JD Sports reports rising sales in first half-year free of Covid-19 in-store trading restrictions – but profits are dented by supply shortages and end of fiscal stimulus

Image courtesy of JD Sports

Image courtesy of JD Sports

JD Sports today reports rising sales but falling profits in the first half-year since 2019 in which all of its stores have been free of Covid-19 restrictions. 

Profits, particularly in North America, were hit both by supply shortages from some international brands and from the withdrawal of Covid-19 stimulus packages. In recent months, many brands have reported prioritising their own direct-to-consumer channels above those of wholesale customers at a time of product shortages and supply chain delays. However, JD Sports says its relationship with the international brands it works with is now as strong as ever. 

JD says that following softer sales – particularly online – in a relatively warm August and early September, sales are now ahead of the same time last year. The retailer also says it is making progress with its move towards fulfilling European stores and online orders from within the single market. 

During the first half, the multichannel sports fashion and outdoor retailer was fined £4.3m by the CMA for breaching an official order against sharing commercially sensitive market information regarding its takeover of Footasylum without consent. Peter Cowgill, previously chief executive and chairman of JD Sports, has since left the business. He has since been replaced by Andrew Higginson as chair and by incoming chief executive Régis Schultz who brings expertise in digitalisation gained in Asia and the Middle East to the JD Sports multichannel strategy. Cowgill, who led the business for 18 years, will offer advice on a consultancy basis over the coming three years. In August, JD Sports sold Footasylum for £37.5m to Aurelius Group. 

JD Sports non-executive chair Andrew Higginson says the first-half result was at the top end of group expectations in a way that demonstrated “the ongoing resilience of our global proposition and the strength of our consumer engagement”.

He adds: “The progress that the group is making in its global markets is reflected by the fact that total sales in the group’s organic retail businesses were 5% ahead of the prior year. This performance is very encouraging, as notwithstanding the non-comparability of trading conditions in the United States, the group has also faced numerous other challenges in the period including the well-publicised shortage of supply from a number of the international brands and the challenging global macro-economic situation.

“JD continues to be the partner of choice for many international brands who see our premium fascias as the natural home for their latest ranges and freshest new styles. Our relationship with these brands and our access to product is as strong as it ever has been.” 

He concludes: “Whilst the overall performance continues to be encouraging and the result for the half year was at the upper end of the board’s expectations, it must also be recognised that the most material trading periods lie ahead. Given the widespread macro-economic uncertainty, inflationary pressures and the potential for further disruption to the supply chain with industrial action a continuing risk in many markets, it is inevitable that we remain cautious about trading through the remainder of the second half. Despite this, the board maintains its view, at this point, that the headline profit before tax and exceptional items for the year ending 28 January 2023 will be in line with the record performance for the year ended 29 January 2022.”

Half-year figures

JD Sports today reports revenues of £4.4bn in the 26 weeks to July 30 2022. That’s 30.5% up from £3.9bn at the same time last year. Sports fashion is the largest part of the business with first-half revenues of £4.1bn and  at the end of the period it traded from 3,154 stores and online, under brands including JD, Size? and Tessuti. Outdoor revenues – made online and through 248 stores, including Go Outdoors, Blacks and Millets – came in at £274.7m. Pre-tax profits came in at £383.5m before one-off costs – the majority related to financial hedging activity and to write downs in asset values – of £85.2m. That’s 12% down from £439.5m a year earlier. Bottom-line pre-tax profits of £298.3m were 18% down from £364.6m last time. 

The sports fashion and outdoor retail group says that the half-year was the first since 2019 that all its businesses had traded free from Covid-19 restrictions, but that the end of restrictions also meant a return to more normal trading, without fiscal stimulus, particularly from the US government. The group returned to profit in Europe (£57.1m from a loss of £7.2m) while profits, before tax and exceptional items, in its UK and Republic of Ireland market came in at at £153m, down 12% from £174.2m last time. But pre-tax profits in North America fell 46% to £130.4m from £245.5m last time as the market was particularly affected by the withdrawal of government Covid-19 fiscal stimulus, and by supply shortages from brands.

The group says like-for-like sales in the half-year were 25% ahead of the same period in pre-pandemic 2019. 

In the first six weeks of the second half, total sales were about 8% ahead of the previous year. Trade in the UK softened online in August and early September – JD Sports says this was because customers were slow to buy heavier autumn clothing when the weather remained warm and dry, but that performance has since improved. 

Operations & logistics

The JD group is now fitting out a new 515.000 sq ft Derby warehouse, that will be used exclusively for UK online orders from the first quarter of next year. It is also building a new 620,000 sq ft warehouse in the Netherlands, for use from mid-2024, and is expanding warehouses in Belgium an France as it looks to shift more of its Europe store and online fulfilment to the single market. Currently 90% of store deliveries and 15% of online orders re fulfilled from these sites. 

Its 512,000 sq ft warehouse in California, capable of serving about 400 shops, is now operational. Solar panels on the site now generate 96% of the power it requires. 

Sustainability strategy

JD Sports says it is on track to use 100% renewable energy in its Western Europe business by the end of the year, while its use of ‘better cotton’ in its private label business stands at 98.5%. 

JD Sports is a Leading retailer in RXUK Top500 research. 

Read More

You may also like

Register for Newsletter

Created with Sketch.

Receive 3 newsletters per week

Created with Sketch.

Gain access to all Top500 research

Created with Sketch.

Personalise your experience on IR.net