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JD Sports Sees Decline In Profits But Has Positive Outlook For Remainder Of Year
Like many businesses this year, JD Sports has experienced a rise in digital sales as a result of global lockdowns and a sharp decline in physical sales due to shop closures. However, overall, JD saw decline in profits for both their ‘Sports Fashion’ and ‘Outdoor’ segments but retained 90% of their total revenues.
Sports retail powerhouse JD Sports just released their 2020 mid-year results and forecasts for the full financial year closing Feb 2021. If it had to be summed up in one sentence: no effort has been spared to counter COVID effects.
Despite the global pandemic, revenue for the first semester only fell 6.48% versus the same period last year, from £2,721.2m to £2,544.9. Profit before tax fell more drastically, by 68.05%, reaching £41.5m vs £129.9m last year.
Peter Cowghill, Executive Chairman, commented:
“Ultimately, given the unique circumstances of this trading period, we are reassured by the strength of the JD brand as demonstrated by the retention of more than 90% of the total revenues. However, it should be recognised that this has necessitated additional costs principally relating to the provision of enhanced health and safety measures, in all areas of the business, together with increased costs of online fulfilment, including performance marketing.”
JD splits its business between the “Sports Fashion” segment and the “Outdoor” segment*.
Sports Fashion segment revenues declined only -4.6% and generated a profit of £81.6m, while the Outdoor segment’s revenues fell -30.2%, generating a loss of £37.2m.
In a move to fix the Outdoor segment, the Go Outdoors business was restructured during the first semester, reacquired via a pre-pack administration. The move will allow JD to review all contracts and assets. Stock management systems have already been merged with those of the Blacks and Millets businesses to gain efficiencies.
Despite headwinds during those first 6 months, JD plans an annual pre-tax profit of “at least” £265m. Reaching such number would be below the £446m reported last year, but above current market forecasts of £200m.
JD’s net cash balance shows an impressive £764.9m, vs £118.1m last year.
That exceptional performance is the result of a high digital performance, which allowed significant retention of sales; excellent performance in the US, capitalising on the US government fiscal stimulus; no interim dividend distributed to shareholders and two temporary emergency measures: extensions to suppliers terms and rent deferrals to landlords.
Beyond COVID, JD has not forgotten to prepare for Brexit as negotiations are still ongoing between the EU and UK. A new test warehouse in Belgium is now operational. It is too small to support the entirety of JD’s European business, but “learnings are being used to shape the group’s long-term supply chain strategy for Europe”.
JD’s results were well received by stock markets. Following the announcement, JD Sports’ stock rose 8% in early deals. “This is a remarkable performance given the circumstances” said analyst Michael Hewson of CMC Markets.
*JD Sports Segments as of Aug 1, 2020.
Outdoor: 239 doors.
Blacks (57), Millets (94), Ultimate Outdoors (5), Tiso (13), Go Outdoors (66), Go Fishing (4).
Sports Fashion: 2210 doors.
JD (800, incl. 400 in UK and Rep of Ireland, 315 in Europe), Size? (36), Finish Line (790, incl. 295 at Macy’s), Livestock (4) and others (580) – including :Chausport (France), Sprinter (Spain), Sport Zone (Portugal, Spain & Canary Islands), Perry Sport / Aktiesport (Netherlands), Hot-T (South Korea).
JD Revenues per geographical zone