JD Sports beats the sceptics with surging sales at home and abroad
today Sep 12, 2017
There’s been plenty of speculation about how well (or not) JD Sports would do in its first half with reports that consumers aren’t buying so many of the trainers that are so important to the group making investors nervous. Nike’s decision to sell its goods directly through Amazon had added to jitters around the retailer.
And did it turn out to be bad news? No. In the 26 weeks to July 29, revenue rose 41% to £1.367.2 billion, operating profit soared 33% to £103.3 million, and pre-tax profit was up by the same amount to £102.7 million.
The only cloud on this horizon was a fall in gross profit to 47.4% from 48.1% a year ago, but that reflected an increase in costs due to the weakening of sterling after the Brexit vote.
And importantly, there appears to have been no downturn in the first few months of the second half with sales-to-date continuing “at similar levels to those in the first half supporting our continued confidence in the robustness of the JD proposition.”
As a result, the firm expects full-year results to be towards the upper end of market expectations.
The company said it saw “another record result” with further “encouraging” comparable sales growth and “strong growth online”. Its increased store count helped drive sales upwards with 12 extra JD stores in the UK and Ireland, a net increase of 23 stores across mainland Europe, the first three JD stores in Australia, and additional stores in Malaysia.
There was also a positive (albeit tiny) contribution in the period from Go Outdoors, the recently-acquired business.
And the company said it has a strong cash position “to maximise the available funding to support ongoing growth opportunities.”
During the period, JD’s Sports Fashion segment continued to be the big moneyspinner with revenue of £1.17 billion and operating profit of £103.2 million, while Outdoor saw revenue of £196.6 million and profit of only £0.1 million.
Executive chairman Peter Cowgill said it was “another pleasing result demonstrating the strength of our highly differentiated multichannel proposition and our ability to prosper in an increasingly competitive market for athletic inspired footwear and apparel.”
He added that the base of the group’s success remains the UK and Ireland Sports Fashion chains but “we have strengthened our foundations by significant progression internationally both in-store and online so that the JD fascia now has a much broader store and multichannel consumer reach and brand influence globally.”
It seems that the retailer’s ability to engage customers with first-to-market product launches remains intact. The company added a number of new fashion-focused ranges during H1 with trend being seen by the firm as a key point of difference. New ranges have come from Sik Silk, Tommy Hilfiger and Calvin Klein with further brand partnerships “under constant review.”
Such launches are key to the Sports Fashion division and they seemed to pay off even though there may have been fewer launches than usual, with the company saying it saw a “relative lack of new brand models during the period”.
Thos launches that did happen helped comp sales growth in its core JD/Size? chains in the UK and Ireland to hit 3%, and to rise to 7% in mainland Europe on a constant currency basis. And major product launches are also key online, with e-tail now making up 13.7% of total net sales (from 11.1% a year ago) across its core UK and Ireland markets. No surprise that the company continues to invest heavily in digital innovation and mobile tech both in-store and online.
STORE GROWTH AND ONLINE
Having added new stores at home and abroad, JD said Tuesday that it expects to open quite a few more in H2. In fact, it has already added a fourth Australian JD store during the period so far and it expects to open a similar number of stores in mainland Europe during H2 as it did in H1.
“We are very encouraged by the positive start that we have made internationally and we expect to expand the number of countries in which we are physically present over the next 12 months,” the chairman added.
And of course, the performance abroad isn’t just about the core JD chain. Performance in its non-JD chains in Europe stayed “satisfactory” in H1 with the Sprinter businesses continuing to develop particularly positively in Spain.
Meanwhile, in Sports Unlimited Retail in the Netherlands, its focus has been to consolidate the Perry Sport and Aktiesport store portfolios down to a sustainable size and use those stores which were not part of its longer-term plans to trade through the excess and disjointed stock from the acquisition in the prior year. This process is now substantially complete and the business is “more appropriately positioned for future development.”
Its UK multichannel Fashion business, Scotts and Tessuti, also “continues to gain momentum” with each delivering “pleasing” comp sales growth. “We anticipate further favourable developments as we build on our increasingly strong relationships with the major premium brands with the store environments also being developed to an increasingly high standard,” it said.
The company is investing heavily in driving UK growth, including the Go Outdoors acquisition that completed in May this year. The Outdoor business, including Go Outdoors for the first time, delivered a positive result in the first half for the first time, largely driven from Go Outdoors where the strong camping and outdoor living proposition boosts the first half.
But JD said it also continues “to make encouraging progress” in its pre-existing businesses with Blacks/Millets seeing a reduction in its first half loss from £2.3 million to £1.6 million. “We are pleased that our team's ongoing efforts to improve the Spring/Summer offer and deliver a proposition which can trade all year have had positive results,” it said. Both chain saw positive comps.
Additional “very significant” investments are happening in logistics to support the growth in stores and e-commerce across the businesses.
Works are ongoing on the project to expand its internal use of the group's principal Kingsway warehouse site. With a £40 million spend, the company said it is expanding its storage capacity on this site by around 25% to 15 million units.
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