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JD Sports restructures Go Outdoors unit
23rd Jun 2020 18:47
(Sharecast News) - JD Sports has launched a restructuring of its Go Outdoors unit in response to the "material uncertainty" around its viability in the wake of the Covid-19 pandemic.
In particular, the sports retailer cited the business's ongoing operating costs resulting from "extremely inflexible" long-term leases on its properties, what with upwards only rent reviews despite the enforced closure of the shops.
The company also complained of the disconnect that existed between the rates on those leases, many of which it said were fixed above inflation with no regard to market rent at the location.
Hence, JD Sports board had decided it was no longer in the firm's best interest to continue providing financial support to Go in its existing form.
After putting the unit into administration, it had subsequently repurchased it and all of its assets through a subsidiary, JD Newco 1 Lmtd., for £56.5m with the funds received to be used to deleverage the group.
Michael Magnay and Daniel Butters of Deloitte LLP were chosen as joint administrators to manage the restructuring of the unit.
JD Sports also said that it had examined a number of other possible options before taking the decision and finally judged that "if fundamentally restructured, Go has a future in the Group".
The company's intention was to continue occupying all of Go's stores and "subject to realism and flexibility in the future leases" it would retain most of Go's retail , once the current 12-month leases expired, while protecting as many jobs as possible.
"It is also the Group's intention to honour the principal historic liabilities of the Go business including branded stock suppliers, HMRC liabilities on taxation, customer returns, and gift cards," the company added.
"Further, all pre-existing Go employees will transfer across to the new business with their previous terms and conditions of employment preserved."
In particular, the sports retailer cited the business's ongoing operating costs resulting from "extremely inflexible" long-term leases on its properties, what with upwards only rent reviews despite the enforced closure of the shops.
The company also complained of the disconnect that existed between the rates on those leases, many of which it said were fixed above inflation with no regard to market rent at the location.
Hence, JD Sports board had decided it was no longer in the firm's best interest to continue providing financial support to Go in its existing form.
After putting the unit into administration, it had subsequently repurchased it and all of its assets through a subsidiary, JD Newco 1 Lmtd., for £56.5m with the funds received to be used to deleverage the group.
Michael Magnay and Daniel Butters of Deloitte LLP were chosen as joint administrators to manage the restructuring of the unit.
JD Sports also said that it had examined a number of other possible options before taking the decision and finally judged that "if fundamentally restructured, Go has a future in the Group".
The company's intention was to continue occupying all of Go's stores and "subject to realism and flexibility in the future leases" it would retain most of Go's retail , once the current 12-month leases expired, while protecting as many jobs as possible.
"It is also the Group's intention to honour the principal historic liabilities of the Go business including branded stock suppliers, HMRC liabilities on taxation, customer returns, and gift cards," the company added.
"Further, all pre-existing Go employees will transfer across to the new business with their previous terms and conditions of employment preserved."