JD Sports owner’s profits soar thanks to US shoppers spending stimulus cheques
The owner of JD Sports, Blacks Leisure and Millets has upgraded annual profit expectations by £150m after sales were boosted by US shoppers spending their Covid fiscal stimulus cheques on trainers and athleisure gear.
The retail group, which owns more than 3,000 stores in the UK, US, Europe and Asia, raised its target for the year to £750m after pretax profits soared to a record £364.6m in the six months to 31 July, almost nine times that of the same period a year before when retailers were hit by high street lockdowns around the world. Sales rose 56% to £3.9bn in the half year.
JD Group said all US businesses benefited from the US government’s fiscal stimulus package which gave direct payments to individuals, much of which was spent in stores. The group’s executive chairman, Peter Cowgill, said JD outlets had performed particularly well thanks to their understanding of their customers’ “aspirations and expectations”.
Pretax profits, before exceptional items, more than tripled to £245m in the US from £73m partly thanks to the acquisition of the Shoe Palace and DTLR businesses, adding to its Finish Line and JD outlets.
“It is clear that the US is becoming an increasingly important territory for the group with progression and evolution in this country having a major impact both on the group’s overall performance and its standing with the international brands,” the company said.
Profits in the core UK and Irish business more than tripled to £171m from £52m as the company said it had retained sales through digital channels through high street lockdowns, as shoppers sought out comfortable clothing to work from home, and benefited from pent-up demand when stores reopened.
Cowgill said the results were “extremely encouraging”, adding: “The group continues to demonstrate outstanding resilience in the face of numerous challenges arising from the continued prevalence of the Covid-19 pandemic in many countries, widespread strain on international logistics and other supply chain challenges, materially lower levels of footfall into stores in many countries after reopening and the ongoing administrative and cost consequences resulting from the loss of tariff free, frictionless trade with the EU.”
He said JD had found itself “in the right spot” in fashion terms, as shoppers globally turned to trainers, jogging bottoms and hoodies while working from home.
But Cowgill said he did not believe there would be a switch away from athleisure gear as offices reopened and formal events restarted. “I don’t think it’s a trend – I think it’s a culture,” he said. “There is an increased level of acceptance of athleisure-wear in every walk of life, whether its the workplace or bars, restaurants and clubs. I wouldn’t like to be selling black shoes.”
Jonathan Pritchard, an analyst at Peel Hunt, said JD’s performance in the first half of the year was “beyond even the biggest bulls’ hopes”. He wrote: “The US has been at the heart of the strength, with stimulus cheques driving stellar like-for-like [sales].” However, he said JD’s business in Europe faced more challenges as stores had opened later and import duty had been imposed on goods sent from the UK.
Cowgill said that JD was “generally encouraged” by its performance in the weeks since the end of July. “We remain absolutely confident that our inherent strengths in retail dynamics and operations provide us with a robust platform to make further progress,” he said.
He said the company was looking at opportunities to open shops in the UK and elsewhere to take account of decreased rents and shorter lease terms as high street landlords come under pressure. He said JD would also consider further acquisitions to aid geographic expansion or to diversify in the UK.
Cowgill declined to comment on reports that JD was considering acquiring online fashion specialist Missguided, but said: “We would be foolish if were weren’t looking at areas of the business, particularly in the UK, where our core demographic sit.”
The company said it was not paying a half-year dividend to shareholders, instead promising a potentially larger full-year payout “taking into account the consequences of any potential further restrictions on trading”.