It’s been another 12 months of impressive growth at JD Sports, the yoof clothing retailer (we hesitate to call it a sports shop these days). Annual profits were up 26% to £67.4m last year, marking its sixth consecutive year of growth. Since its fashion ranges tend to be targeted at the (relatively) recession-proof teen-to-mid-twenties age group, JD has continued to outperform its high street rivals during the downturn – hence its share price rising 75% over the course of the last year. However, it did sound a cautious note today about trading conditions post-election, when we start paying off our eye-wateringly large deficit. So the coming year might be a slightly trickier proposition…
The retailer, which operates the likes of Size?, Chausport and Scotts as well as JD, saw a £99m jump in revenues last year. Like-for-likes were up a relatively modest 2.5%, but it’s been expanding through the acquisition of new brands. In a year when most high-street retailers (like arch-rival JJB) were cutting overheads, slashing prices and generally clinging on for dear life, JD went on a shopping spree of its own: it snapped up several sports-related retailers, including rugby shirt maker Canterbury for the bargain price of £6.7m. So its M&A people have had a busy year.
On the other hand, these deals haven’t been entirely pain-free. Despite boosting sales, the newly acquired companies haven’t necessarily done the bottom line much good – they’re being blamed for margins remaining stuck at about 49% (which, in fairness, doesn’t sound too bad to us).
Nor is there any guarantee that it will be able to repeat last year’s trick this time round. Although it’s consistently outperformed the rest of the sector during the recession, JD executive chairman Peter Cowgill says he’s worried about how efforts to repay the budget deficit will affect business. ‘We recognise the increasing challenges of strong comparatives and the current economic and fiscal threats to consumers’ expenditure,’ he said, glumly. Which we think means that it’ll be hard to match last year’s figures, because we’ll all be too skint to buy new Reebok Classics.
Nonetheless, shareholders will take consolation in the fact that if anyone in the sector can navigate these turbulent conditions, it’s probably JD. As the 65% hike in this year’s dividend payment should remind them…
In today's bulletin:
Gordon Brown admits he got it wrong on bank regulation?
Intel perks up tech sector by smashing forecasts
Abercrombie & Fitch boss Jeffries gets $4m not to use his private jet
JD Sports plays it just right as profits jump 26%
EU sick pay rules hammering small business