
“As a consequence of Covid-19, Go Outdoors was no longer viable as previously structured and would have absorbed capital at an unsustainable rate for the foreseeable future. Having investigated all available options for the business, we firmly believe that this restructuring will provide Go Outdoors with a platform from which it can progress whilst remaining a member of the group. Most importantly, we are pleased that it will protect the maximum number of jobs possible,” says JD Sports executive chairman, Peter Cowgill.
“We look forward to having positive conversations with landlords and agreeing new flexible lease contracts which reflect the widely reported challenges of reduced consumer footfall.”
Greg Lawless, analyst at Shore Capital, notes: “In our view, the company has moved relatively quickly to accelerate the restructuring of the Go Outdoors division, which it acquired for GBP112m back in 2016. As we have highlighted before the Go Outdoors division had been struggling in recent years and was loss-making. The Covid situation has accelerated the necessary restructuring programme. The pre-pack administration gives the parent company the opportunity to renegotiate lease terms and build a more sustainable cost base for the business. Taking the stores back on a 12-month licence gives JD some flexibility in their negotiations with property landlords.
“There have been a number of recent retail administrations including Debenhams, Cath Kidston, Laura Ashley, Quiz and All Saints with potentially further retail fallout to come.”
The news follows JD Sports’ filing of a notice to appoint administrators to Go yesterday morning.
