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JD Sports Plc Announce Results For Financial Year Ended January 2021

For the 52 weeks ending January 30, 2021, JD Sports Fashion Plc reports a pre-tax profit of £324.0 million (profit pre-tax & exceptional items, £421.3 million). Q3 saw sales growths across the Group’s Sports, Fashion and Outdoor branches, with Outdoor experiencing a sales growth of 10%, across both physical and digital channels. These increases can be attributed to the lessening of COVID restrictions.

Press Release:
JD Sports Fashion Plc the leading retailer of sports, fashion and outdoor brands, today announces its Final Results for the 52 weeks ended 30 January 2021

Highlights of the year
1)Transformational developments in the United States:

• Exceptional trading performance in the Finish Line and JD fascias in part driven by the enhanced consumer demand consequent to the US Government stimulus
• First flagship store for JD opened in Times Square, New York with a positive reaction from customers and international brand partners
• A further 37 former Finish Line stores converted to JD with 49 stores trading as JD at the end of the year
• Acquisitions of Shoe Palace (based in California) and, subsequent to the year end, DTLR (based in Maryland) complement the strengths of the existing Finish Line and JD fascias and significantly enhance the Group’s exposure to key consumer demographics on the West Coast and East Coast of the United States

2) International development of JD in other markets continues to progress positively although the number of new stores slowed temporarily as a consequence of restrictions on construction and fit out works with:

• Net increase of 31 JD stores across Mainland Europe
• Net increase of five JD stores in the Asia Pacific region

3) Outdoor business returned to profitability in the second half of the year with a strong performance in key categories

4) Physical retail in England and Wales now re-opened

5) Physical retail in United States has largely traded free from Covid related restrictions in the new financial year to date

6) Net cash at the period end of £795.4 million reflects the high point of the working capital cycle and is stated before:

• Completed acquisitions in the new year to date with aggregate cash consideration paid of approximately £380 million
• Reversal of temporary factors, including agreed tax deferrals and rent deferrals across our global businesses, totaling in excess of £125 million

7) Ongoing significant investments in logistics to mitigate against the risks associated with:

• Requirement to operate with social distancing
• Duties payable consequent to the form of the UK’s trade agreement with the European Union

8) Dividend payments resumed with final dividend of 1.44p per share proposed which recognises the significant contribution to profitability from the Group’s international operations, particularly those in the United States

Peter Cowgill, Executive Chairman, commented:
“The global COVID-19 pandemic and, more recently, the UK’s formal exit from the European Union have presented a series of unprecedented challenges which have severely tested all aspects of our business including our multichannel capabilities, the robustness of our operational infrastructure and the resilience of our colleagues. However, at all times, the Group has strived to do the right thing for all stakeholders.

“Notwithstanding these well publicised challenges, a number of positive themes have been increasingly apparent through the year which gives us confidence that, as we begin to emerge from the worst of the disruption, JD 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 £421.3 million (2020: £438.8 million). We are indebted to all of our teams in our different territories for their determination and resilience in dealing with the potentially life changing challenges of the past year and we fully acknowledge the contribution from all of our colleagues in the delivery of this excellent result.

“Our recent completed acquisitions of Shoe Palace and DTLR in the United States together with the conditional acquisition of Sizeer in Central and Eastern Europe are important steps in our evolution which will transform our consumer connection in these markets and further develop our key brand relationships.

“Whilst we must recognise the substantial level of temporary store closures to date and ongoing, we remain confident that we are well placed to benefit from the opportunities that prevail and, at this early stage, our current best estimate is that the Group headline profit before tax for the full year to 29 January 2022 will be in the range of £475 million to £500 million.”

Below are excerpts from the Executive Chairmans Statement UK and Republic of Ireland Sports Fashion:
“We are encouraged by the resilient nature of trading in our core UK and Republic of Ireland market throughout the year. During the initial closure period in the Spring approximately 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. There is cause for optimism in the future of our store estate though as, even with materially lower footfall into many city centres and major shopping malls, sales in like for like stores grew by more than 4% in the Q3 period from August to October, which was largely a period free from restrictions.

“Recognising the benefits that accrue from investing in our retail estate in terms of consumer engagement, we have continued with our programme of upsizes in key locations with bigger stores opened during the year in Exeter, Plymouth and Brighton. We intend to continue with this programme in the new financial year with new larger format stores scheduled to open in a number of key locations including Belfast, Edinburgh and Stratford, East London.”

