UK: JD Sports' first-half hit by Blacks costs
- H1 net profit fell to GBP2.8m from GBP20.1m
- Revenue rose 26.4% o GBP555.98m
- Plans to close more Blacks stores
JD Sports has revealed plans to close more Blacks stores after the outdoor wear retailer weighed down the group's first-half results.
The company today (18 September) said it plans further closures beyond the 97 stores it has shuttered since January. Currently operating 198 stores, it envisages operating a store base of around 150 stores.
Most of the stores are expected to continue to trade through to Christmas, but the long-term structure of its store base will depend on an assessment against newly negotiated rents and other property costs, JD Sports said.
JD Sports acquired Blacks from administrators in January this year for GBP20m (US$32.5m). But it emphasised that when it acquired the business it inherited a limited and unbalanced stock lacking many core high-performing lines, as well as an excessively large and over-rented store portfolio.
Blacks recorded an operating loss of GBP10m over the half-year ended 28 July, with GBP9m of this loss arising in the first three months when the stores' stock position was at its weakest.
The losses incurred by the division pulled down the group's overall results, with profit before tax falling to GBP2.8m from GBP20.1m in the first half of last year. Revenue rose 26.4% to reach GBP555.98m.
The company's sports fascias JD, Size?, Chausport, Sprinter and Champion Sports recorded a 6.8% drop in operating profits before exceptional items to GBP18.9m. The decline was blamed on a warehouse move, costs from the Government's Carbon Reduction Commitment Energy Efficiency Scheme, and ongoing efforts to strengthen resources in key business areas such as multichannel.
Revenue in the division increased 15% to GBP371.2m, with like-for-like sales up 1.2% in the group's UK and Irish stores.
The fashion division, which includes Bank, Scotts, Cecil Gee and the recently acquired Tessuti and Originals fascias, saw operating losses widen to GBP5.3m from a loss of GBP3.4m last year. The losses were attributed to costs relating to the acquisitions of Tessuti and Originals, along with investments to expand the commercial and design teams at Bank.
Revenue in the division increased 10.2% to GBP65.6m, with like-for-like sales up 0.7%.
Commenting on the results, Conlumino analyst Matt Piner said: "In the longer term, the Blacks acquisition could also prove to be a shrewd move, with JD already making impressive strides in stabilising and re-shaping a business which has been through several years of turmoil.
"Although a GBP10m loss has been sustained due to Black's stock and cost situation, this represents a reasonable price to pay given the business was originally picked up at a fraction of its potential worth."
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