Torrid summer weather in the U.K. has affected the outdoor division of the JD Sports Fashion group for the half-year to Aug. 4, but the entity that includes Blacks, Go Outdoors and other outdoor stores has managed to raise its turnover and to generate cash in the first half of its fiscal year.
The division's turnover firmed up by nearly 6 percent to £208.2 million (€233.9m-$272.7m) for the period of 26 weeks. It was helped by the opening of four Go Outdoors stores but adversely impacted by the hot weather that reduced traffic in British stores over the summer.
JD Sports Fashion said that its outdoor division ended the first fiscal quarter with a comparable store sales rise of 7 percent for the combination of its physical and online stores, owing to the severe winter weather, but the hot and dry spells in the second quarter nearly undid the early gains. The division ended the six months with marginally positive comparable sales.
JD Sports Fashion said it was reassured that the business generated cash despite the unfavorable weather in the second quarter. With a dip of 0.2 percentage points in its gross margin to 43.1 percent, the outdoor business reported Ebitda of £2.9 million (€3.3m-$3.8m) for the six months, down from £6.5 million for the year-ago period. But it ended up with an operating loss of £3.8 million (€4.3m-$5.0m), against a profit of £0.1 million, after depreciation and a charge for the non-trading amortization of retail brands and various other brand names.
JD Sports Fashion said it was continuing to integrate the outdoor division after its acquisition of Go Outdoors, which was finalized last year. It is building up joint operations, working toward a single pool of stock with common merchandising systems and shared central warehousing. For this purpose, it intends to transfer Go Outdoors onto the group's enterprise resource planning system, and into shared warehousing in the first half of next year.
The integration applies to management as well. Lee Bagnall, who has been the managing director of Blacks since 2013, has taken up the same function at Go Outdoors. The previous managing director for Go Outdoors was Claire Webb, who has left the company. She had been with Go Outdoors for nearly four years, starting as a chief financial officer and then as managing director from June 2017.
The entire outdoor division expanded by two stores to 239. With its four openings in the period, Go Outdoors ended up with 64 stores. Blacks added one store to reach 58 at the start of August, while the number of Tiso stores remained unchanged at 13, but the number of Millets stores was reduced by two to 98 and Ultimate Outdoors closed one store to end up with six. Due to the opening of larger Go Outdoors stores, the joint surface of the outdoor retail entities increased by 3.9 percent.
The entire JD Sports Fashion saw its sales soar by 35 percent to £1,846.3 million (€2,073.9m-$2,417.8m) for the half year, aided by store openings and the acquisition of The Finish Line. The retailer said that its comparable sales moved up by more than 3 percent for the six months, although they were flat without its online sales.
The group's operating profit jumped by 20 percent to £123.9 million (€139.2m-$162.3m). It ended up with a pre-tax profit of £121.9 million (€136.9m-$159.7m), up by 19 percent, while its net profit jumped by 17.6 percent to £95.4 million (€107.2m-$125.0m).
The acquisition of The Finish Line marked the group's expansion into the U.S. market. It contributed to the JD group's performance for seven weeks after the acquisition, adding £180.0 million (€202.2m-$235.8m) in sales and £4.8 million (€5.4m-$6.3m) in operating profit. The company is preparing a trial of the JD retail brand in the U.S. in the second half of the fiscal year.
The spike in sales was aided by the opening of an extra 18 JD stores in mainland Europe over the period, which marked its launch in Finland. Another 21 stores were added in the Asia-Pacific region, including the group's first stores in Singapore, as well as extra stores in Malaysia and Australia. Thailand should be next, in the second half of the year.
Pushed up by The Finish Line, the turnover of the sports fashion division alone surged by 39.9 percent to £1,638.1 million (€1,841.0m-$2,132.6m) for the six months. Its gross profit margin was up by 0.8 percentage points to 48.9 percent and its operating profit moved up by 23.7 percent to £127.7 million (€143.5m-$166.3m).
Comparable sales were up marginally for the sports fashion stores but they were up by 4 percent including online retailing. The performance was aided by a significant double-digit increase in comparable sales in both Europe and the Asia-Pacific region. Online sales are gaining traction in both areas, aided by access to the universal stock pool at the group's distribution facility in Kingsway, which is undergoing an extension.
JD Sports Fashion ended the six months with 2,184 stores in its sports fashion division, up from 1,237. Most of the added stores came from The Finish Line, which accounted for 553 standalone stores and 375 locations at Macy's, although the group intends to close a double-digit number of loss-making concessions in the second half.
The number of JD and Size stores increased by 47 to 695, with expansion across Europe and several Asian markets. The British retailer found it particularly reassuring that it managed to improve the profitability of its business in the U.K. and Ireland, where it added five JD stores to end up with 390.
Among other banners in the sports fashion business, the progress of Perry Sport and Aktiesport in the Netherlands has enabled Sports Unlimited Retail to deliver a positive result for the first time. At the same time, JD Sports Fashion is pursuing the integration of some of the retail assets and operations of JD Sprinter and Sport Zone, after their owners finalized an agreement earlier this year to jointly form the second-largest Iberian sports retailer.
The company said that sales to date in the second half have continued at similar levels and it continues to anticipate an result aligned with current market expectations. With The Finish Line included for part of the year, they range from £337 million to £345 million.