JD Sports confident of matching last year’s record financial performance
Revenues have risen, but pre-tax profits have fallen in the half year at Bury-based sports and athleisurewear retailer JD Sports Fashion.
The business said it believes the fall in profits is due to the unseasonal weather through the summer in the activity-based sector, and is not a true reflection of the substantial progress it is making in this sector. It added: “Consequently, we remain confident in our longer term prospects and we continue to work on initiatives which enhance the resilience of our proposition.”
The group has returned to paying an interim dividend, following two years of withholding a payout to shareholders. It also expects to match last year’s record year in its annual results.
Revenues for the six months to July 30, 2022, were £4.418bn, up from £3.885bn the previous year. Pre-tax profits of £298.3m were compared with £364.6m in 2021.
A dividend of 0.13p per share has been recommended.
During the year the group achieved a continued robust performance in the sports fashion retail fascias in the UK and Republic of Ireland which delivered a profit before tax and exceptional items for the first half of £153m, down from £174.2m the previous year.
It made a return to profit in the sports fashion retail fascias in Europe which contributed to a profit before tax and exceptional items for the first half of £57.1m, as opposed to a £7.2m loss in 2021.
A profit was achieved for the sports fashion retail fascias in North America of £130.4m (2021: £245.5m) with the performance in the period reflecting, as expected, the non-comparability of trading conditions in the US as a result of the Federal fiscal stimulus in the prior year and the supply chain challenges of certain international brands which has led to reduced availability of key footwear styles, particularly in the first quarter.
Internationally, the group opened 51 net new JD stores across Europe, including a first store in Hungary with the first store in Greece due to open shortly. There are 101 stores now trading as JD in the US, with a flagship store in Chicago due to open in the second half of the financial year.
Four JD stores are trading in Indonesia and two stores in Israel were opened under joint venture arrangements in the period, meaning that the core JD fascia now has a retail presence in 27 countries
There is also further progress in Australia with three new stores opened in the period and a first store in Adelaide opened subsequently.
Non-executive chair, Andrew Higginson, said: “Whilst this has been a period of transition for the board, it is reassuring that this has not impacted the financial performance of the group which continues to deliver strong results. With this year expected to follow a more normalised trading pattern, this result is at the top end of our expectations for the first half demonstrating the ongoing resilience of our global proposition and the strength of our consumer engagement.
“The progress that the group is making in its global markets is reflected by the fact that total sales in the group’s organic retail businesses were 5% ahead of the prior year. This performance is very encouraging, as notwithstanding the non-comparability of trading conditions in the United States, the group has also faced numerous other challenges in the period including the well-publicised shortage of supply from a number of the international brands and the challenging global macro-economic situation.”
He added: “JD continues to be the partner of choice for many international brands who see our premium fascias as the natural home for their latest ranges and freshest new styles. Our relationship with these brands and our access to product is as strong as it ever has been.
“We continue to be reassured by the ongoing resilience in the group’s performance with trade to date through the second half following a similar trend to the first half with total sales in the group’s organic retail businesses tracking around 8% ahead of the prior year after six weeks.
“Whilst the overall performance continues to be encouraging and the result for the half year was at the upper end of the board’s expectations, it must also be recognised that the most material trading periods lie ahead.
“Given the widespread macro-economic uncertainty, inflationary pressures and the potential for further disruption to the supply chain with industrial action a continuing risk in many markets, it is inevitable that we remain cautious about trading through the remainder of the second half.
“Despite this, the board maintains its view, at this point, that the headline profit before tax and exceptional items for the year ending 28 January 2023 will be in line with the record performance for the year ended 29 January 2022.”
However, Russ Mould, investment director at Manchester investment platform, AJ Bell, said: “Life could get a lot tougher for JD Sports given the significant headwinds facing retailers. With interest rates set to keep going up for the foreseeable future and consumers starting to feel less confident about job security given the dark clouds over the economy, JD is going to need some highly desirable products on its shelves or its second half results won’t be a patch on the first half.
“A reduction in consumer spending combined with the potential for more supply chain disruptions could add up to a nasty cocktail, and one that could give Régis Schultz serious challenges in his first months as the new chief executive.
“The key thing to watch is unemployment levels. JD sells a lot of goods to young adults, many of whom work in the leisure and retail sectors, areas which could be susceptible to job cuts if the economy goes into a serious downturn.”
He added: “Interestingly, JD appears to be keeping its eye on the longer term opportunity rather than retrenching because of the near term headwinds. It is investing in stores to make them look smarter, thereby strengthening its appeal to shoppers who want to own the latest must have trainers and be seen to shop in the best looking places.
“This should serve the company well in the long term as many of its rivals are likely to be fretting about the current conditions and risk losing market share if they get scared. But JD still needs to be prepared for a tough period in the coming months and continue to keep an eye on the money coming in and going out.”
By 10.30am shares in JD Sports had fallen by 6.82% to 115.40p per share.