Boosted by a stellar performance from its Sports Fashion segment and a positive contribution from the recently-acquired Go Outdoors, JD Sports Fashion PLC reported profits before taxes climbed 32.7 percent in the first half ended July 29, to £102.7 million ($136.3 mm).
Revenues jumped 41.1 percent to £1.37 billion ($1.82 bn). Beyond new stores and acquisitions, the gains were aided by “significant growth” in online sales. Comparable-store sales increased approximately 3 percent.
Total gross margin of 47.4 percent was 0.7 percent lower than the prior year partly as a result of the higher participation of the lower margin Outdoor businesses in the overall Group result after the acquisition of Go Outdoors in the second half of last year. Margin has also been impacted by sterling weakness after the Brexit vote.
“The base of our ongoing excellent multichannel retail performance comes from the continued strength of our core U.K. and Ireland Sports Fashion fascias,” said Peter Cowgill, executive chairman. “We have strengthened our foundations by significant progression internationally both instore and online so that the JD fascia now has a much broader store and multichannel consumer reach and brand influence globally.”
By segment, Sports Fashion’s sales reached £1.17 billion ($1.55 bn) against £897.5 million a year ago, up 31.8 percent. Opening profit rose to £103.2 million ($137.1 mm) from £79.9 million, a gain of 29.2 percent.
Despite a relative lack of new brand models during the period, same-store sales growth in its core JD/Size? Fascias in the UK and Ireland was 3 percent and 7 percent in mainland Europe on a constant-currency basis.
Cowgill said the sales results were “highly satisfactory” given the double digit same-store growth achieved overall in the previous three years (compound growth in the UK and Ireland over this period of approximately 50 percent) as well as double digit growth in online sales for the JD websites. Online represented 13.7 percent of net sales in the half versus 11.1 percent a year ago.
Said Cowgill, “We will continue to invest heavily in digital innovation and mobile technologies both instore and online, further enhancing the multichannel journeys available to our customers.”
A net of 23 JD stores opened in the half across mainland Europe, The Sports Fashion segment converted 12 stores in Portugal previously trading as The Athletes Foot to JD. The company expects to continue to open stores in Europe at its “current momentum” with approximately one new store opening per week on average.
In its non-JD stores in Europe, the Sprinter chain continues to perform “particularly positively” in Spain. With Sports Unlimited Retail in the Netherlands, the focus has been on consolidating the Perry Sport and Aktiesport store portfolios while liquidating excess inventories through stores acquired last year that are being closed. The process “is now substantially complete and the business is more appropriately positioned for future development,” said Cowgill.
In Malaysia, two additional JD stores opened. Its first store opened in Australia and it now has four locations. Said Cowgill, “Both territories have trading websites to complement the development of the stores and we are pleased with our overall development in these new markets.”
In its multichannel Fashion business, Scotts and Tessuti, also continues to gain momentum with each chain delivering a positive same-store performance. Said Cowgill, “We anticipate further favorable 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.”
The overall gross margin in Sports Fashion was slightly below the previous year, as previously anticipated and reported, reflecting an increase in cost prices consequent to the weakening of sterling after the Brexit vote. The overall market remains favorable.
In its Outdoor segment, sales more than doubled to £196.6 million ($261.1 mm) from £73.1 million a year ago, reflecting last year’s acquisition of Go Outdoors. The Outdoor segment showed an operating profit of £100,000 ($132,000) against a loss of £2.3 million in the same period a year ago. The profit, according to Cowgill, “largely been driven from Go Outdoors where the strong camping and outdoor living proposition benefits the first half.”
The period included a non-recurring amortization charge of £1.9 million ($2.5 mm) from the acquired Go Outdoors business. Excluding the charge, Go Outdoors delivered a profit of £4.0 million ($5.3 mm), broadly in line with expectations, and £1.6 million ahead of year-ago levels.
The Blacks/Millets business reduced its first half loss from £2.3 million to £1.6 million. Said Cowgill, “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. Both fascias delivered encouraging like for like store sales growth during the period.”
Cowgill also said the company remains in the preliminary stages of planning for an enlarged Outdoors business and doesn’t’ anticipate making any material changes to the operations in the next year. Added Cowgill, “However, we believe that the availability of product in the Go Outdoors stores, and consequently the sales, could be enhanced by having a greater proportion of stock supplied from central warehousing. This is a longer term objective.”
Cowgill provided an upbeat outlook for the second half.
“We are encouraged by the sales to date in the second half which have continued at similar levels to those in the first half supporting our continued confidence in the robustness of the JD proposition,: said Cowgill. “We expect year end outturn to be towards the upper end of market expectations, which currently range from approximately £268 million to £290 million, and remain confident that we are appropriately positioned to deliver further profitable growth.”
Photo courtesy JD Sports