8th Jul 2022 12:09
(Alliance News) - JD Sports Fashion PLC has been scrutinised at a corporate governance level recently, though market commentators on Friday hailed the appointment of Andy Higginson as chair as a step in the right direction.
Higginson brings with him strong executive experience in consumer-facing companies. He was formerly chair of supermarket chain Wm Morrison Supermarkets PLC, from 2015 until its private equity takeover in November. He is also currently a senior independent director at Paddy Power owner Flutter Entertainment PLC.
Analysts at Peel Hunt said Higginson, alongside Terry Leahy, was part of a team that "took Tesco to greatness in the 1990/2000s".
"Andrew's CV is extremely impressive," Peel Hunt analyst Jonathan Pritchard commented.
"[JD Sports] shares have been under a cloud but one of the reasons for that has been boardroom uncertainty; the fact that one of the vacant roles has been filled by such a high quality candidate should be received well."
Shore Capital Markets also hailed the appointment.
"We see this as a positive evolution while waiting for the formal CEO confirmation, expected over the summer. Andy is a respected and proven retailer and chair with over 28 years of executive and non-executive experience," analysts at the broker said.
In May, Peter Cowgill left as executive chair with immediate effect. JD Sports in July 2021 had bowed to shareholder pressure over its corporate governance, agreeing to split its controversial joint role of chair and chief executive officer.
Cowgill had served as both executive chair and CEO of JD Sports, since taking up the latter position in 2014.
AJ Bell analyst Russ Mould commented: "Given how JD's share price has slumped in recent months amid market worries about consumer spending and the surprise departure of Cowgill, Higginson will be under pressure from day one to try and improve the company's reputation from a boardroom perspective, and to find the right person to lead the business."
Shares in JD Sports were 1.6% higher at 124.15 pence each on Friday afternoon in London. The stock has fallen by a third over the past 12 months, however.
Corporate governance concerns began to cast a dark cloud on the firm, particularly the dual role of chair and CEO.
In addition, JD Sports has faced regulatory scrutiny.
Back in February, JD Sports and one-time acquisition target Footasylum were fined nearly GBP4.7 million for collective breaches of an interim order issued by the UK's Competition & Markets Authority during an in-depth phase two merger investigation.
JD Sports acquired Footasylum back in March 2019 for GBP90.1 million, but the deal was subject to CMA investigations and orders related to the buy. In November last year, the CMA ordered JD Sports to sell the footwear seller to address concerns about competition and to protect consumers.
The CMA imposed an interim order in May 2021 to stop the companies from "further integration" and ensure they remained competitors during a probe of the tie-up.
The order required the CMA to be immediately notified if any information was exchanged.
The CMA said JD Sports and Footasylum had "severely deficient safeguards in place - so much so that they created an environment where information exchanges were almost inevitable". The CMA alleged two meetings took place in July and August of 2021, where the two chief executive officers, Barry Brown of Footasylum and Cowgill of JD, exchanged commercially sensitive information - on topics such as contracts, planned store closures, stock issues and financial performance. The CMA said it was not notified.
JD in response said any exchange of information was "limited" and "inadvertent" but conceded it was not reported to the CMA.
By Eric Cunha; [email protected]
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