JD Sports Poised to Expand Into the Middle East With First Franchise Agreement

JD Sports is still in growth mode despite noting last week that it’s experiencing a slowdown in North America.

Now, the UK-based sports retailer has inked a new deal with Dubai-based brand management company GMG on its first-ever franchise agreement. The agreement will allow JD Sports to expand into the Middle East.

Under the terms of the 10-year agreement, GMG will open around 50 stores under the JD fascia by 2028, with a focus on locations in United Arab Emirates, the Kingdom of Saudi Arabia, Kuwait and Egypt. This is a meaningful contributor to JD’s plans to open between 200 and 300 new stores each year over the next five years.

According to JD, the deal is a “significant milestone” in its global strategy that was announced by CEO Régis Schultz at the company’s capital markets event in February. The partnership will enable JD to deliver on the roll out of its ‘JD Brand First’ strategy and is a pivotal move in the continued expansion into underpenetrated markets, JD stated on Monday.

Schultz said in a statement on Monday that he is “very pleased” to be signing this “historic” deal. “Through my own career, I have seen firsthand the massive untapped potential for retailers in the Middle East, and I am certain that GMG – with their expansive retail expertise and a local understanding of the customer – are the best partners for us in the region,” Schultz said. “We also know, from our love index, that no matter the market there is a direct correlation between having a strong physical retail presence, and popularity and love for the brand.”

Looking ahead, Schultz also indicated that he is open to other similar deals in the future. “We are excited by the opportunity to explore franchise partnerships as an avenue for further store growth in underpenetrated markets, leveraging the global growth phenomenon of athleisure while bringing our proven proposition to more customers worldwide,” the CEO added.

Mohammad A. Baker, deputy chairman and CEO of GMG, added in his own statement that his company is “starting a new chapter” in the sports retail landscape through this deal. “This alliance is a testament to our commitment to enhancing the lives of consumers in the region, as we embark on a journey to provide them with unmatched choices and empower their active lifestyles,” Baker noted.

This news comes just one week after JD executives admitted at its annual general meeting with shareholders that there has been some softening in its business in the North American market.

The UK-based athletic retailer said at the meeting Tuesday that the softening was “consistent” with other businesses in the sector and that inventories are at “normal levels” in the region. JD also maintained to shareholders that the company will not implement an aggressive promotional strategy in the region and will opt to remain competitive.

Despite the slowdown in business in the U.S., overall, JD Sports is optimistic about its business and reiterated its forecasts for pretax profit of about 1.04 billion pounds ($1.33 billion, based on current exchange) this fiscal year.