6th May 2020 08:07
(Alliance News) - JD Sports Fashion said Wednesday it "fundamentally disagrees" with the UK Competition & Markets Authority's decision to block its takeover of smaller peer Footasylum.
The FTSE 100-listed athleisure retailer will now be required to sell Footasylum, which it had agreed to buy for GBP90 million a year ago.
The CMA said its in-depth phase 2 investigation found that the merger "would leave shoppers worse off", with "fewer discounts or receiving lower quality customer service".
While the regulator accepted that the Covid-19 lockdown is significantly affecting UK retailers, it "has not found evidence that the impact of coronavirus would remove its competition concerns".
The CMA's conclusion in its final report "materially fails to take proper account of the dynamic and rapidly evolving competitive landscape in which we operate, as well as the long lasting - and likely permanent - impact that Covid-19 has had on our industry", countered JD Sports.
The CMA has failed to recognise "the reality of Footasylum's financial situation", it added.
Executive Chairman Peter Cowgill called the regulator's decision "absurd" given the current economic situation.
"In conclusion, we firmly believe that the CMA has failed to meet its objective of protecting consumer interests and today's decision will be detrimental for Footasylum, its customers, its 2,500 staff and the UK sports retail market as a whole. We are carefully considering whether to make an application to the Competition Appeal Tribunal to review this decision," said JD Sports.
It said any purchaser of Footasylum will be forced to cut central function jobs, particularly in the north west of England.
JD Sports shares were down 0.8% early Wednesday.
Here is what you need to know at the London market open:
----------
MARKETS
----------
FTSE 100: marginally higher at 5,851.86
----------
Hang Seng: up 1.5% at 24,225.61
Nikkei 225: Tokyo market closed for holiday.
DJIA: closed up 133.33 points, 0.6%, at 23,883.09
S&P 500: closed up 0.9% at 2,868.44
----------
GBP: soft at USD1.2433 (USD1.2453)
EUR: soft at USD1.0832 (USD1.0842)
Gold: up at USD1,703.68 per ounce (USD1,698.55)
Oil (Brent): up at USD30.85 a barrel (USD30.22)
(changes since previous London equities close)
----------
ECONOMICS AND GENERAL
----------
Wednesday's Key Economic Events still to come
Japan Constitution Memorial Day observed. Financial markets closed.
0930 BST UK CIPS-Markit Construction purchasing managers' index
0955 CEST Germany services PMI
1000 CEST EU eurozone services PMI
0700 EDT US MBA weekly mortgage applications survey
0815 EDT US ADP national employment report
1030 EDT US EIA weekly petroleum status report
----------
UK Prime Minister Boris Johnson will come under fresh criticism over his handling of the coronavirus crisis when he faces Keir Starmer for the first time during Prime Minister's Questions. The PM will return to the Commons for Westminster's set-piece event on Wednesday, a day after the UK's official death toll became the highest in Europe, PA reports. The Labour leader is expected to question Johnson on the government's response to the crisis and also pressure him to set out a detailed plan on easing the lockdown. It will be the first time Johnson has taken questions in Parliament since returning to Downing Street after his admission to hospital with Covid-19. Though more than 32,000 have died in the UK during the pandemic, the rate has been slowing and the PM is expected to unveil his "roadmap" of future steps later this week.
----------
A scientist whose research aided Johnson's decision to impose a lockdown has resigned from the Scientific Advisory Group for Emergencies after admitting an "error of judgment", PA reports. Professor Neil Ferguson said he regretted "undermining" the continued need for social distancing to tackle coronavirus after it was claimed he broke the rules. The Telegraph reported that he allowed a woman, said to be his "lover", to visit him at home in London on at least two occasions during the lockdown, on March 30 and April 8. Ferguson's research with Imperial College London colleagues warned that 250,000 people could die in the UK without drastic action before the prime minister imposed the restrictions.
----------
Activity in Ireland's services sector dropped to a historic low in April, data from IHS Markit showed on Wednesday, as the country's economy all but shut down in a bid to halt the spread of Covid-19. The Business Activity Index "continued its historic descent in April" to 13.9, well below the 50.0 no change mark and a decline from 32.5 in March. The index had read a positive 59.9 as recently as February. "The month-on-month decrease in the Index, at 18.6 points, was smaller than March's 27.4-point plunge, but still far exceeded anything else in the series to date," IHS Markit noted. The April reading was the lowest in the survey's 20-year history.
