While Holdsport has generally held up better than most of its retail peers in the face of a depressed economy, the rally in the share price was sparked by investment firm Long4Life's decision to make a bid to acquire the company in July. The offer came despite a muted performance by the specialist retailer in the year to February. Holdsport reported a 5.8% rise in sales, but a fall in profit of 11.4%, to R273.7m.
Chief financial officer Cobus Loubser said on Thursday a tie-up with Long4Life would provide Holdsport with access to Long4Life's balance sheet, producing appetite and capacity for growth both acquisitively and organically, and access to its management team with proven deal-making expertise.
"Holdsport has always focused on achieving a high return on funds invested," said Loubser. "We have an experienced management team that understands the business and our market sector well.
"We have managed to build a good business with a proven track record of high levels of cash generation, resulting in attractive returns and dividends to shareholders."
The group operates through a network of Sportsmans Warehouse and Outdoor Warehouse retail chains. These chains operate large-format stores mostly located in value centres in recognised retail nodes in SA. The firm also has an expanding wholesale division that designs, manufactures, imports and distributes technical sports and outdoor apparel and equipment under the First Ascent, Capestorm, Second Skins and African Nature brands.
Analysts at consultancy EY said speciality retailers such as Holdsport, provided the strongest returns in 2016 with a 51.6% return on equity, while grocery retailers averaged 22.3% and clothing chipped in a decent 41.1% return.
Long4Life's bid for Holdsport is a choice between 12.1 of its shares for each Holdsport share, or 11.2 shares plus R5 cash. The cash offer is capped at R204m.
Prospects for sportswear as a category are set to improve as consumer interest in health and fitness booms. A Euromonitor report says sportswear is growing at a faster pace than general clothing and footwear. Sportswear includes athleisure, or sports-inspired clothing.
"Although performance sportswear takes the lead in terms of market size, valued at 78bn in 2016, sports-inspired is the category driving growth," said Euromonitor International apparel and footwear analyst Bernadette Kissane.
Source: Business Day
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