JD Sports stays strong, Finish Line key but still a work in progress
today Apr 16, 2019
JD Sports Fashion’s results announcements always make encouraging reading for anyone who wants some relief from the endless stream of sales drops, administration filings and profit warnings that seem to characterise the UK retail sector at the moment. And on Tuesday, the company’s preliminary results for the 52 weeks to February 2, offered plenty of that relief.
The company said its revenue was up 49.2% compared to the 53 weeks ended February 3 last year. With revenue of £4.717bn, JD is clearly riding high, although it has to be said that part of that surge was down to acquisitions. Its revenue divided into £2.137bn in the UK, £1.368bn in Europe, £967m in the US and £244m in the rest of the world. While the £967m US figure gave the overall revenue figure a huge boost based purely on the Finish Line acquisition, even without it, overall group revenue would have risen by £589.4m.
Gross profit may have dropped to 47.5% from 48.4% in a tough market to which JD said it’s not immune, but profit on an Ebitda basis rose 26.8% to £488.4m, and operating profit before exceptional items was up 17.1% to £361.5m. Pre-tax profit rose 15.4% to £339.9m.
The company said it saw “encouraging total like-for-like sales growth in global Sports Fashion fascias of more than 6% against a backdrop of widely reported retail challenges in the group's core UK market.” It even managed double-digit Ebitda in its Outdoor chains after “a particularly weather-challenged trading period.”
Executive chairman Peter Cowgill said: “We firmly believe that the elevated and dynamic multi-brand multichannel proposition of the core JD fascia, which enjoys the ongoing support of key international brands, has the necessary agility to continue to exceed consumer expectations and prosper in an increasing number of international markets.
“We believe that our acquisition of the Finish Line business in the largest market for sport lifestyle footwear and apparel and the home to many global sportswear brands, will have positive consequences for our long-term brand engagement whilst significantly extending the group's global reach.”
Frustratingly he gave no update on current trading, citing the impact of Easter calendar shifts and saying "any announcement of like-for-like sales performance in the year to date would lack precision.” But he added that he’s “pleased with the continued underlying positive performance of the group and excited by the major developments ahead.”
EUROPE, APAC AND THE US
And those developments will be significant, especially as it grows abroad. JD is now in 10 mainland Europe countries having recently opened in Finland, and its first Austrian store will open in the first half. Its team in Iberia is also progressing with “an accelerated process to integrate the Sport Zone fascia into the Sprinter commercial operations.”
In Asia Pacific, it has opened its first stores in Singapore, Thailand and South Korea, with its local partner Shoemarker, and now has 16 JD stores, which includes 14 conversions of the multi-brand Hot-T chain that was acquired in the previous year.
And as mentioned, it's extremely upbeat on its American operations and believes Finish Line "is capable of delivering improved levels of profitability.”
It opened its first five JD stores in the US prior to the key holiday season too, which included the conversion of four existing Finish Line stores. The company said it’s too early for any conclusions on the potential for JD there “as these stores do not currently contain a full representation of the JD product offer, particularly apparel.” Given lead times on ordering it will take until the second half to sort this out. Its stores have also lacked the benefit of full digital support but will get that “later in the spring leveraging off the Finish Line digital expertise.” However, it’s “encouraged with the early results and we are using the learnings to further refine our proposition.”
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