JD Sports: profits soaring, chickens not being counted

JD Sports has reported a staggering rise in profits and dividends. But it knows that retail's currently a game of two halves...

by Dave Waller
Last Updated: 06 Nov 2012
Pre-tax profit for the sports and fashion retailer in the year to end of January came in at £78.6m, 28% up on the £61.4m it made a year earlier. Revenue rose a highly impressive 15% to £883.7m. Chairman Peter Cowgill described it as the group’s ‘seventh successive year of good progress in revenue and profitability’ - and he's even hiked the dividend by almost a third.

Talk about bucking trends. The group, which operates 350 JD Sports and Size? outlets in the UK, has clearly been doing a whole lot better than much of the rest of the high street. Chains like Mothercare, HMV and Dixons Retail - which owns Currys and PC World - have all posted profit warnings recently. The British Retail Consortium yesterday reported the largest monthly fall in sales since records began in 1996 – down 1.9% in March compared with a year earlier. But perhaps JD’s success goes to show that even the first decline in disposable income in 30 years won’t keep the yoof from their McKenzie tracksuits (‘on it since 1974’ apparently).

But even a star performer like JD Sports isn’t beyond some sensible restraint right now. Cowgill admits to being ‘extremely cautious’ about the outlook, thanks to ‘multiple economic pressures’. Here’s where the story becomes more familiar: JD’s net sales declined by 1.2% in the first eight weeks of its financial year, with margins squeezed by a rise in costs and the knock-on effects of the government’s austerity measures. JD reckons this year’s VAT hike could wipe £16m from its profits as it struggles to pass on the increase to cash-strapped customers.

It’s probably thankful that it didn’t go ahead with its bid to take over its struggling rival JJB Sports. JD gave up chasing that particular loose ball last month, saying that JJB wouldn’t give it the information it requested.

Still, while the rest of the year may prove tougher going, JD’s profits for the past year were better than expected. Given the adverse conditions, that must be the corporate equivalent of going in at half-time not only one-nil up, but with an away-goal in the bag.

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