U.K.-based JD Sports Fashion reported total revenue of £4.78 billion ($5.91 billion) for the first half of its fiscal year ended July 29, up 8.3 percent year-over-year. JD said organic growth in its North America business was up 15 percent with the three largest segments—Finish Line/JD, DTLR and Shoe Palace—delivering between 13 percent and 17 percent organic sales growth.
JD Sports did note that first-quarter sales were stronger than Q2 in North America as it believes the first quarter benefitted significantly from better stock availability. Sales in June were slow, partly due to a lower level of new product releases, but sales picked up in July and have continued to improve since then. Gross margins in North America in the first half were down versus last year due mainly to a more normalized promotional environment but operating profit grew 12 percent.
Companywide, the retailer’s sports fashion business globally achieved revenue of £4.51 billion over the period, up 9 percent on the corresponding period last year.
The premium sports fashion operation, which accounted for 80 percent of its Sports Fashion segment by revenue, saw revenue growth of 17 percent to £3.59 billion. Within its other sports fashion fascias, revenues of non-core fashion businesses declined by 16 percent to £783.8 million.
The retailer’s outdoor business reported total revenue of £272.0 million in the first half of this financial period, 1 percent down from the previous fiscal year.
The gross margin of JD Sports for the first half was 48.0 percent versus 48.5 percent a year ago.
Over the period, the retailer posted an operating profit of £400.1 million in the first half of the fiscal year. Its profit before tax (PBT) was £375.2 million for the period, up 25.8 percent from £298.3 million in the same period last year.
Its basic earnings per share were 4.65 percent in H1, up 29.9 percent from 3.58 percent in the prior year period.
JD Sports fashion chief executive officer Régis Schultz said, “We have delivered a strong first half to our financial period with organic sales growth of 12 percent and profit on track for the full year. In line with our strategic plan, growth is being driven by our premium Sports Fashion business with an impressive performance in Europe (+27 percent) and North America (+15 percent), supported by a strong performance in our more mature UK market (+8 percent). This performance continued in the important back-to-school period.
“We have made good progress delivering on our strategic pillars, focusing on expanding the JD brand and we will open more than 200 JD stores worldwide in this financial period. We are going to accelerate JD brand growth in Europe through purchasing the non-controlling interest in both ISRG and MIG and the acquisition of GAP stores in France. This is alongside the proposed acquisition of Courir in the region, which will, when completed, enhance the Group’s existing portfolio of complementary concepts, bringing into the company its market-leading focus on the female customer. Meanwhile, we are building and investing in talent and infrastructure to support future growth.
“Our first half performance would not have been possible without the efforts of our people across the world and I am extremely grateful for their continued hard work and commitment. I would also like to thank outgoing CFO Neil Greenhalgh specifically for his support since I joined and for his years of service to JD. I look forward to working with Dominic Platt, who will start as our new CFO in October 2023.
“Looking ahead, our core consumers remain resilient in the face of the ongoing global macro-economic challenges. The JD brand continues to strengthen its global presence, supported by our strategic partnerships with much-loved brands and our strong balance sheet.”
Sports Fashion
JD Sports said, “Our Sports Fashion business achieved revenue of £4,511.9m in the period, up 9 percent on the corresponding period last year, or 7 percent in constant currency1. The gross profit margin was 48.4 percent, 60bps down on last year, due mainly to operating in a more normalized promotional environment because of much better product availability, especially in North America. Before adjusted items1, operating profit was £398.6m, 3 percent lower than last year as we continued to invest in our operational infrastructure.”
Premium
JD Sports said, “Premium Sports Fashion revenue, which represents 80 percent of our Sports Fashion segment by revenue, was up 17 percent to £3,594.2m, or 16 percent in constant currency1. Organic sales growth was 15 percent. Operating profit was £335.5m, down 5 percent on the corresponding period last year, due primarily to operational infrastructure investment.”
U.K. and Republic of Ireland
JD Sports said, “This was another good performance from our longest-standing region. With our premium Sports Fashion retail fascias growing revenue by 8 percent to £1,202.5m and organic sales growth of 8 percent.
“Operating profit in premium Sports Fashion was down 12 percent to £141.9m as head office elements of our investment in future growth, such as dual-running of DCs, acquisition costs and certain systems developments, are attributed to this region.
“In terms of store numbers, we ended the period at 448 premium Sports Fashion stores, up four since the start of the period. The UK remains an opportunity for selective growth. New stores in the period included Derby, which was our 400th JD store in the UK and our 100th on a retail park, and upsizes to come include premium malls such as the Trafford Centre in Manchester and Stratford in London.”
Europe
JD Sports said, “Premium Sports Fashion revenue grew 32 percent to £773.8m, or 28 percent in constant currency1, with organic sales growth of 27 percent and LFL sales growth of 15 percent. Footfall was very strong in Q1 helped by better year-on-year product availability. All major European countries saw strong organic sales growth with Italy, Holland and Spain leading the way. The conversion of 19 Conbipel stores in Italy to the JD brand helped to drive strong sales growth in the period. These conversions are trading well and ahead of expectations and helped Italy to be the fastest-growing market for the JD brand in Europe.