Premium Fashion
Our premium brand Fashion businesses are an important part of our Group, further elevating our overall proposition. Mainline Menswear, which to all extents is a pureplay online business, had a very strong year in particular with new customers attracted by its reputation for a high quality digital and customer service experience. Elsewhere, in those businesses which have both physical and digital offers, we are reassured by the fact that the retention of sales through the various temporary closure periods was broadly consistent with that seen in JD. We continue to make selective complementary acquisitions in this area where they expand our geographical presence or brand relationships.

Europe Sports Fashion
Across Europe, the average retention of sales through the period of the temporary store closures in the Spring was approximately 35% with a stronger retention in Northern Europe where online is more mature. Footfall was initially slow to recover as stores re-opened although it progressively improved through the Summer and early Autumn. Like for like store sales were positive in Q3 in many markets although the significant exception to this were the stores in Iberia where a large part of employment, and consequently the wider economy, is linked to tourism.

Restrictions were reintroduced before Christmas in a number of markets including the closure of all stores in Germany and the Netherlands. The retention of sales through this closure period in these countries was approximately 60%, which is slightly ahead of the retention that we saw in the Spring. There continue to be partial closures or restricted trading hours elsewhere including Italy, France and Spain.

As would be expected, as a direct result of the COVID-19 outbreak, the number of new store openings this year was reduced with 31 net new stores opened during the year, which included a flagship style store on the key shopping street of Rue de Rivoli in the centre of Paris. We expect to increase the number of new stores in the new financial year with openings closer to our previously stated ambition of one new store per week on average.

North America Finish Line & JD
The Finish Line and JD businesses have had an exceptional year. There are a number of reasons for this:

• The United States is widely regarded as the most mature market in the world for online trading with our digital team at Finish Line highly regarded within the industry. As such, it is not surprising that, of all our global businesses, it was Finish Line and JD in the United States that saw the greatest retention rate through the temporary closure period in the first half with online revenues equivalent to approximately 75% of the combined physical and digital revenues in the prior year.
• Consistent with other national retailers in the United States, our businesses benefitted significantly from May to July from the fiscal stimulus made available by the Federal Government. Total revenues across physical and digital channels increased by nearly 50% in this period. This strong demand resulted in sector wide lower inventory levels which are not expected to normalise until later in 2021. Consequently, there was less promotional activity through the rest of the year than might have been expected which has benefitted gross margins in the second half of the year.
• We are encouraged by the development of JD in the United States with 49 stores trading at the end of the year (2020: 11) including the conversion of 37 former Finish Line stores, the majority of which were converted in the lower cost ‘badge flip’ style, complementing the opening of our first flagship store in Times Square, New York. It is our intention to convert up to 50 more Finish Line stores to JD in the current financial year.

Outdoor
We acknowledge that the restructure of Go Outdoors in the first half of the year was a difficult process. However, we believe that it was a necessary exercise as the inflexible and uncompetitive terms of the historic property leases in the business meant that Go Outdoors was in danger of becoming a material drain on Group profitability for the foreseeable future. The Group protected the interests of creditors in this process by honouring all liabilities with regards to branded stock suppliers, employees, HMRC taxation, customer returns and historic gift card sales.

Further, all pre‑existing Go Outdoors employees transferred across to the new business with their previous terms and conditions of employment preserved. To date, two significantly loss-making stores have been closed with new terms either completed or substantially agreed on a further 53 stores. Dialogue continues with landlords on the remaining stores.

This restructure has given Go Outdoors a positive platform from which to develop and we intend to invest in all aspects of the business to provide an instore and digital experience which inspires consumers to get outdoors. We will do this by presenting authoritative product offers in key categories. This includes fishing where we have now started to integrate the Fishing Republic business into larger Go Outdoors stores by creating specialist areas for fishing products. In December 2020, we further delivered on this approach through the acquisition of the highly regarded Naylors equestrian business which, on acquisition, had three standalone stores. As with Fishing Republic, it is our intention to include Naylors branded equestrian areas in Go Outdoors stores where space allows.

The Go Outdoors, Blacks, Millets and Ultimate Outdoors businesses now operate on common merchandising systems with shared commercial resources. Further, all stock is now fulfilled from a separate dedicated warehouse at Middlewich. This operational integration provides the most cost-efficient platform for these businesses to develop.

We are encouraged by the performance of all of our Outdoor businesses in the second half of the year. In the Q3 period, which was largely a period free from trading restrictions, we saw sales growth across the combined physical and digital channels of more than 10%. Many of our stores had to be closed again at various times through Q4 with total sales retention through the closure periods of approximately 80%, which was ahead of the retention rates that we saw in the initial closure period in the Spring.