JD Sports Fashion's continued to extend its footprint in the outdoor sector during the first six months of its financial year, ended last Aug. 2, and its results in the sector showed some improvement.
The group, which is also involved in the generalist sporting goods sector and in fashion retail, acquired two more regional outdoor retail operations. It bought Oswald Bailey in the southern part of England and Ultimate Outdoors in the northern part, complementing its Blacks, Millets and stores and Tiso, the Scottish outdoor retailer that it acquired in November 2013.
While keeping the two existing Ultimate Outdoors stores in Lancaster and Skipton in operation, it placed the same banner on a new and larger pilot store with a new design in Preston, and launched a website with a broad product offering under the same name.
The pilot store in Preston measures a total of about 20,000 square feet and includes a biycle shop and a café. It also has a fishing section. JD said in its interim financial report for the first half of this year that it is still too early to assess the performance of the new outdoor retail format, but the group is already looking at its possible extension, subject to the availability of cost-effective property in appropriate locations.
JD, which is controlled by Pentland Group, reported a drop in the gross margin of its outdoor retail segment to 43.7 percent during the six-month period from 44.4 percent in the corresponding period of 2012. However, sales jumped to £61.5 million (€78.3m-$100.5m) from £43.1 million, and the operating loss declined to £5,611,000 (€7.1m-$9.2m) from £8,871,000.
Tiso made a small loss in the period, in line with expectations, and while its recent results improved, it is unlikely to make a profit for the full year. On the other hand, Tiso is giving the group access to many new brands. Its biggest store in Glasgow measures about 16,000 sqft.
Blacks and Millets made considerable progress, JD said. They are now clearly positioned in the market with distinct propositions. Blacks is more technical and has a wider selection of products. Millets stores, which generally occupy secondary locations, are more into camping and other recreational activities targeting the whole family.
By Aug. 2, JD had a total of 186 outdoor stores in operation, measuring a combined net retail surface of 568,000 sqft. That was up from 173 stores measuring 531,000 sqft. at the end of January, in spite of the closure of two Blacks stores and ten Millets stores.
Better performance levels at its generalist sporting goods stores in the U.K. and the rest of Europe led JD to book a 170 percent increase in pre-tax earnings to £16,454,000 (€21.0m-$26.9m) for the six-month period, in spite of problems in the fashion segment.
The company's total revenues grew by 27 percent to £721.4 million (€919.0m-$1,179.2m) during the period, driven by a strong performance in the sports segment. Across the group, the gross margin went down to 47.8 percent from 48.8 percent in the year-ago period, but operating earnings doubled, rising by 102 percent to £209,997,000 (€267.5m-$343.3m) before exceptional items.
In the sports sector, net revenues went up to £576.8 million (€734.8m-$942.9m) from £451.7 million during the period. While the gross margin on these sales declined to 48.4 percent from 49.7 percent, due in part to a higher proportion of low-margin online sales, the segment's operating profit grew to £34,834,000 (€44.4m-$56.9m) from £26,059,000, with good performances in all the territories.
The relatively good performance in the sport segment is leading the management to focus its investments in this area, especially outside the U.K., where more JD stores will be opened in the second half of this year.
The management predicts that the group's results for the full financial year will reach the upper end of analysts' expectations in spite of a tough comparison in the second half with the comparable period of last year, where sales increased by 11.2 percent on a same-store basis.