As Frasers sets out to build its presence in Europe, it has struck a deal to acquire SportScheck, one of the leading sports retailers in Germany. Retail Week examines the significance of the move and finds out how Frasers’ overseas sports division compares to rival JD Sports.
Frasers Group chief executive Michael Murray says the purchase is “a big step in our journey to becoming the number one sports retailer in EMEA” as the group leverages brand partnerships with global giants Adidas and Nike to grow internationally.
Why is the deal significant?
Last year, Frasers’ international retail sales climbed 15.2% to £1bn, driven by the acquisition of Danish retailer Sportmaster and a strong performance from the group’s Malaysian business.
Core business Sports Direct in the UK delivered a standout performance accounting for £3bn in sales during the same period and Nike referred to the retailer as one of its “top-three global strategic partners”. Frasers, which also owns department stores, sees an opportunity to increasingly replicate its sports success overseas. The SportScheck acquisition will help the group build momentum.
SportScheck brings a well-established store estate in major German cities and a customer base of 13 million.
In a large market such as Germany, SportScheck’s sales of €350m (£303m) give Frasers a platform to build on as well as put its elevation strategy into effect on a global level.
That strategy has taken centre stage in its growth in the UK over the last year and is based upon investing in store formats to draw in more affluent customers, digital capabilities and strengthened brand relationships.
“SportScheck’s €350m in sales gives Frasers a platform to build on in Germany – but Germany is one of the toughest retail markets in Europe”
Kate Calvert, Investec
Shore Capital analyst Eleonora Dani says: “There are two things that stand out from this deal. First is that as a key geography in the sports market, Germany offers a substantial growth opportunity for Frasers. The addition of SportScheck, a well-established brand in Germany with a loyal customer base, aligns with Frasers’ expansion ambitions.
“Furthermore, the endorsement and support of major global brands such as Adidas and Nike are indicative of the momentum generated by Michael Murray behind his elevation strategy. This strategy focuses on digital innovation and investment in the group’s stores, and its success is reflected in the strong performance of Frasers’ shares, which have surged by more than a quarter over the past year.”
As significant as the German market is for sports retailers, it is highly competitive. Investec analyst Kate Calvert says Frasers may need to put more work in before it starts to reap the benefits.
Calvert says: “SportScheck’s €350m in sales gives Frasers a platform to build on in Germany – but Germany is one of the toughest retail markets in Europe. It’s a start but Frasers have a long way to go to becoming the number one sports retailer in EMEA. SportScheck has had multiple owners in the past and Frasers will need to invest to achieve an elevated store format.”
How does Frasers compare with JD Sports internationally?
JD Sports has around 80 stores in Germany and scale across other main European markets. It has ramped up expansion across Europe in recent months with the acquisition of French sportswear retailer Courir.
The retailer also bought out minority shareholders to have full ownership of Poland-based footwear and clothing company Marketing Investment Group (MIG) and Iberian Sports Retail Group (ISRG).
As JD puts its long-term global development strategy into action, it is well placed with Courir’s 283 stores in France; a further 320 across Europe; ISRG’s 460 stores in Iberia, Spain, Portugal and the Netherlands; and MIG’s strong foothold in Central and Eastern Europe.
In the six months to July 2023, JD Sports’ sales from its international business across North America, Europe and the Asia Pacific amounted to £3.1bn. JD Sports is well-positioned as an international retailer with sales equally split across its portfolio in the UK, North America and Europe, whereas the mjority of Frasers’ comes from its business in the UK.
“JD is focused on athleisure wear and fashion, while Sports Direct is more about sporting goods, performance wear and functional sportswear. They are two very different strategies”
Eleonora Dani, Shore Capital
However, there are big differences between the two retailers, which means there is space internationally for both.
Dani says: “JD Sports and Sports Direct cater to two very different segments of the market. JD is more focused on athleisure wear and fashion, while Sports Direct is more about sporting goods, performance wear and functional sportswear. They are two very different strategies.”
JD also has strong relationships with brands such as Adidas and Nike, which has been key to its success, and the likelihood is the big brands will be happy to see both it and Frasers do well.
“The support Frasers has been getting from Nike and Adidas has been in the performance wear and sporting goods category, so there is very little overlap between the two,” says Dani.
The rivalry between JD and Sports Direct may run as deep as ever and increasingly be fought overseas as well as at home. Frasers has further to go to mirror JD’s international scale but there are reasons to belive both will succeed.
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