JD Group, which has announced its interim results this week, is investing in several projects to expand its European logistics infrastructure after facing incremental costs of around £20 million arising from the additional administration and duty costs that now exist as a result of the UK’s new trading arrangements with the European Union.
The warehouse at Kingsway, Rochdale has been the group’s primary facility for the UK and Europe since 2012 but the group says that despite a programme of continual investments, some of the original equipment, which was largely focussed on the picking of product for stores, will start to approach the end of its natural useful life over the next few years.
As a result, Clipper Logistics are to provide a temporary fix with the provision of a range of logistics operations, including warehousing and e-fulfilment. Longer-term JD Group has exchanged contracts on a long-term lease on a new 515,000 sq ft facility in Derby which will be used exclusively to fulfil online orders in the UK. It will be handed over for fitting out later this year with go-live anticipated for the site by Autumn 2022, although it will be early 2023 before the site is fully operational.
JD Group said it expects a capital investment of approximately £70 million on the new site in Derby over the next two years, of which approximately £35 million is expected to be incurred in this financial year. “The Kingsway facility will then largely focus on the provision of product to the JD stores in the UK although it will also have spare capacity to fulfil online orders for the JD fascia in the UK at peak periods,” said Peter Cowgill, executive chairman for JD sports Group.
He said the Brexit changes had also impacted the business. As well as increased duties he said the group had seen a a higher than expected number of trailers stopped for checking. “There is a significantly enhanced administrative burden and whilst our operational systems have been configured to sort stocks as required by the Customs Authorities and to produce the necessary documentation in the right format, this does not guarantee that goods flow freely into the EU, with an unexpectedly high proportion of trailers stopped at the border for detailed manual checking. This can add several days on to delivery timelines but, until a particular trailer is pulled for inspection, we do not know which specific deliveries will be impacted.”
He said the company had been able to reduce its exposure to the adverse consequences of Brexit through an 80,000 sq ft third-party warehouse in Southern Belgium which opened in Autumn 2020. “This site is already receiving stocks and fulfilling a large proportion of the core ranges and fastest moving lines required for stores in Mainland Europe.”
But he said the facility does not provide a solution for online orders and so JD Group has signed a short-term lease on a 115,000 sq ft facility in Lille, Northern France which will be dedicated to processing online orders for several countries across Mainland Europe. “The fit-out of this site and installation of group systems has now commenced with customer orders beginning to be fulfilled from this site ahead of the peak trading period,” he said.
The company is also investing in a new site in the Netherlands. “As our business in Western Europe increases in scale and complexity, we are looking to build a cost-effective, service-orientated supply network which can support business growth both in stores and online. The first stage of this is a larger, permanent facility which will have the capacity to process substantially all of the volume required for our stores and online orders in Western Europe.”
The group is currently finalising legal contracts for the lease of a 620,000 sq ft facility in Heerlen, South-East Netherlands. Construction has begun and is scheduled to be handed over in the second half of 2022 for initial fitting out. “We would hope to begin fulfilling from this site on a small-scale manual basis in the second half of 2023 although the current long lead times on the supply of warehouse automation equipment means that it will likely be mid-2024 before a more automated solution is available and the site is fully operational,” he said.
“We currently estimate that capital expenditure of approximately £100 million will be incurred before Summer 2024 to bring the site into full operational use with the majority of this spend being incurred in the period between Summer 2022 and Summer 2024.”
Longer-term, this facility will likely be complemented by smaller regional hubs near major urban areas. Meanwhile, JD’s new 65,000 sq ft warehouse near Dublin will begin receiving stock from suppliers shortly, enabling the supply of product to stores and fulfilment of online orders in the Republic of Ireland ahead of the peak trading period.
