Chairman heralds successful year of transition as JD expects to hit record sales

JD Sports chairman Andy Higginson has highlighted governance improvements and a simplification of the business as the key factors driving the growth and profitability of the Bury-headquartered retail giant.

In a statement accompanying unaudited preliminary results for the year ending January 2023, Higginson acknowledged the focus Régis Schulz has brought to the business and the disposal of non-core brands. 

The business recorded record sales of £991.4 million (52 week period ended 29 January 2022: £947.2 million), a record result, with profit before tax of £440.9 million (2022: £654.7 million).

Chief executive Régis Schulz has also reduced his direct reports in the business from a peak of 30 when he arrived last year.

In other governance changes, Deloitte are to replace KPMG as auditors.

Higginson has also beefed up the JD board and will welcome Angela Luger (nee Spindler), formerly CEO of N Brown Group Plc and Darren Shapland, currently Chair of Topps Tiles Plc to the board as of 1 June 2023. 

Ian Dyson, currently Chair of Currys Plc joined the board on 9 March 2023.

Boston Consulting Group have been retained to improve cyber security following a cyber breach in January. 

The company has avoided a sanction by the Information Commissioners Office, although they have highlighted several areas where they believe JD needs to demonstrate improvement. 

In addition, JD has now appointed an interim Chief Information Security Officer with the recruitment of both a permanent CISO and a Chief Information Technology Officer ongoing.

The business also took a wrap on the knuckles from the Advertising Standards Authority over an Instagram post last year featuring YouTube star KSI, where he failed to identify the post as a paid for promotion.

Higginson said: “In July 2022 I had the great privilege of being appointed the Chair of the JD Group. This followed the departure of Peter Cowgill who had led the business so successfully for the previous 18 years. I found  a business that had a strong leadership team, committed staff and a supportive majority shareholder in Pentland. The business was in tune with its customers, respected by its branded suppliers, was trading strongly and had a significant number of opportunities for growth ahead of it. Before going any further, it is important to thank Peter and his team for developing such a great business.”

However he claimed “a significant governance deficit” in a listed business of JD’s size. 

“In many ways, the business, which is highly profitable and with significant net cash, was well controlled and conservatively managed. However, it relied too heavily on a few key individuals and on informal controls which were more appropriate for a smaller business. The sort of formal Board oversight and detailed scrutiny that would be normal in a business of this scale were not always present.”

He continued: “In September 2022, the arrival of our new CEO, Régis Schultz led to a reappraisal of this strategy and a narrowing of the business focus. We have subsequently disposed of a number of Fashion businesses and are concentrating our resources on fewer initiatives. There has also been a simplification in the organisation of the business with the number of direct reports into the CEO reduced from over 30.”

AJ Bell analyst Russ Mould said there was little to get the stock moving upwards in morning trading following the results.

“True, the company does expect to exceed the £1 billion mark in terms of profit in the current financial year but, beyond this arbitrary milestone, JD still has work to do and considerable sums to spend to meet its ambitious goals for growth.

“Profit fell at the pre-tax level on adjustments, some of which related to restructuring and acquisition costs, and in February new CEO Régis Schultz flagged an outlay of up to £3 billion as JD looks to roll out as many as 1,750 stores globally over five years.

“For now, Schultz is off to a flier in his new role, replacing the long-term brains behind the business, Peter Cowgill. JD is demonstrating the strength of its brand and its successful capture of the under-25 demographic as it enjoys resilient sales.

“However, it needs to be wary of any shifts in consumer preferences. Fashion is by its nature cyclical and a move away from the athleisure trend would be unhelpful to JD.

“The company must hope that its target market, potentially insulated from cost-of-living pressures if they still live at home, continues to enjoy a decent level of disposable income and that its relationships with core brands like Adidas and Nike remain strong as they pursue direct-to-consumer strategies.”