JD Sports bucks retail trend by posting 19% rise in profit

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JD Sports has this morning announced a 19% rise in profit before tax to £121.9m in its first half results. Overall like-for-like sales grew by 3%, though this was driven by the online channel, as like-for-like sales in stores were flat.

In the sports fashion business, like-for-like sales rose by 4%, and in the outdoor business (which includes Go Outdoors and Millets) like-for-like sales growth was just marginally positive, though that was after a good first quarter that saw growth of 7%. The net result was the outdoor business registered a £3.8m operating loss however.

A decision not to engage in discounting in the Sports Fashion business meant gross margins rose from 47.4% to 48.2%.

Overall, profits for the year are expected to come in at between £337m and £345m.

Analysis: Laith Khalaf, Senior Analyst, Hargreaves Lansdown

There’s not too many retailers on the UK high street who can boast a 50% rise in their share price over the last year, but that’s just the sweet spot JD Sports finds itself in. The retailer is now knocking on the door of the FTSE 100, and currently matches Marks & Spencer in terms of its equity market value.

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What’s more, earnings are continuing to rise. The top line has grown, largely thanks to digital sales, and a decision not to engage in tit-for-tat discounting has meant more revenues flowing through into profits.

The company’s outdoor business had a mixed performance, as it was subject to the yin and yang of the Great British weather. The Beast from the East led to a flurry of sales at the beginning of the year, but the hot summer took a toll on demand for waterproof anoraks. C’est la vie in the highly seasonal world of retailing.

JD’s performance has undoubtedly been bright, but it’s not short of aspirations either, notably cracking the US market after its recent acquisition of the American shoe retailer, Finish Line.

Expansion hasn’t come cheap, and that’s meant JD Sports has swung from having net cash of £223m on the balance sheet, to being in debt to the tune of £85.1m . That level of borrowing is well-covered by earnings though, and shareholders won’t mind the additional spend as long as it bears fruit.

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JD’s performance shows it’s possible to thrive on the UK high street, though future store openings in this country are likely to be limited. That means the retailer will be looking to digital and overseas sales, and possibly further acquisitions, to drive growth forward from here.

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