The John David Group has reported respectable results for the year ended last Jan. 28, in spite of persistently competitive trading conditions in the UK market and the upheaval that followed its acquisition of Allsports in October 2005. Revenues were up by 4 percent on the previous year at £490.28 million (€721m-$923m), and the gross margin improved from 45.6 to 46.2 percent, thanks in part to lower inventory clearance activity in the group’s fashion stores.
On a same-store basis, while the group’s fashion stores suffered a decline of 8.5 percent during the financial year, the sports stores did 0.3 percent better, to the exclusion of the recently bought Allsports units. The operating margin in the sports retail segment reached 5.0 percent on revenues of £448.9 million (€660m-$845m). The fashion stores continued to be in the red, but their operating losses declined, producing a negative margin of 6 percent.
In the period of the new financial year ended Apr. 29, sales comparisons with the same period a year ago showed a same-store increase of 2.1 percent for the JD Sports chain against a 5.2 percent decline for the group’s fashion doors, indicating improved conditions.
Before increased exceptional charges of £13.0 million (€18.9m-$24.2m), the group’s operating margin increased last year from 3.6 to 4.1 percent. Net debt has been reduced by £17.6 million in the last year and £37.8 million over the last two years in spite of investments of £4.5 million (€6.6m-$8.5m) for the acquisition of RD Scott in December 2004 and £15.0 million (€22m-$28m) for the purchase of Allsports in October 2005.
A rationalization of the group’s store portfolio looks set to continue. Peter Cowghill, executive chairman of the JD group, expects the closing of another 25 stores, with at least 15 of them shutting down during the current financial year. JD purchased only 178 of Allsports’ 270 stores last Fall, and 80 of them, all in favorable locations, have been converted to 77 JD stores and three Scotts units. The others have been given back to the judicial administrators of Allsports.
As it turns out, JD only licensed the Allsports name at the time of purchase. However, last January JD’s management came to the conclusion that the name no longer had the same value as before and decided to discontinue it. It also laid off Allsports’ management.
In a conference with analysts last week, Cowghill criticized landlords for charging inflated rental prices that bear no relation to the current retail conditions in the UK. The group ended the year with 416 stores in its group, 370 in sports and 46 in fashion. That compares with 299 sports stores and 53 fashion units at the end of the previous financial year.
While considering that the JD group is delivering pretty sound figures in a tough market, Barry Brown, chief executive, believes that its product offering will continue to evolve to appeal to a broader group of consumers. A number of marketing initiatives are in place to increase brand awareness with a slightly older group of consumers who, while they are apparently happy to buy their footwear in JD stores, prefer to do their sports/fashion apparel shopping elsewhere. The core apparel buyer in a JD outlet is more likely to fit into the 14-15-year age bracket.
One priority is to increase the volume and the density of the group’s apparel turnover. While its own brands, Brookhaven and Mackenzie, currently account for around 8 percent of total sales, JD recently added two aspirational brands to its portfolio - Box Fresh and Life & Legend – while some poor selling Allsports brands have been jettisoned. Box Fresh was recently bought by Pentland Group, which remains as JD’s controlling shareholder.
