JD Sports is mulling the purchase of specialist retailer Go Outdoors, which is set to be sold this year. But how will it bolster the Bury-headquartered retailer’s offer?
JD Sports, which currently owns outdoors retailers Blacks and Millets, is understood to be eyeing Go Outdoors to expand its offer.
The outdoors retailer, which reported a 20% boost in sales between 2014 and 2015, has embarked on a £10m expansion plan and has been put up for sale by its private equity owners.
We take a closer look at Go Outdoors, analysing the strengths, weaknesses, opportunities and threats of its proposition as bidders including JD Sports circle the retailer.
Strengths
Category killer status
Go Outdoors has successfully exploited the gap in the market for a large-scale outdoor pursuits operator catering for a wide range of activities under one roof.
In less than a decade it has become the UK’s largest outdoor specialist retailer.
Its superstores have become destination outlets, with customers prepared to drive for up to an hour to shop in them and the company is rapidly moving towards category killer status.
Value-led approach and strong own label offer
The retailer’s value-for-money approach, which includes the use of a discount loyalty card, is still in tune with the current value-oriented consumer mindset, but the ‘good, better, best’ pricing policy is important in allowing customers to trade up should they wish to.
Go Outdoors was quick to establish an extensive own-label offering and this now accounts for just over a third of overall sales, generating higher margins than third-party brands.
Weaknesses
Modest profit levels
Profits have come under pressure from on-going investment in the business, including very rapid physical expansion up to 2011/12 when the company was substantially loss-making.
While profitability has improved in recent years, its pre-tax margins remain relatively low.
Low sales densities
Sales densities have continued to decline despite the slowdown in the store opening programme and, at just under £100/sq ft in 2014/15, these are now at a low level, although not necessarily out of line with retailers that operate large-scale outlets in retail parks.
The rising proportion of sales generated online will also be impacting these levels.
Opportunities
Multichannel development
Network targets have been scaled back significantly and full multichannel development should enable the group to grow much more profitably.
Online sales still only account for an estimated 7% of total sales, so there is clearly scope to raise this much further.
Destination stores
The large number of services and activities offered within the stores (climbing walls, cycle servicing, etc) means that customers continue to have a reason to visit them.
This will become an increasingly important edge to have in the digital age.
Threats
Spectre of Sports Direct
Dominating the more generalist sports sector, Sports Direct is known to be keeping a fairly watchful eye on the outdoor pursuits sub-sector, and the spectre of the acquisitive giant does cast a potential shadow over the market.
The retailer operates in a very competitive sector, with competition coming from a number of dynamic specialists, non-specialists and online retailers.
- This is an excerpt from Go Outdoor’s profile on Retail Week Prospect, an intelligence service offering insight and analysis on the UK’s most innovative retailers
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