Alive and kicking: JD Sports thrives in struggling high street environment

 
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JD Sports' store expansion meant it swung into net debt (Source: Getty)

JD Sports sprinted ahead of its high street rivals as it boosted both profit and revenue margins in its interim results today.


The figures

The shoe and sportswear retailer posted a 35 per cent year-on-year hike in revenue to £1.85bn for the six months to the end of August while profits before tax stepped up almost 20 per cent to a record £122m.

Basic earnings per share stood at 10.05p, 24 per cent higher than the same period in 2017, but its interim dividend stood at just 0.27p per share.

Shares rose one per cent to £4.92 in early morning trading.

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Why it’s important

JD Sports managed to post strong performance despite the high street suffering a difficult time recently, with footfall faltering in August’s heatwave.

The improved earnings were fuelled by like-for-like growth of over three per cent, with profitability in UK and Ireland stores coming in higher than they did in 2017.

In fact, the firm added 18 new outlets across mainland Europe and 21 new stores across Asia Pacific, including an expansion into South Korea and Singapore.

However, this expansion has seen it swing from holding a healthy net cash of £223m to being £85m in debt.

While its Outdoors business, including brands Millet and Go Outdoors posted a £3.8m loss, though like-for-like sales growth was marginally positive.

JD’s positive set of results follows arch rival Sports Direct witnessing its profits plunge 72 per cent earlier this summer after taking an £85m hit on its stake in struggling high street store Debenhams.

While Sports Direct’s share price has tumbled over the last year, JD Sports has recorded a 50 per cent rise in its own over a similar period.

What JD Sports said

Peter Cowgill, executive chairman, said:

Against a backdrop of widely reported retail challenges in the UK, it is extremely reassuring that the profitability in the UK and Ireland Sports fascias has been further enhanced.

This reflects the value of the investments that we have made over a number of years in developing a dynamic multichannel proposition which marries the best of physical and digital retail, enabling customers to interact with us where and when they want and through the channel of their choice.

He said JD Sports is on track to deliver an outturn in the range of £337m to £345m for the full year.

What the analysts said

Laith Khalaf, senior analyst at Hargreaves Lansdown, said the firm finds itself in a “sweet spot”.

“The retailer is now knocking on the door of the FTSE 100, and currently matches Marks & Spencer in terms of its equity market value,” he added.

“What’s more, earnings are continuing to rise. The top line has grown, largely thanks to digital sales, and a decision not to engage in tit-for-tat discounting has meant more revenues flowing through into profits.”

Read more: Sports Direct boss Mike Ashley could face a shareholder revolt this week

Richard Hunter, head of markets at Interactive Investor, added: “Despite high expectations going into these numbers, JD Sports has nonetheless shot the lights out in spectacular fashion.

“Its current pace of expansion does carry integration risk, whilst the cost of that expansion is keeping a lid on the dividend yield, which currently stands at just 0.3 per cent.

“It has also propelled the company into net debt from net cash, although given the strength of these results that may well be recouped sooner rather than later.”