JD Sports today said it would scrap its interim dividend after the sportswear brand reported a sharp fall in profit and warned of the continued impact of lower footfall.
JD Sports posted revenue of £2.5bn in the 26 weeks to 1 August, down 6.5 per cent on the same period last year.
Pre-tax profit slumped by £96.7m to £61.9m over the period.
Net cash at the end of the period was £764.9m, up from £118.1m last year.
Basic earnings per share were 3.85p, compared to 9.67p.
Why it’s interesting
JD Sports’ update covers a broad period of turbulent trading, including pre-lockdown, store closures and reopening.
The fashion retailer hailed resilient trading during the crisis with more than 90 per cent of total revenue retained, which it said was due to the strength of the brand.
But JD acknowledged that increased costs relating to health and safety measures — as well as higher costs relating to its online service — had hit profit over the period.
The chain said almost all its outlets were closed by 23 March, while most were reopened by the end of June.
The budget sportswear brand said pent-up demand had driven a boost in sales as stores reopened but warned this trend was “generally short-lived” and that footfall remained much lower than usual.
JD withheld some rent payments across its global portfolio of stores. “We firmly believe that it cannot be equitable to pay full contractual rents when there is no realistic prospect of any income from a store,” the firm said.
The company also said the crisis had highlighted the importance of a strong online offering, and said it had invested £2m on additional equipment and fixtures.
It said its Kingsway distribution site in Rochdale now had capacity to deal with Black Friday sales level every day.
Shares in JD Sports were up more than eight per cent in early trading.
JD Sports warned of an uncertain outlook and the continued challenge of subdued footfall.
The company said it would scrap its interim dividend in a bid to bolster cash reserves, but reiterated its guidance for the full year.
Richard Hunter, head of markets at interactive investor, said the results were “something of a curate’s egg”.
“On the plus side, the majority of revenues were retained as consumers switched to buying online following the closure of the store estate,” he said.
“However, this came with significant additional costs, mostly linked to the fulfilment of these orders and the necessity for safety equipment and associated changes to working practices.
“The outcome has been that the group was not quite ready for the accelerated pace of change to online, and equally will now need to consider how much of this change in shopping habits is permanent.”
What JD Sports said
“We are generally encouraged by our performance since the stores re-opened and with our performance in the first few weeks of the second half,” said executive chairman Peter Cowgill.
“However, retail footfall remains comparatively weak and the recent strengthening of measures in many countries and the subsequent temporary closure of some stores reminds us that Covid-19 remains an ongoing challenge.
“Nonetheless, we remain absolutely confident in our strengths in consumer engagement, key brand relationships and globally consistent multichannel retail standards. These, combined with an agile operational infrastructure, provide us with a robust platform for further positive development.”