Sports retail giant JD Sports Fashion Plc has emerged from a year of disruption in a position of sales growth, one analyst says, with revenues for the year up GBP56.5m (US$77.8m) on the previous twelve months.
For the 52 weeks ended 30 January, total revenues edged up 0.98% to GBP6.17bn from GBP6.11bn.
The retailer cited an exceptional trading performance in the US with the Finish Line and JD fascias, driven in part by the enhanced consumer demand consequent to the US Government stimulus.
In addition, JD Sports said it is encouraged by the resilient nature of trading in its core UK and Republic of Ireland market throughout the year, adding during the initial closure period in the spring, about 70% of the combined store and online revenues from the prior year were retained through solely digital channels. This retention rate increased to 100% through November when stores in the UK were closed again.
Pre-tax profits, meanwhile, fell 7% to GBP324m from GBP348.5m a year earlier. Gross margin widened to 48% from 47%, largely due to a stronger margin in the US with strong demand consequent to the federal fiscal stimulus driving lower levels of promotional activity in the overall market compared to previous years.
Executive chairman Peter Cowgill said the Covid-19 pandemic and, more recently, the UK’s formal exit from the European Union, presented a series of unprecedented challenges which have “severely tested” all aspects of the business.
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He cited, however, a number of positive themes which give the group confidence it is at the “pinnacle of the global sports fashion industry.”
“We have a market-leading multichannel proposition which continues to enhance its relevance to consumers and has the necessary agility to progress in an environment where the retailing of international brands may see permanent global structural change.
“Our positive outlook is reflected by the fact that, even with the unique circumstances of store closures for a substantial period of the year, the group has retained substantially all of its record profitability from the prior year with a profit before tax and exceptional items of GBP421.3m.”
Looking ahead, the group expects headline profit before tax for the full year to 29 January 2022 will be in the range of GBP475m to GBP500m.
Multichannel offer proves resilient
Emily Salter, senior retail analyst at data and analytics company GlobalData, notes JD Sports has emerged from a year of disruption in the enviable position of sales growth, though a minimal rise of GBP56.5m to GBP6.17bn, with only a small fall in its operating profit, protected by its sportswear specialism and strong online offer.
“The retailer proved to be a clear destination for loungewear and athleisure for young shoppers throughout 2020, and as these consumers start socialising again, demand for items with higher price points such as fashion trainers will rise, boosting its fortunes further.
“International expansion continues to be a priority for JD Sports, which is a smart move to reduce its reliance on Western Europe which remains badly hit by Covid-19. Its main vehicle for overseas growth is acquisitions, with a slew of purchases in the last year including MIG in Poland and Shoe Palace in the US. As the US was the only market in growth in FY2020/21, with sales growing by GBP169.5m to GBP1.78bn, including a nearly 50% boost in sales from May to July due to the government fiscal stimulus, the retailer has clearly gained a loyal shopper base across the region. JD Sports’ future performance in the US will be boosted by the acquisition of DLTR in February, expanding its reach in states across the North and East.
“Additionally, the opening of JD’s first flagship store in New York’s Times Square will further raise consumer awareness and will help JD retain its positive reputation among heavyweight brands such as Nike and Adidas, the presence of which are key to its success.
“The retailer’s well-established multichannel offer has been a key driver of its success, as its young shoppers are well accustomed to shopping online. Finish Line and JD in the US boasted a 75% retention rate of sales through digital channels during temporary store closures in the first half; with JD in the UK not far behind at 70% retention during the first lockdown, rising to 100% in November. However, this online strength has not necessarily come at the expense of store performance, as like-for-like store sales for JD and Size? in the UK rose by over 4% on the year during August to October, and shoppers were eager to return to JD locations upon store reopenings in England yesterday, with queues spotted outside many of its sites, reinforcing a bright outlook for FY2021/22.”