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JD Sports says multichannel gave it a competitive advantage in a year of unprecedented challenges

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JD Sports says its multichannel strategy has given it a competitive advantage during the pandemic as it today reports rising sales and a smaller hit to profits than might have been expected in a year in which its shops were shut for much of the time during Covid-19 lockdowns.

The JD Sports group turned over £6.2bn in the year to January 30 2021 – 0.9% up on the previous year. Pre-tax profits before one off costs came in 4% lower at £421.3m, after after one-off costs it reported a bottom line pre-tax profit of £324m. One-off costs of £97m were primarily related to write down in goodwill at Footasylum (£55.6m), with the acquisition subject to a continuing CMA investigation, as well as the £20m restructuring of Go Outdoors. That’s 7% down from the £348.5m it reported last time. It now expects to report pre-tax profits of between £475m and £500m in the year to January 2022.

The retail group has benefited from the consumer shift towards casual wear and sportswear over the last year– and expects this to continue. JD Sports executive chairman Peter Cowgill says the  “unprecedented challenges” of the Covid-19 pandemic and Brexit have “severely tested all aspects of our business including our multichannel capabilities, the robustness of our operational infrastructure and the resilience of our colleagues”.

Cowgill also says the retail group’s response to those challenges gives it confidence that “JD is at the pinnacle of the global sports fashion industry”. He says: “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.”

Engaging with brands and customers across channels

JD Sports says factors behind its success include the high regard that brands have for it and a shared vision of an “elevated marketplace” built on long-term brand collaborations. International expansion – through five acquisitions in North America and beyond – helps it to build brand relationships. 

At the same time it describes a “deep bond” with customers who “expect to engage with us through any channel and be presented with an innovative and exciting product mix that meets their style aspirations.” It says a combination of stores and online sales has helped it to build that connection with customers, with stores providing the platform where customers can see and try the products, while online provides agile and flexible speed of service.

The use of online helped the group’s brands retain a growing share of its sales during the lockdowns of the last year. In the UK, its JD and Size? brands, for example, used digital channels to take 70% of sales made in the previous year via both online and store channels in last spring’s first lockdown. But by November’s lockdown it was making 100% of its prior year sales online. 

This effectiveness varied by market, with 35% of prior year European sales being made online during last spring, and an “exceptional year” for the mature US market, where 75% of prior year sales were taken online at its Finish Line business.

Store outlook

Despite the apparent shift online, JD Sports says it is optimistic for the future of its stores because sales in like-for-like JD and Size? stores were up by more than 4% between August and October, when stores were largely open. Meanwhile, its largely online-only premium men’s fashion business has won new customers during the year. 

During Covid-19 lockdowns the retailer withheld the payment of some rents in markets around the world when it had to close stores as a result of the pandemic. Today it said it had worked with its landlords in all markets to find agreements, an had been able to do so in most cases. It continues to talk to the landlords who have not come to agreements. 

It also used a formal restructuring to renegotiate rents on its Go Outdoors business, with two stores closed and new terms agreed on 53 stores. 

Rethinking logistics in the light of Covid-19 and Brexit

JD Sports is now expanding its warehousing and distribution operations in order to deal with the challenges of Covid-19 and Brexit. In the UK, it is working with Clipper Logistics to provide warehousing and fulfilment for operations at a time when online demand continues to be high and social distancing seems likely to have to stay in place “for the foreseeable future”. 

The retail group opened an 80,000 sq ft warehouse in Belgium in the autumn to handle goods destined for stores in mainland Europe. However, since this does not solve the problem of online orders or dealing with products going to the Republic of Ireland, it is now fitting out a 65,000 sq ft warehouse near Dublin which will become operational in the second half of the year. At the same time it is considering opening a larger, permanent warehouse in Europe to handle online and store orders for that market. If this does go ahead, however, it is not likely to open before the autumn of 2022. 

JD Sports is a Leading retailer in RXUK Top500 research, Footaslyum is ranked Top100 and Size? and Go Outdoors are ranked Top150.

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