The JD Sports Fashion group reported that its Blacks and Millets outdoor stores have reached breakeven for the year to Jan. 30, although the group's entire outdoor retail business remained loss-making due to costs relating to larger Ultimate Outdoors stores.
The JD group's outdoor retail division raised its sales by 11.0 percent to £155.3 million (€196.7m-$224.0m). Its gross profit margin was up by 1.1 percentage point to 43.3 percent and its operating loss before one-off items was reduced to £4.0 million (€5.1m-$5.8m), compared with an operating loss of £7.1 million (€9.0m-$10.2m) for the previous year. The large Ultimate Outdoors stores remain a trial.
JD's outdoor retail business ended the fiscal year with 182 outdoor stores, two fewer than the previous year, as the number of Blacks stores declined by 13 to 60, while the number of Millets stores increased by 7 to 99. The group had 16 Tiso stores left after one closure during the year, and the number of other stores increased by five to seven. The average size of the stores is apparently increasing, since the smaller number of stores is paired with an increased surface of 672,000 square feet, compared with 608,000 at the end of the previous fiscal year.
JD said that the profit margins of its outdoor division improved due to lower levels of discounts. The group is targeting further improvements this year as the outdoor division is increasingly aligning with JD's sports stores in terms of merchandising and commercial approaches. However, JD added that it was facing competition from retailers with a large share of sales from private labels, and thus called on major brands to provide more product differentiation and other forms of support.
The group attributed some improvement to the operational management changes it made in the early part of the fiscal year, bringing Blacks, Millets and Ultimate Outdoors under joint leadership. The company is confident that the change will deliver a further improvement in the financial performance of the relevant stores in the current fiscal year.
The whole JD Sports Fashion group had a buoyant year, supported by the athleisure trend and expansion in several European countries. Its sales from continuing operations soared by 20 percent to £1,821.6 million (€2,306.5m-$2,627.6m), with comparable store sales up by 11.6 percent across all retail formats.
With a slight decline in the sports division and an increase in the outdoor division, the group's gross margin remained roughly flat at 48.5 percent. Its profit before tax and exceptional items advanced by 57 percent to £157.1 million (€198.9m-$226.6m), and pre-tax profit was up by 45 percent to £131.6 million (€166.7m-$189.8m).
The sports fashion division alone raised its sales by 20.5 percent to £1,666.3 million (€2,110.5m-$2,404.3m) for the year, with comparable sales growth above 10 percent for the second consecutive year. The group said it was reaping the benefits of the investments made in previous years to build up an outstanding multi-channel retail proposition, adopting the latest digital technology. JD added that its efforts to expand this retail offer across Europe were receiving strong support from key suppliers, but made it clear that it would not expect a third year of organic growth at the same level.
The division ended the fiscal year with 736 stores, up from 660 at the start of the period. The number of JD stores increased by 10 in the U.K. and Ireland and by 38 in other European countries. The company opened more stores in existing markets and moved into three more in the fiscal year, Denmark, Sweden and Italy.
The number of Size? stores increased by five to 36. The British group rapidly expanded the Sprinter stores, with a net increase of 24 stores to 104 for the year. The number of Chausport stores declined by one to 72 and the number of stores trading with other banners was also reduced by one to 59 at the end of the fiscal year. Separately, the group reports that there were four JD branded gyms in the U.K. at the end of the period in Hull, Liverpool, Preston and Coventry, and a fifth opened in Washington after the end of the fiscal year.
JD said it was satisfied with the progress of Chausport in France and Sprinter in Spain, as well as the turnaround in the trading performance of Kukri, its supplier of multi-sport kit for schools, universities and sports teams. Tessuti and Scotts were adequately established as premium brand multi-channel fashion retailers, JD added.
Just before the end of the fiscal year, the company also opened its first JD store outside Europe, with an outlet at Sunway Pyramid in Kuala Lumpur, as part of a newly formed joint venture with Stream Enterprise in Malaysia.
The expansion continued after the end of the fiscal with the acquisition of Perry Sport and Aktiesport stores from the bankrupt Unlimited Sports Group (USG) in the Netherlands, as previously reported. There were 187 trading stores and two online stores on acquisition, but it was agreed as part of the transaction that 55 of the stores were to be closed. The deal was sealed at a price of €26.5 million, which JD reported as a consideration paid in cash for £18.9 million.
JD declined to provide further information about its intentions for the acquired stores. It remains to be seen if any of them may be converted into Blacks or Millets stores, particularly since the outdoor category was among the most significant for Perry Sport.
Gross profit margin for the sports fashion division slipped by 0.2 percentage points to 49.0 percent for the fiscal year, which the group chiefly attributed to changes in the exchange rates between the pound and the euro. But operating profit before exceptional items for the division soared by 49 percent to £162.9 million (€206.3m-$235.1m).
The above results exclude a loss of £15.8 million (€20.0m-$22.8m) from discontinued operations last year. Exceptional items for the year reached £25.5 million from the impairment of intangible assets and the write-off of costs on the project to replace the group's core IT systems. This was discontinued, as the group came to the conclusion that it would be cheaper, more efficient and less risky to enhance internally developed systems, including capacity for increased internationalization.