JD Sports warns Brexit may cause "headwinds on margin" next year

Helen Cahill
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The sportswear company said it is well-placed to handle currency headwinds (Source: JD Sports)

JD Sports' share price has hit a record high after the company reported a jump in profits today — but the retailer has warned that the fall in sterling could cause some headwinds next year.

The figures

Pre-tax profits for the sports fashion retailer grew by 66 per cent for the 26 weeks to 20 July, reaching £77.4m as compared to £46.7m for the same period last year.

The retailer's share price climbed 3.53 per cent on the news.

Revenues increased 20 per cent, up from £809m to £970m.

The group said international development was continuing, with 20 new stores opening in Europe.

Why it's interesting

The main effect from Brexit for retailers so far has been the fall in sterling, although price increases are expected to come in next year.

Executive chairman, Peter Cowgill, said in a statement today that the "weakening of sterling against the US dollar after the Brexit vote may cause some headwinds on margin in 2017". He maintained that the company is well-prepared to handle the change in circumstances, however.

Read more: JD Sports plans takeover of rival retailer Go Outdoors

JD Sports is, at least, in a better position than its immediate competitor Sports Direct, which failed to hedge for its US dollar purchases before the country went to the polls at the end of June.

It recently emerged that JD Sports is planning to acquire sports retail rival Go Outdoors. Meanwhile, Sports Direct is trying to clean up its image to attract the likes of Adidas into its stores.

Freddie George, analyst at Cantor Fitzgerald said: "The stock is still undervalued, in our view, and has failed to catch up following a period of consolidation over the last six months, with recent earnings upgrades.

"There are no signs of any concerns on the horizon, the key brands remain supportive and the strategic changes planned by competitor, Sports Direct, are not likely to impact over the medium term. We are, thus, confident that the positive momentum in earnings can continue and the company now has the balance sheet to make a meaningful aquisition."

What JD Sports said

Cowgill said: "The favourable trends for athletic inspired footwear and apparel in Europe have continued into this year. We are very much at the centre of this market with our success being a positive consequence of the investments we have made over a number of years to develop the JD retail concept.

"Notwithstanding the demanding comparatives going forward following the strong revenue growth in the previous three years, the positive nature of trading in the second half to date is encouraging."

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