JD Sports Fashion, the owner of Blacks, Millets and other chains of outdoor stores in the U.K., delivered bumper results for the 26 weeks to July 30, with a 20 percent hike in sales to £970.6 million (€1,127.2m-$1,259.4m) and profit before tax and one-off items soaring by 66 percent to £77.4 million (€89.9m-$100.4m).
The performance is all the more remarkable since JD Sports Fashion already achieved a record last year – meaning that the added profit was beyond reasonable expectations, as the company put it. The buoyant performance made it easier for the group to seal two acquisitions in the Netherlands and Portugal this year, and unconfirmed reports said it was studying a potential takeover of Go Outdoors, the British outdoor retailer with sales of £202 million for the fiscal year to January.
The revenues of the outdoor stores in the JD Sports Fashion group jumped by 7.1 percent to £73.1 million (€84.9m-$94.8m) for the half-year until July 30. The group ended the period with 180 outdoor stores, which was a net decline of two over the six months: Blacks and Tiso both lost one store, to end up with 59 for Blacks and 15 for Tiso, while the number of Millets stores remained unchanged at 99 and same applies for the seven other outdoor stores.
The gross margin of the outdoor stores inched up by 0.3 percentage points to 44.2 percent. They remained unprofitable but the operating loss before one-off items narrowed to £2.3 million (€2.67m-$2.98m), compared with an operating loss of £4.5 million for the same period in 2015.
The improvement in the margin was described as the first impact of aligning the merchandising and commercial functions of the outdoor team with the core JD team. The group said that more material improvement of the margin represented an upside for the outdoor stores over the longer term – adding that this will require brand support, particularly in terms of product differentiation. JD Sports Fashion's majority shareholder is Pentland Brands, the owner of Berghaus and several other brands.
The group's sports fashion stores raised their sales by 21.0 percent to £897.5 million (€1,042.4m-$1,164.5m), including the addition of 20 stores from existing banners, and two sizeable acquisitions. Their gross margin increased by 0.7 percentage points to 48.4 percent, owing to the stronger euro and low markdowns. The operating profit of these stores before one-off items amounted to £79.9 million (€92.8m-$103.7m), up from £52.1 million in the year-ago period.
The JD group's sports fashion arm has been thriving with another rise of 10 percent in comparable store sales for the period. It has been aided by fashion trends favoring athleisure products, as well as the group's own investments in its retail concept, and reinforced partnerships with its leading suppliers. JD Sports Fashion said it would be unreasonable to expect organic growth to continue at this level, but that JD has a very strong base to explore ongoing opportunities in the British and international markets. It added that trading in the second half to date is encouraging.
The sports fashion segment boasted 953 stores at the start of August, up from 736 around the same time last year. This included 14 extra JD stores in continental Europe and five more Sprinter stores in Spain.
In March, JD Sports Fashion acquired trade and store assets from an entity of the bankrupt Dutch Unlimited Sports Group (USG), which ran the Perry Sport and Aktiesport banners. Based on the detailed store count, it acquired 187 Dutch stores and closed 22 in the period. Although Perry Sport is a generalist sports retailer that plays an important role in the Dutch outdoor market, it appears that JD has no immediate intention of turning any of the Perry stores into specialty outdoor stores.
The British group said that it initially focused on stabilizing the Dutch business and dealing with a fragmented acquisition stock position. JD does not expect the acquired stores to make a positive contribution in the current fiscal year. The second buy related to 12 stores previously trading as the Athlete's Foot in Portugal, which will be converted to JD in the second half.
But at the same time, the group has been moving further afield. After the opening of its first Asian store in Kuala Lumpur, JD Sports has expanded its presence in Malaysia with the acquisition of 20 small multi-brand stores trading as Sports Empire, Revolution and The Marathon Shop. The stores were bought from JD's joint venture partner, Stream Enterprises. And even further away, JD has snapped up Next Athleisure, which has 32 stores trading as Glue in Australia. These outlets were bought after the end of the fiscal half-year. The buyer said that this business and its management will provide the platform to open JD in Australia.
The group has expansion plans for the JD banner in several European countries. More on this and other related news in Sporting Goods Intelligence Europe.