UK: JD Sports full-year profit hit by Blacks acquisition
- Profit before tax down 14% to GBP67.4m
- Revenue increased 19.9% to GBP1bn
- Like-for-like sales down 1%
The firm today (12 March) said profit before tax for the year ended 28 January fell 14% to GBP67.4m (US$107.4m). The Blacks Leisure business dented profits by GBP2.2m.
Revenue increased 19.9% over the year to GBP1bn, with like-for-like net sales down 1% over the year. And operating profit was down 4.3% to GBP76.5m.
Gross margin fell to 49.2% from 49.5% in the previous year, which the company attributed to the impact of the acquired businesses.
The company remains cautious about its prospects for the coming year although expects "some improvement in consumer confidence from the forthcoming international sporting events," executive chairman Peter Cowgill said.
Like-for-like sales in the nine-weeks to 31 March have risen 1.2%, although margins "remain under pressure as consumers continue to be offer driven."
The company said that Blacks, which it acquired for GBP20m in January this year, needs to concentrate on the traditional core strengths of its branded and own brand outdoor offer "and re-establish its market-leading authority through a much reduced store base, a strong multichannel offer and a more appropriate central cost structure".
Since the acquisition, 81 loss-making Blacks stores have been closed, leaving a current store base of 215. The final size of the store base will depend on performance against newly negotiated rents and associated property costs.
The company said it is also evaluating central overheads and rationalising where appropriate.
"We do not expect these savings to be wholly realised until spring 2013 and so, whilst we expect a modest recovery in the second half, we now anticipate that Blacks will be earnings dilutive in the current year," said Cowgill.
Conlumino analyst Matt Piner said the results demonstrate that "although money is tight and confidence is low, young people are still prepared to spend money on looking good, even if that means cutting back elsewhere".
JD Sports has "made sure it capitalises on this attitude by upping its promotional activity and making its shoppers feel like they are getting a bargain," Piner added.
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