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JD Sports cautious despite 28% profit jump

JD Sports Fashion has warned of a tough outlook despite notching up a 28% increase in full year pre-tax profits. Its sports fascias outperformed its young fashion chains but trade has deteriorated in the last eight weeks.

JD Sports said pre-tax profits were £78.6m on total group sales up 15% to £883.7m in the year to January 29, with like-for-likes up 3.1%. Gross margin improved 49.5%.

Sports fascias

Like-for-likes at its sports fascias, which include its eponymous chain, French chain Chausport and Irish chain Champion Sports, rose 3.8% during the year, an 8% increase in total sales to £667.2m. Operating profits rose to £73.3m, up from £64.1m the year before, including a £0.5m contribution from Chausport.

JD Sports said it was set to expand the eponymous chain overseas, starting with stores in Europe. It has opened three JD Sports stores in France.

Fashion fascias

Like-for-likes at its fashion fascias, which include the Bank and Scotts chain, dropped 0.7% during the year. Total sales were £102.4m, up from £82.8m the year before. Operating profits were £5.2m compared with £3m in 2009.

JD Sports said that it thought there was “significant opportunity” to grow operating margin through better stock management, own brand development and a store roll out. Although it warned progress could be hampered by rising input prices and as yet unspecified changes to its brand distribution policy.

Current trade

Current trade since the year end, however, has softened. Total like-for-likes increased by only 0.4% in the 8 weeks to March 26, although JD Sports said it was hard to make a comparison as Easter fell earlier last year. The sports fascias performance slumped in the eight week period to fall by 1.4% on a like-for-like basis. Performance at the fashion fascias has remained flat.

In the 8 week period net sales declined 1.2%, which JD Sports said was a direct result of the Government’s fiscal changes, which include the raising of VAT.

Impact of VAT

JD Sports chairman Peter Cowgill said takings would be hit by £16m for the year to January 28, 2012 compared with the year ending 2011, as a result of the VAT rise.

He said: “The retail environment has recently been significantly impacted by adverse fiscal changes in addition to the multiple current economic pressures.

“Against that background, therefore, it is inevitable that the board is extremely cautious in its outlook, particularly when the profits achieved for the year are effectively rebased purely as a result of the impact of increased VAT.”

Cowgill said the reporting year had been the seventh successive year of “good progress in revenue and profitability for the Group.

 “Management remain highly focused on all avenues of revenue growth, margin protection and cost control…..and with a strong balance sheet and dominant market position in our core business, we expect to be able to deliver operational and financial progress for the Group over the long term.”

Acquisitions

JD Sports’ year end net cash position rose to £86.1m and a £75m working capital facility will allow the business to continue its acquisitions spree. During the year, the retailer acquired brands Sonneti, Chilli Pepper, and Nanny State for a total of £2.1m. Since the year end it bought Fenchurch out of administration for £1.1m and acquired Champion Sports. It has expressed an interest in buying rival JJB Sports.

JD Sports said it was looking at potential acquisitions and joint ventures in other territories “on a regular basis”.

JD Sports said it continued to rationalise its store portfolio wherever possible but added: “With the current economic climate impacting heavily on retail property occupancy levels, it remains very difficult to dispose of underperforming and/or duplicate stores.”

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