The JD Sports Fashion group saw its operating profit before one-off costs shrink to £3.2 million (€3.9m-$5.2m) for the 26 weeks until 28 July, down from £16.2 million (€20.1m-$26.3m) for the same weeks in 2011, chiefly due to the disruption caused by acquisitions. The British sports fashion retailer bought Blacks Leisure, the outdoor retailer, out of administration in January, and it acquired two fashion retailers in the last months. However, JD said its outdoor retail business was stabilizing and it was aiming to break even in the second half before restructuring charges.
As anticipated, JD suffered an initial loss of £10 million (€12.4m-$16.3m) from the Blacks acquisition, because the outdoor retailer's stock was depleted and it suffered from an unsustainable cost base. Then again, JD pointed out that about £9.0 million (€11.1m-$14.6m) of this loss was incurred in the first three months after the acquisition.
Since the acquisition, JD closed 92 Blacks and Millets stores, leaving 102 stores, and another four were closed since the end of the reporting period. The company said that the stores would be assessed again after the end of the year, partly depending on new rent deals, but its current intention is to move toward a single outdoor banner, Blacks, with a long-term target of about 150 stores. The company has recently opened the first refurbished Blacks store at St Paul's, in London, which yielded satisfactory results so far.
The JD group's outdoor stores reached sales of £52 million (€64.4m-$84.5m) for the period, with a gross margin of 52.7 percent. This gross margin is much higher than that of the group's sports stores and ahead of expectations, owing to the strong performance of Peter Storm, the private label. The margin at Blacks is expected to weaken in the second half, however, due to a British summer that was rainier than ever – putting pressure on sales of camping products, which have to be cleared with aggressive discounts.
Meanwhile, the JD group is continuing to clean up Blacks' operations. These measures will not be completed until next spring, when the Blacks warehouse and central office facility in Northampton will be vacated. At that stage, the Blacks business will be fully integrated into the JD group and its infrastructure. As previously reported, JD has hired a new managing director for Blacks, Ken Reeve, the former buying and merchandising director at Costwold Outdoor, who will join Blacks in November.
The JD group's sports retail business continued to enjoy organic growth, with a comparable sales expansion of 1.2 percent for its sports fashion stores in the U.K. and Ireland. Adding acquisitions and store openings, in France and Spain, the group's sales reached nearly £556 million (€688.9m-$903.8m), which was a rise of 26.4 percent. Its comparable operating profit dropped by 8.2 percent to £14.9 million (€18.4m-$24.2m).