JD Sports defies high street slump by increasing sales and profits

National sports retailer JD Sports has gone against the recent trend of high street brands suffering, with the announcement that the firm has seen a 10% rise in like-for-like sales during the first half of the financial year.

JD Sports put the retailer’s success down to its investment into both its online and in-store offerings.

The JD Sports Group saw a 47% increase in revenues to £2.72bn, with profits growing by 37% to £235.2m.

Peter Cowgill, Executive Chairman, said: “I am very pleased to report that this has been another period of significant progress for the Group with revenue growing by 47% and the headline profit before tax and exceptional items increasing by a further 30% to £158.6m (2018: £121.9m).

“Against a backdrop of widely reported retail challenges in the UK, it is extremely encouraging that JD has delivered like for like sales growth of more than 10% with an improved conversion reflecting consumers’ increasingly positive reaction to our elevated multichannel proposition where a unique and constantly evolving sports and fashion premium brand offer is presented in a vibrant retail theatre with innovative digital technology. JD also continues to gain momentum in Europe with a further double digit increase in total like for like sales and a net increase of 23 stores in the period.

“We are pleased by the continued positive trends to date in the second half in Sports Fashion whilst recognising the tougher comparatives ahead.

“Notwithstanding the ongoing uncertainty with regards to Brexit, the Board is confident that, without the impact from the transition to IFRS 16, the Group would have been on track to deliver headline profit before tax for the full year at the top end of market expectations which currently range from £402m to £424m. However, after adjusting for the impact of the transition to IFRS 16, we would expect to deliver results at the mid-point of expectations. We remain encouraged by our prospects for further growth.”

Industry reaction

Steve Miley, senior market analyst at www.asktraders.com

Once again JD Sports breaks the gloom that characterises the UK retail space with an upbeat half year trading report. Since the beginning of the year to yesterday’s close, the company value grew by a staggering 81% with the stock price being a few percent lower than the average analyst price target.

The revenue growth was again driven by the Sports Fashion division that recorded a 12% increase in like for like sales. The company opened another 25 JD stores over the period, boosting the revenue generation capability. Finish Line, the United States fashion sport brand performed well post-acquisition with like for like sales growth of 5%

The Outdoor segment dragged on the performance of the group. Sales recorded a 3 % decline with the loss from operation increasing 10-fold. The plans of integrating Blacks and Go Outdoors into the same merchandising system with common warehousing is still in progress, with disruptions still not providing the foreseen economies of scale and positive impact on operations.

Due to uncertainty surrounding Brexit, the company has embarked on the process of securing an 80,000 sqft space in Belgium ahead of 2021.

The company strategy of focusing on millennials and generation Z customers through a combination of multi-channel organic growth with strategic acquisitions is paying off, JD Sports being one of the retailers with increasing sales and profitability. The current global expansion efforts aim to transform what was a UK focused business into a global player in the Sports Fashion segment.

With the acquisition of Finish Line in the US completed last year and the planned opening of new stores under the JD brand, the company is well prepared to expand in the largest sports market in the world.

Russ Mould, investment director at AJ Bell

JD Sports is proof that the best-run retail businesses still have a chance of making big money in a difficult market. It appears that JD’s latest sales boost has been helped by getting more interested customers to open their wallets and actually buy items rather than simply browse, as per the reference to having ‘improved conversion’.

Now that it has made a massive success of the UK market, JD’s story is now one of international roll-out. Europe is already off to the races with the company deciding to increase the physical size of new stores, showing confidence that consumers like its offering.

Asia Pacific’s growth is being held back by property availability but operations in the US are slowly expanding. While JD calls itself the ‘undisputed king of trainers’, clothing is increasingly important to the overall proposition, selling t-shirts, hoodies, tracksuits and more.

The acquisition of boutique men’s clothing brand Pretty Green and a majority stake in designer clothing seller Giulio Fashion earlier this year would suggest it is prepared to go beyond the standard sports-related leisurewear.

It could use these brands to help expand the appeal of its stores to a wider audience. This product diversification theme is also a continuation of the 2016 acquisition of camping-to-cycling retailer Go Outdoors which has given JD a strong position in the fast-growing outdoor clothing market.