JD Sports profits rise, but with consumer uncertainty it calls for "rental realism"
The extent to which the world has changed was made clear as JD Sports Fashion reported its full-year results on Tuesday. Its news about the 52 weeks to February 1 felt like it came from another era.
But as a sign of just how well the firm was doing pre-pandemic — and how it’s likely to be one of the businesses to bounce back fastest — it was useful.
It gave few hints of how it’s faring in the new world though, pointing out that it’s too early to draw many conclusions as stores have only reopened in recent weeks.
Yet online trading continued during lockdown and delivered “a very resilient performance during the closure period and beyond”. Stores also started reopening in some countries from the end of April with the majority of the group's stores now trading again. It said initial footfall has been weaker in malls and shopping centres, particularly in Northern Europe at weekends, as “consumers remain nervous about the risks associated with densely occupied enclosed spaces”.
It also said it was “encouraged by the continued positive trading in the early weeks of the year prior to the emergence of Covid-19 and we firmly believe that we are well placed to regain our previous momentum”.
It added that it needs to wait and see on consumer behaviour and footfall “with future store investments highly dependent on rental realism and lease flexibility. Ultimately, however, we remain confident that we have a market leading multi-channel proposition which has the necessary flexibility and agility to prosper within a retail environment that may see profound and permanent structural change”.
So what about last year? Revenue was up as much as 30% to £6.11bn and group EBITDA before exceptional items on a comparable accounting basis increased 28% to £623.6m. Comparable profit before tax and exceptional items increased by more than £110m to £465.6m but reported pre-tax profit rose a smaller 3% to £348.5m. The gross profit percentage dipped slightly to 47% from 47.5%.
Like-for-like sales growth in its global sports fashion chains was a healthy 12% and included “highly encouraging growth of more than 10% in the core UK and Republic of Ireland sports fashion fascias,” the company said.
The company continued to expand during the year with a net increase of 52 JD stores across mainland Europe and 18 in Asia Pacific. The JD store base in the US increased to 11 with the first flagship location in Times Square, New York to open later in the summer.
Overall, it saw an "encouraging performance" in the US with comparable operating profit before exceptional items of £97.9m, up from £26.6m for the 33 weeks after the acquisition of its American business. This was driven by 9% like-for-like sales growth at Finish Line and a gross margin rise to 42.9% from 42.2%.
But in the UK, the firm’s Outdoor business was challenged and the recent administration filing and buy-back of Go Outdoors highlighted this. That business made an overall pre-tax loss of £23.5m. Yet the company said “Outdoor continues to have relevance," especially in relation to third-party brands. It needs to be relevant all year round, however, and the Blacks/Millets business has made progress here, returning to a small profit last year.
Despite the Go Outdoors issues, the year was a good one. However, the current year will be weaker with store closures in 14 countries representing more than 98% of the group's physical store estate at one point.
Peter Cowgill, Executive Chairman, said that “Covid-19 has constrained our short-term progress [but] JD has a market-leading multi-channel proposition, which maximises its consumer relevance and reach by creating, and then maintaining, a deep emotional connection with its consumers. This proposition remains extremely robust and I am pleased to report that it was another year of significant progress for the group. We were encouraged by the continued positive trading in the early weeks of the year.”
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