----------
The European Commission is due to unveil its forecast for the post-lockdown economy on Wednesday, with officials warning in advance of a surge in unemployment and a major hit for economic output, dpa reports. Sobering figures on joblessness, inflation and first-quarter gross domestic product were posted last week, but the spring economic forecast is to lay out more clearly the scale of the damage the EU's executive branch anticipates. EU Economy Commissioner Paolo Gentiloni is to present the outlook, which typically includes a country-by-country breakdown of anticipated GDP growth for the coming two years. The European Central Bank has already warned of a downturn of between 5% and 12% for the region.
----------
BROKER RATING CHANGES
----------
JEFFERIES RAISES HISCOX TO 'BUY' ('HOLD') - TARGET 850 (1325) PENCE
----------
JPMORGAN CUTS HISCOX PRICE TARGET TO 860 (1225) PENCE - 'NEUTRAL'
----------
HSBC RAISES COATS GROUP TO 'BUY' ('REDUCE') - TARGET 62 (69) PENCE
----------
COMPANIES - FTSE 100
----------
Online grocer Ocado said retail revenue in the second quarter to date is up 40% on a year ago after 10% growth in the first quarter. However, it has suspended its retail guidance for the current financial year until it can get some visibility on the length of the Covid-19 crisis and the longer-term impact on customers' disposable income. The number of items per basket appears to have levelled off. but still remains high, as "more normal" shopping behaviours have returned. To support the "unprecedented" level of business Ocado Retail is doing, the firm has ramped up capacity significantly. "Although we expect the long-term shift towards on-line grocery to accelerate post-crisis, there remain many uncertainties about the length of the crisis, customer reaction immediately post and its long term impact on customers' disposable incomes and so we have suspended our guidance for Retail Revenue for FY20 until we can accurately forecast likely outcomes," said Ocado. In its solutions business, Ocado said it has managed to deliver the first international customer fulfilment centres to international partners Groupe Casino and Sobeys.
----------
ITV said sales were down in the first quarter as Covid-19 put a halt on ITV Studios productions. Total external revenue was down 7% in the first quarter to GBP694 million, with ITV Studios revenue down 11% and Broadcast revenue up 2%. ITV total advertising revenue was up 2%. Since mid-March ITV Studios has had to pause the majority of its productions due to Covid-19, it said, and there has been a "significant impact" on advertising demand across most categories. More positively, ITV Studios Global Distribution is seeing good demand for library content internationally and its BritBox streaming service is seeing "good growth". Given the uncertain outlook, ITV said it will not be giving guidance for the second quarter or for the remainder of the year.
----------
Smith & Nephew said first quarter sales were down, with the decline deepening in April, due to a suspension of elective procedures. First quarter revenue of USD1.13 billion was down 7.6% on a year ago on an underlying basis, with reported growth down 5.7%. The performance of all three global franchises was held by back Covid-19, it said. April revenue was down around 47% on an underlying basis, reflecting the suspension of elective procedures in most markets, which was somewhat offset by improving trading in China. Elective surgeries are starting to return in some markets, though the pace and extent is "varied and uncertain" across countries. Second quarter revenue and the trading margin for the first half is expected to be "substantially down" on a year ago, as previously announced, and 2020 guidance remains withdrawn due to continuing Covid-19 uncertainty.
----------
COMPANIES - INTERNATIONAL
----------
An Amazon.com worker at a warehouse in New York where employees called for greater coronavirus safety measures has died of Covid-19, the e-commerce giant said. Amazon has become a lifeline for consumers facing lockdowns and restrictions around the world, and the company is in the process of adding some 175,000 new employees to cope with surging demand. But the company has also faced protests from warehouse workers and activists who claim Amazon has failed to do enough to keep them safe. More than a dozen demonstrators, including employees and activists, protested outside the Staten Island warehouse last week.
----------
Wednesday's Shareholder Meetings
Mpac Group
Clarkson
Ocado Group
GlaxoSmithKline
EMIS Group
Curzon Energy
Tiziana Life Sciences
Renewables Infrastructure Group
Ascential
Standard Chartered
TT Electronics
----------
By Tom Waite; [email protected]
Copyright 2020 Alliance News Limited. All Rights Reserved.
Related Shares:
HiscoxCoatsJD Sports