JD Sports doubles profit, but warns on growth this year
By Frank Prenesti
Date: Wednesday 22 Jun 2022
(Sharecast News) - UK retailer JD Sports Fashion more than doubled annual profits and said trading in the current year to date was up 5% as demand for sportswear continued after the Covid pandemic, but warned that growth would be held back by inflationary headwinds.
The company posted pre-tax profits of £654.7m for the year to January 29, up from £324m a year earlier, driven by strong performances in the UK, Ireland and North America. It added that earnings for the current year would be in line with expectations.
Revenue rose to £8.5bn from £6.1bn and the total dividend was lifted to 0.35p a share from 0.29p.
JD's outdoor division also returned to profitability with an elevated demand for holidays in the UK and a "general recognition of the physical and mental health benefits of spending time outdoors". The division posted profit before tax and exceptional items of £25.9m compared with a £6m loss a year ago.
The company said the process to recruit a new chief executive was ongoing with a number of "high calibre" candidates at different stages of consideration "including some who have only recently made their interest in the role" known following the sudden departure of Peter Cowgill a month ago.
It added that independent probes and a governance review into its regulatory issues identified the need to bolster the board and improve internal controls.
JD has been a subject of several investigations by the UK's Competition and Markets Authority, including a provisional finding that the company along with a rival broke competition law over Rangers FC merchandise pricing.
The company said its annual profit had been achieved against a backdrop of a global shortfall in the supply of certain key footwear styles, adding that supply was expected to improve progressively through the remainder of the year.
It also cited temporary store closures in many markets, supply shortages due to factory closures in the supply chains of the international brands, turbulence in international logistics and "the ongoing administrative and cost consequences" of Brexit as significant constraints during the year.
AJ Bell investment director Russ Mould noted that the company's financial period ended before the Ukraine war unfolded and inflation surged.
"Therefore, it is not representative of the current environment in which consumers are under considerable financial pressure and are losing confidence with regards to the economic outlook, which will curb their ability and willingness to keep spending at levels seen in 2021," he said.
"This headwind is clear to see in the retailer's forward earnings guidance. After seeing pre-tax profit more than double in the past financial year, JD now expects no profit growth at all in the current year."
"To make matters worse, the company is still searching for a new leader after splitting with executive chairman and architect of the group's success, Peter Cowgill. Fortunately, whoever it hires will inherit a strong business with fingers in many pies.
"JD Sports is more than premium trainers. It is now more involved in the biking space, capitalising on interest from those having a mid-life crisis and happy to splash several thousand pounds on the latest carbon frame road bike, as well a general trend for people to be healthier and do more exercise."
Reporting by Frank Prenesti at Sharecast.
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