GO Outdoors saved from uncertain future as owner buys it back
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Troubled UK retail chain GO Outdoors was placed into administration yesterday and then immediately bought back by its owner for £56.5m.
JD Sports Fashion made the move in a bid to restructure the business and save it from an uncertain future.
In a statement to the London Stock Exchange the company said: “Following the onset of COVID-19, the future viability of the business has become materially uncertain with the enforced closure of GO’s stores in March bringing into sharper focus the operating costs of the business.
“Specifically, the terms of the property leases at GO were extremely inflexible with stores having an average remaining period to lease expiry of approximately ten years with upwards only rent reviews, many of which are fixed at rates above inflation regardless of the market rent in the location.
“Such factors have resulted in the Board deciding that it is not in the best interests of the wider group and its shareholders to provide financial support to GO in its existing form.”
It added that the group considered a number of options for GO, which included the appointment of advisers in May to market the business for a potential sale. In an apparent U-turn, JD Sports says it ultimately determined that if fundamentally restructured, the store chain has a future in the group. “Consequently, via its newly incorporated subsidiary, JD Newco 1 Limited re-acquired the business and substantially all the assets of GO from the administrators for £56.5m, which returns to the group as partial repayment against its historic debts.”
GO will continue to occupy all its 67 stores and, subject to ‘realism and flexibility’ in future leases, JD says its intention is to retain the majority of its estate and preserve as many jobs as possible. The group will also honour its historic liabilities, including branded stock suppliers, tax liabilities, customer returns and gift cards. All existing GO employees will transfer across to the new business with their previous terms and conditions of employment preserved.
Peter Cowgill, Executive Chairman of JD Sports, said: “As a consequence of COVID-19, GO Outdoors was no longer viable as previously structured and would have absorbed capital at an unsustainable rate for the foreseeable future.
“Having investigated all available options for the business, we firmly believe that this restructuring will provide GO Outdoors with a platform from which it can progress while remaining a member of the group. Most importantly, we are pleased at it will protect the maximum number of jobs as possible.
“We look forward to having positive conversations with landlords and agreeing new flexible lease contracts which will reflect the widely reported challenges of reduced consumer footfall.”