Sportswear retailer raises group profit expectations after strong festive period

Bury-based sportswear and athleisure retailer JD Sports Fashion has increased profit forecasts following a period of strong Christmas and second half trading.

In a trading update today it said it expects pre-tax profits for the year to January 2, will increase from the current market expectation of around £295m to at least £400m.

This is despite further forced temporary store closures in many of the group’s global territories due to the coronavirus pandemic.

JD also said total revenues for the 22 week period to January 2, in its like-for-like businesses, were more than five per cent ahead of the previous year as consumers readily switched between physical and digital channels.

Looking ahead, the group said it is clear that operational restrictions from the COVID-19 pandemic will also be a material factor through at least the first quarter of the year to January 29, 2022.

And, while it is confident it has the proposition to continue to attract consumers throughout this period, it warned that the process to scale down activity in stores and scale up the digital channels, often at extremely short notice, presents significant challenges.

It added that, under normal circumstances, the group would be confident that the results for the forthcoming year to January 29, 2022 would show a strong improvement on the current year.

However, given the ongoing uncertain outlook with stores in the UK likely to be closed until at least Easter and closures in other countries possible at any time, JD’s current best estimate is that the group headline profit before tax for the full year to January 29, 2022 will be five per cent to 10% ahead of the current year.

Russ Mould, investment director at Manchester investment platform AJ Bell, said: “This morning’s update from JD Sports does not read like there is a global pandemic going on.

“It grew like-for-like sales materially in the period encompassing Christmas. To guide for profit ahead of expectations, despite the massive disruption resulting from COVID, is a mammoth achievement.

“It also demonstrates the fact that retail spending itself has held up reasonably well, despite the crisis – it’s just that sales have shifted from physical stores to the internet.

“In this context JD Sports’ online channel has delivered and then some, both in the UK and across the Atlantic.”

He added: “The company has also mastered the basics of retail, it is good at managing stock and costs, and crucially it keeps the cash flowing in.

“JD Sports has a very clear idea about who its customer is and what they want – namely trainers and so-called ‘athleisure’ gear which can be worn for working out and socialising – in more normal times – as well as hanging out at home.

“A short-term concern will be that its youthful customer base will be particularly exposed to the mounting jobs crisis in the UK, given they are probably more likely to work in hospitality or other retail businesses.

“Longer term, while JD is still seen in a positive light by major sporting brands like Nike and Adidas, the former, in particular, is shifting to a more direct-to-consumer model, selling more product through its own website. For now though, JD is still a valued retail partner.

“Given this encouraging update, investors will be even more relieved management did not take on the distraction of buying failing department store Debenhams before Christmas. The recent bolt-on acquisition of Shoe Palace in the US looks a much better fit.”