Confident JD Sports boosts dividend and predicts profits of £500m for current year
Athleisurewear giant JD Sports has increased dividend payments, despite incurring exceptional items of £97m in its annual accounts to January 30 2021.
The Bury-based group revealed a total turnover of £6.167bn, up from £6.111bn the previous year.
Profit before tax and exceptional charges was £421.3m, down from £438.8m in 2020. Pre-tax profits came in at £324m, against £348.5m the prior year.
Exceptional items of £97.3m included impairment of goodwill and fascia names, the restructuring of the Go Outdoors brand, and the integration of businesses, systems and warehousing.
However, the total dividend payment to shareholders will be 1.44p per share, up from 0.28p per share a year ago.
The group forecasts its headline pre-tax profits for the current year will be in the range of £475m to £500m.
Net cash held at the end of the reporting period stood at £795.4m, compared with £429.9m in 2020.
Throughout the year the group said it achieved significant retention of sales and profitability through an unprecedented period of global uncertainty and multiple periods of temporary store closures, which reflected the strength and premium position of the JD brand and consumers’ affinity to it, the relevance of the product offer to style-conscious consumers, its agile multichannel ecosystem built up over a number of years, and its infrastructure flexibility.
JD has expanded its presence in the US market, including its first flagship store in Times Square, New York, with a positive reaction from customers and international brand partners. It also enjoyed an exceptional trading performance in the Finish Line and JD fascias in part driven by the enhanced consumer demand consequent to the US government stimulus. There were a further 37 former Finish Line stores converted to JD with 49 stores trading as JD at the end of the year.
The group also completed the acquisitions of Shoe Palace, based in California, and, subsequent to the year end, DTLR, based in Maryland, which complement the strengths of the existing Finish Line and JD fascias and significantly enhance the group’s exposure to key consumer demographics on the West Coast and East Coast of the US.
In mainland Europe the group reported a net increase of 31 JD stores and five more in the Asia Pacific region.
It reported that the outdoor business returned to profitability in the second half of the year with a strong performance in key categories.
Executive chairman, Peter Cowgill, said: “The global COVID-19 pandemic and, more recently, the UK’s formal exit from the European Union have presented a series of unprecedented challenges which have severely tested all aspects of our business, including our multichannel capabilities, the robustness of our operational infrastructure and the resilience of our colleagues. However, at all times, the group has strived to do the right thing for all stakeholders.
“Notwithstanding these well publicised challenges, a number of positive themes have been increasingly apparent through the year which gives us confidence that, as we begin to emerge from the worst of the disruption, JD is at the pinnacle of the global sports fashion industry.
“We have a market-leading multichannel proposition which continues to enhance its relevance to consumers and has the necessary agility to progress in an environment where the retailing of international brands may see permanent global structural change.
“Our positive outlook is reflected by the fact that, even with the unique circumstances of store closures for a substantial period of the year, the group has retained substantially all of its record profitability from the prior year with a profit before tax and exceptional items of £421.3m.
“Our recent completed acquisitions of Shoe Palace and DTLR in the United States, together with the conditional acquisition of Sizeer in Central and Eastern Europe, are important steps in our evolution which will transform our consumer connection in these markets and further develop our key brand relationships.”
He added: “Whilst we must recognise the substantial level of temporary store closures to date and ongoing, we remain confident that we are well placed to benefit from the opportunities that prevail and, at this early stage, our current best estimate is that the group headline profit before tax for the full year to 29 January 2022 will be in the range of £475m to £500m.”
“A big crowd outside one of JD Sports’ London stores yesterday illustrates how consumers are eager to get their kicks from having the latest trainers,” says Russ Mould, investment director at Manchester investment platform AJ Bell.
“For every person who thinks they are only smelly, functional items, there is someone else who sees dollar signs and has a desire to collect footwear with the hope of selling them to someone else at a higher price.
“JD Sports’ results are impressive given it has suffered periods when stores were closed, and it is equally encouraging that its shops were among the more popular destinations as soon as the latest lockdown restrictions were eased.”
Mr Mould said: “There is more to its appeal than selling collectable footwear.
“The broader athleisure scene was given a boost during the pandemic as lots of people took up running to exercise. Individuals were also able to wear more relaxed clothing if they were working from home rather than the office.
“These were sales catalysts for JD Sports, so too were people shopping online out of boredom as well as those buying shoes and sports clothes so they can take pictures for their social media feeds, showing off to their mates.
“As a business, JD Sports is becoming increasingly international. The US is expected to be a major contributor to earnings in the coming years and the company is making progress expanding across Europe.
“Online sales have helped to offset weakness from temporary shop closures and, unsurprisingly, success with the digital channel has put pressure on its warehousing capacity. That’s an easy fix by striking a deal with Clipper Logistics to provide related services.”
He added: “However, what’s not fixable with a quick signature is dealing with heightened competition. Various shoe manufacturers including Adidas and Nike are now selling direct to consumers online, meaning JD has new rivals on the retail side.
“There is a growing trend for product creators to skip the middleman and use the online channel to go directly to the end customer, as it could boost profit margins and enable them to better understand the consumer which could influence future product development.
“JD may, therefore, have to put more emphasis on its physical stores as being unmissable showrooms and lean on the appeal of trying shoes on in the store.”