JD Sports Fashion enjoyed a 111 percent increase in pre-tax income to £6,087 million (€7.293m-$9,865m) for the first half ended on Aug. 3. Gross margins improved to 48.8 percent of sales from 48.4 percent in the year-ago period on 2.0 percent higher sales of £567,370,000 (€679.8m-$919.4m). Operating earnings before exceptional items rose by 226 percent to £10.39 million (€12.4m-$16.8m).
The British retailer's progress was largely due to a record performance for the company's Sports Retail segment in terms of sales and margins. Including Champion Sport, the Irish chain, which is now serviced and managed from the U.K., the segment's sales in the U.K. and Ireland advanced by 7.5 percent on a same-store basis, whereas those in its Fashion segment declined by 2.2 percent excluding premium locations. Gross margins improved in the U.K. and Ireland to 49.5 percent from 51.5 percent in the year-earlier period, thanks in part to lower markdowns and a favorable exchange rate with the U.S. dollar.
| Quiksilver Consolidated Income Statement | |||
| (US$ ‘000, Third Quarter ended July 31) | |||
| 2013 | 2012 | % Change | |
| Americas | 267,997 | 286,136 | -6.3 |
| EMEA | 163,796 | 154,076 | 6.3 |
| APAC | 63,356 | 71,623 | -11.5 |
| Corporate Operations | 615 | 604 | 1.8 |
| REVENUES | 495,764 | 512,439 | -3.3 |
| Cost of Goods Sold | 250,989 | 258,951 | -3.1 |
| SGA* | 216,579 | 225,788 | -4.1 |
| Interest Expense | 20,195 | 14,834 | 36.1 |
| Foreign Currency Loss (Gain) | 4,074 | (2,242) | -281.7 |
| Minority Interest | 247 | 151 | 63.6 |
| Income Before Tax | 1,775 | 14,967 | -88.1 |
| Tax Benefit (Loss) | 49 | (2,508) | -102.0 |
| NET INCOME | 2,071 | 12,610 | -83.6 |
| Euro/Share | 0.01 | 0.07 | -85.7 |
| *Selling, general and administrative | |||
Adding up the results of the group's growing sports retail activities in other countries, total sales grew by 11.2 percent to £412.8 million (€494.5m-$668.6m) in the Sports Retail segment, and they delivered a gross margin of 50.9 percent, up from 49.3 percent a year ago. Operating profit rose by 55 percent to £29,161,000 (€34.9m-$47.2m).
The management expressed satisfaction at the development of its sports retail operations in the European mainland. JD acquired its first stores in the Netherlands and Germany in the last few months. As previously reported, it took over Setpoint, a Dutch chain of 15 menswear stores last May 1, which are being converted to the JD Sports format. An additional seven stores have been opened in the country up to now. In Germany, last July 1 JD bought a chain of ten small stores called Isico Sports, and they should be converted to JD in the course of 2014.
The group expanded the presence of its sports stores in France and Spain further. In France, the number of JD shops was raised to 12, with six further openings planned for the second half of the financial year. While the JD banner sported same-store growth of 7.1 percent in France during the first half, the group's Chausport chain suffered a drop of 2.8 percent, which led to a slight increase in the overall loss in France to £1.0 million (€1.2m-$1.6m).
Losses increased to the same level in Spain because of the increase in the VAT from 18 to 21 percent on Sept. 1, 2012. On a net basis, comparable store sales declined by 0.5 percent in the first half in the country, but JD pointed out that Sprinter's performance continues to be very encouraging in view of the challenging conditions of the market. Spain has proved to be a more difficult market for the JD banner than France, said the company. Some changes have been made to the product offer with the help of the management team at Sprinter. There were six JD stores in Spain at the end of the first half and two more were planned for the second half.
As the Outdoor Retail segment, represented by the Blacks and Millets stores acquired at the beginning of last year, is still in a reorganization process, its sales declined by 17.2 percent to £43.1 million (€51.6m-$69.8m). The gross margin fell to 44.4 percent from 52.7 percent in the year-ago period, but its operating losses declined slightly to £8,871,000 (€10.6m-$14.4m) from £9,995,000, before exceptional items (more on this segment in The Outdoor Industry Compass).
Sales declined by 40.2 percent to £40.2 million (€48.1m-$65.1m) in the Distribution division of the group, following the transfer of ownership in Canterbury to Pentland Group, which is the majority shareholder in JD Sports Fashion. The gross margin fell to 35.2 percent from 38.6 percent, and the division made a loss of £2,978,000 (€3.6m-$4.8m), up from £357,000 a year ago.
In the five weeks ended Sept. 7, same-store sales continued to go up by 2.8 percent in the sport and fashion chains operated by the group in the U.K. and Ireland. The management cited the continued robust performance of its core sports chains as a reason for its belief that the group is well positioned to deliver results within the range of current expectations.
