JD Sports Fashion said it was on track for a 5 percent rise in annual profit as demand for premium leisurewear such as Nike Air Force One and Adidas Samba sneakers pushed half-year sales higher despite the cost of living crisis. The retailer said revenue grew 7 percent to £4.7 billion (€5.4bn), with organic sales growth up 12 percent in the six months to July 29. JD Sports said it was now on track to post an annual pre-tax profit of £1.04 billion (€1.2bn). Greater footwear availability resulted in a more normalized promotional environment, resulting in a slight gross margin fall to 48 percent from 48.5 percent a year ago.
“In the last seven weeks, trading across the group has continued in line with our expectations. At constant exchange rates, organic sales growth was 10 percent. In addition, we have continued to open new JD stores worldwide and are on track to meet our full-year store targets,” the company said.
JD’s premium range, which represents 80 percent of its entire sports fashion business, grew 16 percent to £3.6 billion (€4.15bn). It also noted “particularly strong growth” from New Balance and On Running.
On a regional basis, North American premium revenue was up 15% to £1.4 billion (€1.6bn), with the three largest – Finish Line/JD, DTLR and Shoe Palace – delivering between 13 percent and 17 percent organic sales growth, calming investor nervousness after profit warnings from rivals Foot Locker and Dick’s Sporting Goods.
The company said first-quarter trading was stronger than the second three months in the region due to better stock availability.
“Within Q2, June was slow, which can be attributed partly to a lower level of new product releases than in previous periods. Sales growth improved in July, and since then, organic sales growth has continued to improve, helped by a strong ‘back to school’ season,” it added.
The UK and Ireland businesses saw premium segment revenue grow 8 percent to £1.2 billion (€1.4bn) and organic sales growth of 8 percent.
Strong footfall in Europe helped premium revenue grow 28 percent to £773.8 million (€892m), with organic sales growth of 27 percent. Footfall was very strong in the first quarter, helped by better year-on-year product availability.
Analysts at broker Shore Capital said that despite macroeconomic challenges, they still reiterated a “buy” stance on JD Sports “due to its strong structural position: the company’s robust balance sheet allows it to out-invest its peers, particularly in the US market as demonstrated by the statement today. In our view, JD has demonstrated significant progress over the year in line with the plans set out at its capital markets day in February, with the group focused on building critical mass in Europe and reinforcing its corporate governance.”
