JD Sports Fashion reported a rise in annual earnings and indicated Finish Line’s comps in the U.S. grew 9 percent; however, the UK’s largest sneaker chain cut its dividend and warned the coronavirus outbreak has constrained its short term progress.
For the 52 weeks ended February 1, the company’s revenue increased 29.4 percent to £6.11 billion from £4.72 billion the year before. For financial 2020, JD Sports said like-for-like sales at its core in global Sports Fashion banners were up 12 percent on an annual basis, with the core UK and Ireland sales up 10 percent.
Group EBITDA before exceptional items on a comparable accounting basis increased 28 percent to £623.6 million and profit before tax and exceptional items on a comparable accounting basis increased 31.1 percent to £465.6 million.
Pretax profit edged higher 2.5 percent to £348.5 million from GBP339.9 million.
JD Sports also said it had an “encouraging performance” in the U.S. with operating profit before exceptional items on a comparable accounting basis of £97.9 million, nearly triple the £26.6 million level for the 33 weeks post-acquisition the prior year. On June 18, 2018, JD Sports acquired The Finish Line Inc. for $558 million (£400.5 million).
JD Sports also noted that it grew its JD store base in the U.S. to 11 stores with the first flagship store in Times Square, New York, now anticipated to open later in the summer.
The improvement in the U.S. profits was due to
- Like for like sales growth for the proforma 52-week period across the combined Finish Line branded stores and website of 9 percent;
- Gross margin increased to 42.9 percent, up from proforma 52 weeks through February 3 2019 of 42.2 percent.
However, JD Sports, as forewarned, cut its dividend in an effort to preserve cash resources to better navigate the crisis. In April, JD had said it does not intend to pay a final dividend due to the pandemic.
JD Sports further warned COVID-19 continues to affect its commercial operations and will have a material impact on the results for financial 2021. It noted stores began to re-open in some countries from the end of April with the majority of the group’s stores now trading again. Initial footfall has been weaker in malls and shopping centers, particularly in Northern Europe at weekends, as consumers remain nervous about the risks associated with densely occupied enclosed spaces, the company added.
“We were encouraged by the continued positive trading in the early weeks of the year prior to the emergence of Covid-19 and we firmly believe that we are well placed to regain our previous momentum. Looking longer-term, there is inevitably considerable uncertainty as to what the effect of COVID-19 will be on consumer behavior and footfall with future store investments highly dependent on rental realism and lease flexibility. Ultimately, however, we remain confident that we have a market-leading multi-channel proposition which has the necessary flexibility and agility to prosper within a retail environment that may see profound and permanent structural change,” said Chair Peter Cowgill.
During the year the retail group also opened 52 new JD shops in Europe and 18 in the Asia Pacific. At year-end, the retailer sold online and from 2,203 stores around the world, including 402 JD Stores and 153 fashion stores in the UK and Republic of Ireland.
In the U.S., the store count includes 11 JD Sports locations, 508 Finish Line stores and 295 Finish Line in-store shops inside Macy’s.
Photo courtesy Finish Line