“In line with our expectations, operating profit was £25.0m, down 36 percent on the first half last year. While gross profit margins were down year-on-year due primarily to the more normal promotional environment, increased operating costs were the main reason for the reduction in profit: we paid rent and staff costs on the nine acquired GAP stores in France, which will commence trading over the course of H2; we were fully costed on the Conbipel stores in Italy but with only a small proportion of the full expected returns being generated in the period; and we have been taking on additional supply chain costs related to the new Heerlen DC as we ramp up towards full opening.
“We ended the period with 474 premium Sports Fashion stores, up 39 on the period end. We opened 41 new premium Sports Fashion stores across 12 different countries with Italy contributing around half of these new stores.”
North America
JD Sports said, “Our North American businesses continue to trade well. Our market-leading proposition and continued outperformance are built upon larger and better-invested stores, a broader sales mix and compelling brand partner relationships.
“Premium Sports Fashion revenue was up 18 percent in the first half to £1,387.0m with constant currency growth of 15 percent. Organic sales growth was also 15 percent. All our North American businesses achieved good organic sales growth with the three largest—Finish Line/JD, DTLR and Shoe Palace—delivering between 13 percent and 17 percent organic sales growth. Q1 trading was stronger than Q2 in North America. In Q1 we benefitted significantly from better stock availability, while in Q2 organic sales growth was much softer. Within Q2, June was slow which can be attributed partly to a lower level of new product releases than in previous periods. Sales growth improved in July and since then, organic sales growth has continued to improve, helped by a strong ‘back to school’ season.
“Premium Sports Fashion gross margins were down on last year due mainly to a more normalised promotional environment but operating profit grew 12 percent to £136.2m.
“There were 969 premium stores in North America at the period end, up a net 14 versus the start of the period. 24 new stores were opened of which 16 were conversions from Finish Line to JD. Including Canada, we now have 168 JD stores in North America, as we continue to grow the JD brand presence in the region. There were a net three new Shoe Palace openings in the period including at Pearland and Brazos in Texas, as this business extends its presence in the Southern border states.”
Asia Pacific
JD Sports said, “Premium Sports Fashion revenue in Asia Pacific grew strongly by 22 percent in the period to £230.9m, and 26 percent on a constant currency1 basis. Organic sales growth was also 26 percent with all countries in growth including Australia, our principal market in the region.
“Operating profit was up 4 percent to £32.4m as the closure of our South Korea business progressed as planned. Going forward, our Sydney distribution center (DC) will relocate in 2024 to a new, expanded site to ensure we have sufficient capacity for the next stage of growth.
“We ended the period with 84 stores, four less than the start of the period. We opened four stores in the period, and in August 2023 we subsequently opened a new flagship store on Pitt Street in Sydney which is Australia’s prime retail destination. This store achieved our best-ever opening day for a new store globally.”
Other Sports Fashion Fascias
JD Sports said, “Due solely to the UK divestments of non-core fashion businesses, revenue in our other Sports Fashion fascias was £783.8m, down 16 percent or 18 percent in constant currency1. Organic sales growth was 6 percent and all regions achieved organic sales growth. Europe, which now represents 76 percent of our other Sports Fashion fascias, performed particularly well with organic sales growth* of 9 percent led by Cosmos in Greece and Sport Zone in Portugal. Operating profit was broadly in line with the corresponding period last year at £43.7m.
“We ended the period with 1,125 stores, down 92 on the period start. 66 of these were from the non-core fashion business divestments in the UK.”
Sports Fashion – Gyms
JD Sports said, “In the period, we continued to roll out the JD Gyms fascia, expanding our market-leading, premium low-cost gyms business across the UK but particularly in the South of England. After opening two new gyms in the period, the Group operated from 80 sites in the UK. We plan to increase the pace of our organic rollout going forward and have a strong pipeline of new sites. We expect to open a further six locations in the current financial period.”
Outdoor
JD Sports said, “We achieved revenue of £272.0m in the first half of this financial period, which was 1 percent down on the corresponding period last year having reduced the total number of stores by four to 247 by the period end. We made a small operating loss in the half of £0.2m due primarily to the impact from slower camping sales. We saw an uptick in performance in July and August when the UK weather became more unsettled.
“Our new Go Outdoors stores are performing above our expectations including new flagship stores in Derby and Swindon. We also refreshed a further seven GO Outdoors large-format stores during the period, including in Bristol and Milton Keynes.
“We acquired the remaining shares in Tiso Group Limited from the founding family, making the business 100 percent Group owned, while to enhance our customer service and efficiency further, we opened a dedicated B2C e-commerce fulfillment center at Trafford Park, enabling the existing large DC in Cheshire to focus solely on store replenishment.”
Current trading and outlook
JD Sports said, “In the last seven weeks, trading across the Group has continued in line with our expectations. At constant exchange rates, organic sales growth was 10 percent. In addition, we have continued to open new JD stores worldwide and are on track to meet our full-year store targets.
“We are acutely aware of how tough the macro-economic environment is for consumers across the world. Despite this context, assuming current exchange rates, we expect the Group’s headline profit before tax and adjusted items for the 53-week period ending 3 February 2024 will be in line with the current market consensus expectations of £1.04 billion.”
Photo courtesy Reuters
