JD Sports Fashion Plc, the U.K.-based athletic footwear chain that owns Finish Line, Shoe Palace and DTLR in the U.S., said its North American business “had an exceptional year” in 2020. Strongly developed online operations boosted Finish Line’s gains amid the pandemic, the benefit of federal stimulus checks and early success with the rollout of the JD chain in the U.S.

“The Finish Line and JD businesses have had an exceptional year,” said JD Sports in a statement. “There are several reasons for this:

  •  The United States is widely regarded as the most mature market globally for online trading with our digital team at Finish Line highly regarded within the industry. As such, it is not surprising that, of all our global businesses, it was Finish Line and JD in the United States that saw the most significant retention rate through the temporary closure period in the first half with online revenues equivalent to approximately 75 percent of the combined physical and digital revenues in the prior year.
  • Consistent with other national retailers in the United States, our businesses benefitted significantly from May to July from the fiscal stimulus made available by the Federal Government. Total revenues across physical and digital channels increased by nearly 50 percent in this period. This strong demand resulted in sector-wide lower inventory levels, which are not expected to normalize until later in 2021. Consequently, there was less promotional activity through the rest of the year than might have been expected, which has benefitted gross margins in the second half of the year.
  • We are encouraged by the development of JD in the United States with 49 stores trading at the end of the year (2020: 11), including the conversion of 37 former Finish Line stores, the majority of which were converted in the lower-cost ‘badge flip’ style, complementing the opening of our first flagship store in Times Square, New York. It is our intention to convert up to 50 more Finish Line stores to JD in the current financial year.”

North American Sales For Finish Line And JD Climb 6.4 Percent In 2020
JD Sports said total revenues in the Finish Line and JD businesses in the U.S. increased 6.4 percent to £1,704.3 million in the fiscal year ended January 30 from £1,601.5 million a year ago. Profit before tax and exceptional items increased significantly to £156.6 million from £94.2 million the prior year. Elsewhere in North America, in the six-week period after completion, the Shoe Palace business has contributed a profit before tax and exceptional items of £13.9 million with revenues of £56.1 million.

Highlights of North American progress include opening the first flagship store for JD in Times Square, New York in October with a positive reaction from customers and international brand partners. A further 37 former Finish Line stores were converted to JD, with 49 stores trading as JD at the end of the year.

The year ended with 464 Finish Line stand-alone locations, with 37 transfers and six closures year over year. There were also 290 Finish Line in-store shops inside Macy’s, down eight locations year over year.

On December 14, 2020, JD Sports Fashion Plc completed Shoe Palace Corporation’s acquisition for $672.9 million. JD Sports said Shoe Palace had an established retail presence in California, Texas, Nevada, Arizona, Florida, Colorado, New Mexico, and Hawaii, with 163 stores trading under the Shoe Palace fascia and four stores trading as Nice Kicks.

JD Sports said in its statement, “The acquisition of Shoe Palace significantly enhances our connection with the Spanish speaking communities on the West Coast and in the Southern border states and is, therefore, an excellent complementary fit with our existing Finish Line and JD businesses whose consumer connection is at its strongest in the industrial States in the North and East of the United States.”

On March 17, JD Sports completed DTLR Villa’s acquisition, based in Baltimore, for $495 million. At acquisition, DTLR operated from 247 stores across 19 states, principally in the North and East of the United States. JD Sports said in its statement, “The acquisition of DTLR, with its differentiated consumer proposition, will enhance the Group’s presence in the north and east of the United States complementing not only our existing JD and Finish Line fascias but also the recent acquisition of Shoe Palace based on the West Coast.”

Companywide Sales Up 1 Percent In Fiscal Year
Companywide, JD Sports reported earnings in 2020 were down due to the pandemic, but the company reinstated its dividend and predicted a strong jump in earnings in 2021 as the Covid-19 pandemic recedes and restrictions are lifted.

The Group’s total revenue increased by approximately 1 percent in the year to £6,167.3 million (2020: £6,110.8 million). This includes total revenues of £1,760.4 million from our combined businesses in the United States (2020: £1,601.5 million), of which Shoe Palace, which was only part of the Group for approximately six weeks following its acquisition on 14 December 2020, contributed £56.1 million. Given the temporary closure periods in the year, it would not be meaningful to present sales on a like-for-like basis.

Total gross margin in the year of 48.0 percent was slightly ahead of the prior year (2020: 47.0 percent) largely due to a stronger margin in the United States with strong demand consequent to the federal fiscal stimulus driving lower levels of promotional activity in the overall market compared to previous years.

Profit before tax and exceptional items decreased slightly to £421.3 million (2020: £438.8 million). The profit before tax and exceptional items includes a profit of £170.5 million (2020: £94.2 million) from our combined businesses in the United States, of which Shoe Palace contributed £13.9 million in the six weeks post-acquisition.

After taxes and non-recurring items, profits came to £356.6 million from £392.6 million the prior year.

Executive Chairman Comments
Peter Cowgill, Executive Chairman, said in a statement, “The global COVID-19 pandemic and, more recently, the UK’s formal exit from the European Union have presented a series of unprecedented challenges which have severely tested all aspects of our business including our multichannel capabilities, the robustness of our operational infrastructure and the resilience of our colleagues. However, at all times, the Group has strived to do the right thing for all stakeholders.

“Notwithstanding these well-publicized challenges, several positive themes have been increasingly apparent through the year, which gives us confidence that, as we begin to emerge from the worst of the disruption, JD is at the pinnacle of the global sports fashion industry. We have a market-leading multichannel proposition, which continues to enhance its relevance to consumers and has the necessary agility to progress in an environment where the retailing of international brands may see permanent global structural change.

“Our positive outlook is reflected by the fact that, even with the unique circumstances of store closures for a substantial period of the year, the Group has retained substantially all of its record profitability from the prior year with a profit before tax and exceptional items of £421.3 million (2020: £438.8 million). We are indebted to all of our teams in our different territories for their determination and resilience in dealing with the potential life-changing challenges of the past year, and we fully acknowledge the contribution from all of our colleagues in the delivery of this excellent result.

“Our recent completed acquisitions of Shoe Palace and DTLR in the United States together with the conditional acquisition of Sizeer in Central and Eastern Europe are important steps in our evolution which will transform our consumer connection in these markets and further develop our key brand relationships.

“While we must recognize the substantial level of temporary store closures to date and ongoing, we remain confident that we are well placed to benefit from the opportunities that prevail and, at this early stage, our current best estimate is that the Group headline profit before tax for the full year to January 29, 2022, will be in the range of £475 million to £500 million.”

Photos courtesy JD Sports