21st Sep 2022 14:46
(Alliance News) - JD Sports Fashion PLC on Wednesday agreed terms for former executive chair and chief executive Peter Cowgill to depart from the business, removing the "potential distraction" of having a "hugely influential predecessor" at loggerheads with the business, analysts said.
Russ Mould, investment director at AJ Bell dubbed the agreement "a total pay-off" to Cowgill and "heavy price" for ensuring he doesn't take his skills to any of JD's rivals, or poach any of its key staff.
The sportswear retailer agreed that Cowgill will be paid his full salary, benefits and bonus up to May 25, when he had stepped down, in addition to honouring Cowgill's contractual notice period of twelve months.
The board also reached two arrangements with Cowgill which it said were "in the best interests of the business", despite costing the company a total of GBP5.5 million.
The first is a set of restrictive covenants for a two-year period, replacing more limited provisions that were in Cowgill's 18-year-old contract. He will receive GBP3.5 million over two years, under the agreement that he will not work for or advise any of JD Sports's competitors.
The second is a consultancy agreement for an expected period of three years for which Cowgill will be paid GBP2 million, phased over the life of the agreement.
Mould said "extraordinary steps" were in order to prevent "lasting damage" from Cowgill's "acrimonious" departure following the blighted acquisition of smaller rival Footasylum.
"There can't be too many deals with such an outsized impact relative to their scale as JD Sports' ill-fated acquisition of smaller rival Footasylum," Mould explained.
"Not only was JD eventually forced to sell the business by the competition authorities, but revelations around the way the transaction took place were a key catalyst in the departure of its boss Peter Cowgill – a central figure in the sportswear chain's rise."
Cowgill had served as both executive chair and CEO of JD Sports, since taking up the latter position in 2014.
Back in July of last year, JD Sports had bowed to shareholder pressure over its corporate governance, agreeing to split the chair and CEO roles.
Last month, JD Sports named Regis Schultz as its new chief executive, joining from Al-Futtaim Group, a Dubai-based conglomerate where Schultz was president of retail.
Analysts at Shore Capital were optimistic about the change of guard, saying they see the appointments as the "culmination of the strengthening of JD's board" and praised the additional set of skills that came with it.
Mould argued successor Schultz has a hard act to follow, particularly in "less than advantageous circumstances".
"JD will hope this draws a line under the whole episode and frees up management to tackle what could be a hugely challenging period for even the best retail names," the AJ Bell analyst said.
JD will announce its interim results for the six months to July 30 on September 22.
Analysts at Shore Capital said the results will be the "first true read" of the retailer's underlying performance. The broker expects revenue growth of 6% for the year as a whole and set its pretax profit expectation "conservatively" at GBP947 million in order to reflect the cost pressures facing the whole sector.
In the year ended January 29 - JD Sports' last full-year results - the company posted revenue of GBP8.56 billion and pretax profit of GBP654.7 million, or GBP947.2 million before exceptional items.
Shares in JD Sports were down 0.9% at 121.75 pence on Wednesday afternoon in London. Over the past year, the stock has fallen by 45%.
Shore Capital suggested this decline over the past twelve months was "unwarranted" and has a 'buy' rating on the stock.
"We see the company as one of the strongest plays within the retail sector and see recent share price weakness as an opportunity," Shore explained.
"We view the consistency in delivery against market expectations and its profit focus as desirable characteristics, supporting our positive stance on the company."
By Heather Rydings; [email protected]
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