JD Sports: We are on track to deliver over 200 new stores this year

British sports retailer JD Sports Fashion Plc said its performance in the first half of the year was in line with expectations, with revenue growing 8% y-o-y to £4,783.9m, according to its unaudited interim results.

It said its good performance means it is on track to deliver over 200 new stores this year. “The JD brand is our priority and the acceleration of our JD store opening programme has begun,” the company, which is about to open its third store in Cyprus, said announcing its results. “In total, we added 83 new JD stores in the period, of which 17 were conversions. With our strong pipeline of new stores in place, supported by an expanded team in all regions, we are on track to deliver over 200 new stores this year.”

It said the group’s performance for the 26 weeks to 29 July 2023 was in line with expectations. “The Group grew revenue by 8% to £4,783.9m, including the impact of non-core divestments in the UK. In constant currency1 terms, total revenue growth was 7% and organic sales growth was 12%, maintaining the trend seen across the previous financial period.”

Like-for-like (LFL) sales growth, excluding new sites opened during the last 12 months, was 8%. By quarter, JD Sports had a particularly strong Q1, helped significantly by much fuller brand availability year-on-year, especially in North America, but a softer Q2 driven also by North America, with June the slowest month. July was better, helped by strong 'back to school' trading in North America, and this more positive trading has continued since the period ended.

“We ended the period with 3,347 retail stores, 43 less than at the start of the period because of the strategic divestment of 66 non-core premium fashion fascias,” it said.

The Group gross profit margin was 48.0%, 50 basis points ('bps') lower than the same period last year, driven mainly by the more normalised promotional environment due to restored product availability. The reclassification of delivery income boosted gross profit margin by 30 bps.

Operating costs before adjusted items were 10% ahead of the first half last year as it accelerated its investment in people, systems, infrastructure and new store rollouts, it said. “This was the first full period where we saw the financial impact of the investment in our retail colleague base in the UK but we are already seeing the benefits of this investment through more productive teams and lower colleague turnover in our stores.”

Further, there continue to be upfront costs associated with the various operational investments such as store acquisitions and new distribution centres ahead of generating the benefits from higher sales and a more efficient supply chain. The reclassification of delivery income reduced operating cost as % of revenue by 30bps in the period. As a result of these impacts, operating profit before adjusted items was down 5% to £398.4m.

Group profit before tax and adjusted items was £373.5m, in line with expectations and reflecting the move back to a more normal first half contribution of around 35%.

Regarding the chain’s expansion to Europe, it said it opened a net 39 new JD stores, including some of the 19 of the 21 stores it acquired from Conbipel in Italy. It has now re-opened all the Conbipel stores and they are trading ahead of expectations. “We opened our first stores in Slovakia and Cyprus, taking to 30 the number of countries with a JD fascia, while we are on track to open our new flagship store on the Champs Elysees ahead of the 2024 Paris Olympics.”

In Europe, Premium Sports Fashion revenue grew 32% to £773.8m, or 28% in constant currency, with organic sales growth of 27% and LFL sales growth of 15%. Footfall was very strong in Q1 helped by better year-on-year product availability. All major European countries saw strong organic sales growth with Italy, Holland and Spain leading the way.

Commenting on the results, Régis Schultz, Chief Executive Officer of JD Sports Fashion Plc, said:

"We have delivered a strong first half to our financial period with organic sales growth1 of 12% and profit on track for the full year. In line with our strategic plan, growth is being driven by our premium Sports Fashion business with an impressive performance in Europe (+27%) and North America (+15%), supported by a strong performance in our more mature UK market (+8%). This performance continued in the important back to school period.

"We have made good progress delivering on our strategic pillars, focusing on expanding the JD brand and we will open more than 200 JD stores worldwide in this financial period. We are going to accelerate JD brand growth in Europe through purchasing the non-controlling interest in both ISRG and MIG, and the acquisition of GAP stores in France. This is alongside the proposed acquisition of Courir in the region, which will, when completed, enhance the Group's existing portfolio of complementary concepts, bringing into the company its market-leading focus on the female customer. Meanwhile, we are building and investing in talent and infrastructure to support future growth.

"Our first half performance would not have been possible without the efforts of our people across the world and I am extremely grateful for their continued hard work and commitment. I would also like to thank outgoing CFO Neil Greenhalgh specifically for his support since I joined and for his years of service to JD. I look forward to working with Dominic Platt, who will start as our new CFO in October 2023.

"Looking ahead, our core consumers remain resilient in the face of the ongoing global macro-economic challenges. The JD brand continues to strengthen its global presence, supported by our strategic partnerships with much-loved brands and our strong balance sheet."