JD Sports powers ahead as UK and US are strong, but Europe less buoyant
JD Sports fashion had good news on Wednesday as it reported results for the year to 29 January. Revenue rose to £8.563 billion from £6.167 billion with gross profit edging up to 49.1% from 48%.
Headline pre-tax profit before exceptional items was £947.2 million, more than double the £421.3 million of a year earlier. It was also more than double the £438.8 million record of the period to 1 February 2020, its last complete 12 months before the pandemic. It added that its Outdoor segment returned to profitability.
But it also warned this year’s profit could be flat as external headwinds affect the business, despite current robust demand.
Interim chair Helen Ashton said the company was "particularly encouraged" by the strong performance in North America and said it's increasingly evident that its progress there is having a long-term positive impact both on its overall performance and its relationship with international brands.
Ashton added that the process to recruit a CEO is ongoing "with a number of high calibre candidates at different stages of consideration, including some who have only recently made their interest in the role known". A process to recruit a new non-executive chair is also progressing "at pace”.
In the last year, the company saw strong performances from the Sports Fashion retail chains in the UK and Republic of Ireland and North America in particular, although Europe was tougher, as was Asia-Pacific.
In the UK and ROI — where the JD Sports chain is a major player — profit before tax and exceptionals increased to £471.2 million from £262.7 million in 2021 and £288.5 million in 2020, “with a strong retention of sales through digital channels in the first quarter whilst the stores were temporarily closed, combined with strong demand after reopening”.
It said that in premium sports, there was robust consumer demand throughout the period.
And it has continued to see strength both physically and digitally as it invests in both areas. For instance, its new flagship store at Westfield Stratford “is the most technologically advanced store in our portfolio with a number of new consumer focused innovations including self-service checkout kiosks”.
And UK/ROI digital revenues now account for around 30% of sales, up from 22% pre-pandemic, with “no reason to expect that they will drop back to those historic levels”.
In North America, its pre-tax/pre-exceptionals profit increased to £343 million from 2021’s £171.9 million and 2020’s £94.2 million. This includes £57.3 million from Shoe Palace and £50.6 million from DTLR. All of the businesses “successfully capitalised on the favourable trading conditions provided by a second round of fiscal stimulus from the US Federal Government”.
But in Europe, the pandemic and the loss of tariff-free, frictionless trade with the European Union “combined to create a difficult operational environment”. The first half of the year was “particularly challenging” in France, Belgium, Portugal, the Netherlands and Germany.
However, with higher conversion rates, across Europe overall, revenues in the like-for-like stores in the second half were around 10% ahead of the pre-pandemic period.
And in Asia-Pacific, pandemic restrictions had a significant impact in all markets. While all stores traded in the final quarter, footfall was below pre-pandemic levels in all markets. Australia was the market where footfall was closest to normal and, combined with strong conversion, resulted in an encouraging growth in revenues in like-for-like stores in Q4 (relative to 2019) of approximately 20%.
In its domestic market non-sport ops, it attracted and retained new digital shoppers and since reopening, the trends have been broadly similar to those in JD with significant pent-up demand helping sales to beat the pre-pandemic period initially. Similar to JD, footfall has slowed subsequently, although continued higher conversion has helped ensure that the Tessuti and Scotts stores have stayed positive.
It’s continuing to invest in the stores and webstores with a new Tessuti Liverpool flagship to open soon and Digital revenues for Mainline Menswear growing by more than 75% compared to pre-pandemic levels.
It was also reported by Drapers that the firm will close some of its high-end Choice stores and reopen them in new, larger spaces under the Giulio name. The move hasn’t been confirmed by the firm so far. It acquired the Giulio designer independent retail business in 2019 after buying control of Choice a year earlier.
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