JD Sports Fashion’s profit before tax fell by more than 14% last year as the business was hit by its acquisition of outdoor clothing retailer Blacks despite revenues for the year rising by 20%.
In its preliminary results for the 52 weeks to January 28 the group reported that profit before tax dropped 14.2% to £67.4m from £78.6m with operating profit dipping 4.3% to £76.5m from £79.9m the year before.
Due to JD acquiring the Blacks business in Janaury the company incurred a loss of £2.2m. JD said on buying the business Blacks was in a “very fractured state” and JD “inherited a limited and unbalanced stock position, with a particularly severe lack of stocks in many core high performing lines”.
However, it said the management team is investing time in establishing relationships with key brands and getting stocks flowing. JD added that group profit before tax and exceptionals exceeded consensus market expectations despite the drop.
During the year revenues rose 19.9% to £1.06bn.Overall gross like-for-like retail sales for the period in the UK and Ireland increased by 0.6% with the fashion fascias up 2.2% and the sports fascias increasing 0.3% on a like-for-like basis.
Across JD’s sports fascias,JD, Size?, Chausport, Sprinter and Champion Sports, total revenues rose by 16.3% to £774.6m. Operating profit before exceptional items increased by £1m to £74.3m.
JD’s fashion fascias, Banks, Scotts and Cecil Gee, generated a 13.2% rise in total revenue to £151.6m.
The number of Bank stores grew from 74 to 80 during the year. however, JD said the loss of distribution of two key brands had a “significant impact” on the overall result with operating profit dropping from £5.2m to £3.1m. JD said Bank needs to “develop a greater level of exclusivity in its brand mix” and added its acquisition of young fashion brand Fenchurch would help create that differentiated offer.
Executive chairman Peter Cowgill said: “During the period, we have invested significantly in brands, businesses and infrastructure to strengthen the platform for future development of the group. Despite the continued difficult trading conditions across our markets, we are pleased to report some positive results within the group, particularly from our mainland European businesses.”
He added: “Whilst we expect some improvement in consumer confidence from the forthcoming international sporting events, we remain cautious.”
In the nine weeks to March like-for-like sales across core UK and Ireland fascias have risen 1.2% but JD said margins remain under pressure as consumers continue to be offer driven.
Cowgill added: “The group is exceptionally well positioned with its retail proposition, financial resources and management experience to take advantage of any opportunities both in the UK and internationally. Whilst the board recognises that current expansion activity is likely to impact returns in the short term, it remains confident that the group is being positioned to deliver longer term earnings growth and increasing shareholder returns.”